Months after pleading guilty in 1999 in a federal fraud case involving his family’s once-prominent road construction firms, Sebastian “Sam” Palumbo entered into an agreement with the Illinois Department of Transportation barring him from “participating in any capacity” in future state contracts.
A new court filing from IDOT raises questions about whether Palumbo has stuck by those terms, saying he held “an ownership interest” until mid-2022 in “at least one” business associated with Builders Paving LLC.
Run by one of Palumbo’s daughters and her husband, Builders Paving was established in 2010 and has since grown into a significant IDOT contractor, sharing in more than $50 million in state transportation department work from 2016 until the middle of 2022, and more than $40 million since then, records show.
To qualify to bid on contracts with the state agency — which maintains highways across Illinois and answers to Gov. JB Pritzker — companies must first submit an application detailing, among other things, expertise and ownership.
Builders Paving “submitted a prequalification application along with three related companies that appear to have overlapping ownership and leadership: Builders Asphalt, LLC; Builders Concrete, LLC; and Arrow Road Construction LLC,” IDOT said in the court filing, which is part of an ongoing lawsuit.
The court filing says IDOT is now “reviewing” the application submitted by Builders Paving and “its related companies’ prequalification applications for accuracy and completeness in light of the fact that the Department discovered that Sebastian Palumbo had an ownership interest in at least one of the related companies through mid-July of 2022.”
“Palumbo, however, has been permanently disbarred from receiving IDOT contracts since 1999 due to a federal racketeering conviction,” the filing says, noting “Palumbo was not mentioned” in the Builders Paving paperwork submitted to IDOT.
The agency “is concerned about the possibility of material omissions or inaccuracies in the prequalification application and is therefore in the process of determining whether” Builders Paving “is a proper bidder, which is a prerequisite to awarding any contract” to the firm.
“This determination is part of” state government’s “responsibility to protect the public finances and to prevent disbarred bidders from receiving or improperly benefiting from transportation contracts.”
IDOT officials wouldn’t identify what company they were referring to in the court records, or otherwise comment.
If it’s proven that Palumbo violated his agreement over IDOT work, it’s unclear what if any legal repercussions could result.
Neither Palumbo nor Builders Paving would comment. But an attorney representing both has asserted over the last year that Builders Paving and Builders Asphalt “are wholly independent of Sebastian Palumbo.”
A Chicago Sun-Times examination in 2024 raised questions about ties between the Builders operations and Orange Crush LLC.
Top Builders Paving executives include Ryan Gandy and wife Kaitlyn Palumbo Gandy. She’s Palumbo’s daughter who records show has been part of a firm called Five Sisters Management, LLC, that’s served as a manager of Orange Crush. Her father has been an owner of Orange Crush.
Builders Paving and Orange Crush have shared a construction yard in Hillside, and apparently some administrative functions, the Sun-Times found.
Palumbo, a brother and their father pleaded guilty in 1999 to a scam shortchanging their union employees’ benefit plans. They each were sentenced to prison and banned from future IDOT work.
Two of their companies, Palumbo Brothers, Inc., and Monarch Asphalt Company, admitted to overbilling taxpayers on numerous road projects. Those two companies were permanently banned from state and federal projects, as were “all existing or later created affiliates and successors,” records show.
While IDOT has said that includes Orange Crush, the attorney for Palumbo and Builders Paving has disputed that, and has also said that Builders Paving cannot be considered an affiliate or successor to the other banned Palumbo companies.
The attorney has said, “Mr. Palumbo has fully complied with the Administrative Settlement Agreement between himself and IDOT for a quarter century.”
Following questions from the Sun-Times last year, IDOT launched a “review into whether the necessary prequalification steps were followed” by Builders Paving, and the agency also “paused contract awards to the firms in question” until the review is done.
Builders Paving then filed suit, claiming IDOT “unjustifiably and unlawfully” refused to award the company nine contracts totaling more than $21 million even though it “submitted the lowest responsible and responsive bid between September 20, 2024 and March 7, 2025.”
“Builders Paving is currently working on six (6) jobs under IDOT contracts.”
The allegations that Palumbo held an interest in a business “related” to Builders Paving are part of a motion from IDOT asking the court to dismiss the suit.
The agency says Builders Paving’s “assertion that it has some entitlement to the contracts, simply because it submitted the lowest bid, is wrong.”
IDOT says it “may reject any individual bid if there are omissions or ‘irregularities of any kind’ that ‘may tend, in the judgment of the Department, to make the bid incomplete, indefinite, or ambiguous as to its meaning.’”