Juan Rangel, longtime leader of the politically powerful United Neighborhood Organization, has stepped aside from his $250,000-a-year post as UNO's chief executive in the wake of a scandal that cost the group millions of dollars in state funding and led to a federal investigation of its bond dealings.
The influential Hispanic community group operates the largest charter-school network in Illinois.
Rangel's departure "by mutual agreement" with the board of the not-for-profit group is effective immediately, UNO officials said Friday.
Rangel had three family members on the UNO payroll. Sources said two of the relatives quit recently, including deputy chief of staff Carlos Jaramillo, Rangel's nephew.
Reached by phone, Rangel hung up on a reporter.
Rangel has close ties to politicians including Mayor Rahm Emanuel, whose 2011 campaign Rangel co-chaired, Ald. Edward M. Burke (14th) and Illinois House Speaker Michael Madigan (D-Chicago), who sponsored a $98 million state school-construction grant to UNO in 2009 that has fueled its rapid growth as a charter-school operator.
"We are thankful for Juan's leadership over the past two decades," said Freddy Santiago, UNO's interim board chairman. "We wish Juan the best in the next phase of his career."
Jesse Estrada, recently hired as UNO's chief of operations and procurement, was named interim CEO while a search is conducted for a permanent successor.
The state grant to UNO is thought to be the largest government subsidy for charter schools in the country.
But the way UNO spent the money helped bring the end of Rangel's meteoric rise in Chicago politics.
Rangel's top aide, Miguel d'Escoto, resigned in February, days after the Chicago Sun-Times reported UNO had given $8.5 million of business — paid for with the state grant — to companies owned by two of d'Escoto's brothers.
The revelation prompted Gov. Pat Quinn to suspend grant payments to UNO in April, which temporarily halted construction of a new UNO high school on the Southwest Side.
Rangel subsequently offered a public apology, saying he had "failed to exercise proper oversight" and vowed to enact reforms.
Quinn lifted the suspension, and work on the UNO Soccer Academy Charter High School resumed.
But Quinn disclosed recently that he has suspended any payments from the remaining $15 million of the grant in the wake of news that the federal Securities and Exchange Commission was investigating UNO over its bond dealings.
In September, an attorney from the SEC's enforcement division in Chicago told UNO officials the agency "is conducting an investigation ... to determine if violations of the federal securities laws have occurred." The SEC asked UNO to provide documents related to $37.5 million the group has borrowed from private investors, as well as records involving the state grant.
Rangel, 48, grew up in Little Village and became UNO's CEO in 1996. In the late 1990s, he led the group into the business of charter schools, which are privately run but depend on government funding.
Starting eight years ago with a single school, UNO's charter network has grown to 16 schools in Chicago with more than 7,600 students, the vast majority of them Hispanic students from low-income families
UNO has largely depended on state funding to build its schools and on tens of millions of dollars a year from the Chicago public school system to operate them.
Because of its not-for-profit tax status, UNO isn't allowed to get involved in politics. But Rangel eagerly lent his endorsement to politicians, and his employees at UNO often campaigned for the candidates he backed. That was true even when that meant aiding white, establishment candidates running against Hispanic challengers. Rangel drew criticism when he became an early supporter of Emanuel's mayoral bid, scorning two well-known Hispanic candidates.
In Rangel, Emanuel found a supporter who didn't hesitate to take on the mayor's adversaries, including the Chicago Teachers Union during last year's teachers strike.
In late October, though, Emanuel sidestepped questions about Rangel's future, saying that was up to UNO's board.
At the time, UNO's public relations firm, ASGK Public Strategies — founded by Emanuel's friend and former Obama White House colleague David Axelrod — hedged on Rangel's status, saying, "To date, the board has indicated it has confidence in Juan."
After the revelations about UNO's spending, the organization brought in businessman Martin Cabrera Jr. to head its board and oversee Rangel, who in addition to being CEO had been the UNO board's unpaid chairman. But, after just three and a half months as chairman, Cabrera quit Sept. 13 "because of a difference of philosophy and mission."
Estrada, Rangel's interim replacement, came to work for UNO in October from the Archdiocese of Chicago, where he worked for 15 years in a financial role with 61 parishes and 26 Catholic schools, according to UNO.
"We know that UNO's management practices and policies must meet the highest standards and keep pace with the organization's growth," Santiago said.