The action comes just after The Chicago Tribune revealed that Redflex Traffic Systems paid a $900 hotel bill for a city official. The incident happened in 2010 but the company only reported it this month.
Chicago Mayor Rahm Emanuel says that is a violation of the city's ethics law and he accused the company of a cover-up.
"I want to send a clear message to everybody," Emanuel said. "There will be zero tolerance for those type of actions, and so while it's directed specifically at Redflex and what they did in 2010 prior to my being mayor, there will be not only zero tolerance, I want other firms that do business with the city to understand that action."
The company claims it accepts responsibility for the incident and that it has adopted reforms.