Palumbo family business secrets revealed in settlement agreement with IDOT

Chicago area road builder Sebastian “Sam” Palumbo has been banned from participating in state contracts ever since his conviction in a 1990s racketeering case in which prosecutors showed that he ripped off his employees, and that his former construction companies ripped off taxpayers.

In recent years, a consortium of construction firms run by a daughter and her husband and known as Builders Companies has quietly grown in size and significance, securing more than $100 million in road contracts from the Illinois Department of Transportation and other public agencies that build and maintain roadways in the region.

An arm of state government overseen by Gov. JB Pritzker, IDOT spent more than a year investigating whether Palumbo, a felon who did prison time, was a hidden hand behind Builders in violation of his contract prohibitions.

It turns out Palumbo for years quietly intersected with Builders, and the company hadn’t been up front with IDOT about those connections, according to an allegation in a recent settlement agreement. The document marks a conclusion to the IDOT inquiry and a 2025 lawsuit that Builders filed to try to force IDOT to let the company resume contracting.

Yet for reasons not clear since IDOT officials won’t disclose details, the agency determined the findings didn’t constitute a violation of the state’s procurement rules.

Builders attorney William Dwyer emphasized that whatever ties existed between Palumbo and Builders, they didn’t involve IDOT work, so Palumbo never violated his contract debarment arrangement with IDOT and the federal government stemming from his long-ago racketeering case.

"Sebastian Palumbo has fully complied in all respects with this Administrative Settlement Agreement with IDOT for 26 years," Dwyer said.

IDOT is now allowing Builders to resume state work after a “pause” on new roadway contracts dating to the start of the agency’s internal investigation in late 2024.

“IDOT contends that the Builders Companies did not fully or accurately disclose their relationship with Sebastian Palumbo in their prequalification applications or their correspondence with IDOT regarding its investigation,” according to the settlement agreement.

Settlement agreement between IDOT, Builders

Source: Illinois Department of Transportation

“However, based on its review of the companies’ corporate records, IDOT’s own records, and the Builders Companies’ certifications signed under penalty of perjury, IDOT has concluded that there is insufficient evidence at this time to support the conclusion that the Builders Companies were not responsible bidders under the Illinois Procurement Code.”

The Builders Companies include: Builders Paving LLC, Builders Asphalt LLC, Builders Concrete Services LLC and Arrow Road Construction LLC, records show.

Palumbo oversaw Builders Concrete until 2022 and a separate corporate entity, Orange Crush LLC, until it shut down at the end of 2024 amid the IDOT probe, according to the settlement.

“In April 2024, Builders Asphalt, Builders Paving, Builders Concrete, and Arrow Road submitted a consolidated application for prequalification to IDOT,” the settlement says, referring to a process that companies wanting to qualify for often-lucrative IDOT road contracts must go through.

“The companies did not disclose any relationship or business dealings with Sebastian Palumbo in their 2024 prequalification application or in any other application. Based on the representations in their prequalification applications, Builders Asphalt, Builders Paving, and Builders Concrete were prequalified.”

“Subsequently, in late 2024, IDOT received information suggesting that Sebastian Palumbo might have violated the terms of his administrative debarment and criminal plea agreement by participating in contracts let by IDOT and performed by the Builders Companies.”

“IDOT refrained from awarding pending contracts” — two dozen of them totaling more than $50 million — “to Builders Paving so that it could investigate whether the Builders Companies were responsible bidders under the Illinois Procurement Code.”

Sun-Times scrutiny launches IDOT inquiry

The agency launched its inquiry after the Chicago Sun-Times asked, among other things, whether state officials knew that Palumbo’s daughter, Kaitlyn Palumbo Gandy, was part of Five Sisters Management, LLC, which was listed on incorporation records as “manager” of Orange Crush.

Orange Crush was one of Palumbo’s companies banned from state contracts following his long-ago racketeering case, according to IDOT, which maintained a maintenance facility across a fence line from a construction yard shared by Builders and Orange Crush in Hillside.

Gandy was and remains a top Builders executive along with her husband Ryan Gandy, who recently wrote a memo to their employees declaring the settlement a “victory” and saying he’s glad “to put the distractions behind us.”

The settlement agreement provides some detail on the Palumbo family’s once-secretive business dynamics, saying: “During the course of its investigation, IDOT requested and received corporate records and business documents from the Builders Companies.”

“Among those documents was a written ‘borrowed employee agreement,’ dated 2019, between Builders Asphalt, Builders Paving, Builders Concrete, and Orange Crush.”

“Sebastian Palumbo owned and controlled Builders Concrete and Orange Crush as of the date of the agreement, which states that ‘the Builders Companies, and their affiliates, were established pursuant to Sebastian’s intention and plan to transfer his assets, including the assets and operations of the Crush Companies [defined as Orange Crush and Builders Concrete], over time to his children.’”

Builders currently is “beneficially owned and controlled” by Kaitlyn Palumbo Gandy and her four sisters, the records contend.

“Pursuant to the agreement, Builders Asphalt and Builders Paving borrowed employees from Orange Crush and Builders Concrete during the period when Orange Crush and Builders Concrete were owned and controlled by Sebastian Palumbo.”

“The borrowed employee agreement further provides that ‘in no instance'” will Orange Crush “'provide a Loaned Employee to any of the other Companies for work on any project funded in whole or in part by the Federal Government or the Illinois Department of Transportation.’”

“In addition to producing corporate and business documents, the Builders Companies provided four certifications, signed under penalty of perjury by an executive of each company, stating that ‘Sebastian S. Palumbo has not participated with the company in any capacity, including but not limited to participation as a contractor, subcontractor, material supplier, lessor of equipment, employee or consultant, in connection with any contract let by the Illinois Department of Transportation to the Company.’”

Palumbo’s daughters, through Five Sisters, own the property where Orange Crush was based, and where Builders is now based, the records show.

Despite the wording of the settlement agreement, Dwyer said Palumbo “did not create” Builders. Asked for details, Dwyer said: “My clients’ estate planning is none of your business. All intra-family transfers were fully disclosed to IDOT during the investigation. The termination of Orange Crush and its details were fully disclosed to IDOT during the investigation. The terms of the borrowed employee agreement were fully disclosed to IDOT during the investigation.”

Neither Dwyer nor officials from IDOT, led by Pritzker appointee Gia Biagi, would address questions about whether Palumbo’s interactions with Builders, even if not directly on IDOT road projects, helped grow or enhance the business and make it more competitive to secure state-government work.

The settlement agreement also said that “concurrent with its obligation to ensure that bidders on contracts comply with applicable laws, rules, and regulations, IDOT must ensure that the transportation infrastructure of the State of Illinois is continuously improved through the timely execution and performance of construction contracts.”

“To date, IDOT has been satisfied with the Builders Companies' performance of past contracts let by IDOT. Those past contracts, and the contracts that have been held in abeyance, ultimately serve the interests of the people of the State of Illinois.”

The settlement was reached to “avoid the delay, uncertainty, inconvenience, and expense of further litigation.”

While Palumbo has kept a low public profile since being released from federal custody 25 years ago, he has maintained influential relationships, including with powerhouse Illinois lobbyist John Kelly, a likely candidate for Chicago mayor.

They threw a campaign fundraiser in 2023 for DuPage County State’s Attorney Bob Berlin at a Clarendon Hills restaurant where Five Sisters is listed on incorporation records as co-manager.