BY CAM SIMPSON FEDERAL COURT REPORTER

August 16, 1999

The former U.S. Marshal for Chicago teamed with a union boss tied to organized crime in a company bankrolled with a loan that led to a federal racketeering charge this month, the Chicago Sun-Times has learned.

The deal involved former marshal Peter J. Wilkes and John Serpico, the head of the Illinois International Port Authority who was indicted for allegedly using his union muscle to get a series of illegal bank loans. It's the first known connection between Wilkes and Serpico, and the Chicago Crime Commission called their association an "utter outrage."

Most troubling to the law enforcement community is that the U.S. Marshals Service runs the ultra-secretive federal witness protection program, where mob turncoats cooperating with the government hide from their old pals. Mobsters who turn on their associates are relocated for their safety--often with their extended families--and given new identities, jobs, cash and even bodyguards. U.S. marshals also transport jailed mobsters who are secretly cooperating with prosecutors.

Wilkes is not charged in the racketeering case.

Serpico is a longtime associate of Chicago's top crime bosses, according to a federal racketeering lawsuit filed last week. The government said the mob was involved in an umbrella group for several unions Serpico controlled and his decisions for another union "were influenced by organized crime." Insiders are also amazed that one of their clients was the federal government--running a detention center for illegal aliens for the U.S. Immigration and Naturalization Service. INS is a branch of the Justice Department.

Wilkes formed the company--Protective Service Systems, Inc.--two months after he resigned as U.S. Marshal on Sept. 12, 1986, state records show. At the time, he was being investigated for entertaining a girlfriend on government money, basing personnel decisions on sexual favors, and misuse of confiscated property. He was not charged and denied any wrongdoing. It's unclear when they became business partners, but the indictment alleges the startup cash for the company came from an illegal loan secured by Serpico.

The timing of their partnership raises questions about what, if any, connections the men had while Wilkes was still one of the area's top law enforcement officials, said Wayne Johnson, chief investigator for the Chicago Crime Commission. Even if the men's ties were made after Wilkes stepped down, it's "a connection that would lead the Chicago Crime Commission to a feeling of utter outrage," Johnson said. The indictment names the company, but not Wilkes, who is referred to only as "Individual B."

Serpico, 68, of Lincolnwood, was indicted for steering union funds to favored banks in return for sweet deals on personal and business loans that normal customers couldn't get, the indictment charges. Many were totally unsecured. Some had easy payment plans.

The key bank involved, Capitol Bank & Trust, pleaded guilty for its role in the scheme and paid an $800,000 fine. One of the nine loans cited in the indictment, for $195,000 from Capitol, was used by Wilkes' company to buy a building at 4842-44 W. Fullerton, according to the indictment, corporate records and sources familiar with the case.

The indictment says the building was used to hold illegals for INS. The agency refused to answer questions about the deal, even the value and length of the contract. Law enforcement sources, however, said the arrangement was short-lived. The deal came after Serpico admitted his ties to a string of top mobsters at a well-publicized 1985 appearance before the President's Commission on Organized Crime. Serpico testified he was only a friend of the mobsters, not a business partner.

According to land records and sources, the men bought the building, the former headquarters of a Polish-American fraternal club, on Nov. 16, 1988. They made their purchase through a trust set up by Capitol Bank, which allowed them to keep their names out of ownership records normally open to the public. The building was sold June 30, 1990, apparently after the deal with the immigration agency ended.

Wilkes refused last week to answer questions about his relationship with Serpico. "I don't have any comment about that," he said by phone. His company provides building security for landlords. Serpico and his lawyers have not commented on his indictment and did not return phone calls last week. His chair of the authority, the sprawling South Side industrial harbor, has expired. Gov. Ryan is weighing his reappointment.