As good advice as the other answers give, I'm going to go one step further by telling you to act on the problem, not just sit idly by and recording it as it happens. But it's risky and has to be done carefully, with plenty of willingness to stop doing this at any point where you get negative feedback. This all depends on what kind of person the CEO is, and what they project publicly might not be how they actually react to the situation.
With all the paper trail you are making and already have, you can go to your superiors and ask for advice on how to handle the situation. Don't act dumb or sarcastic, just ask them intelligent questions with intelligent suggestions on how you think it should be acted on. You don't want them to think you are incompetent, or insubordinate, you just want guidance for this particular situation. You also don't want to make it obvious that you are trying to put the blame on them, if things go wrong, but that's part of what you're trying to do.
If you get silence for a significant amount of time, say two weeks or whatever your culture would consider to be appropriate, then go on up the chain of command. If your boss won't tell you how to deal with it, go to their boss and explain the situation plus the silence you've already gotten. If you get silence again, do the same thing. You are essentially letting your bosses boss (and up the line) know that you aren't getting the help and guidance you need. Done correctly, this isn't exactly blame and you can get a good answer to the problem. If no one is willing to help you, it creates a paper trail for you if/when it gets to the "final solution".
If you end up at the CxO level and talking with their "connection", simply bringing up the issues might be all it takes. There's a couple of ways it could go from here, and to name a few:
- That connection might take care of the situation for you, so they don't lose respect due to Mr. BusinessGuy.
- You get fired and don't have to worry about it anymore.
- Mr. BusinessGuy starts making more problems because the CEO talked to them about it.
Of course, you getting fired isn't a good resolution, but if the management is that kind of toxic or has that bad of nepotism, you're likely to be better off in your next job. It can be difficult and scary to find another job, but it might be worth it to get away from that guy.
If Mr. BusinessGuy starts making more problems, keep recording the paper trails and after a short time (maybe less than a month if it's happening often), do the same thing again, but wait that little bit of time to establish this as a new pattern. By waiting, you also give the CEO time to hear about it on their own, since they may now be paying attention a little better.
The point here is to not complain about someone or sound like you are "ratting" Mr. BusinessGuy out. What you need to do is stay professional and simply bring up the problem to people who might have a good way to handle this situation, since his connection to the CEO is essentially leaving you without a good solution. Someone may have a good solution, simply because they have experienced a similar situation previously. Or someone might have a personal relationship with the CEO they can lean on. And someone might even have a way to leverage their own reputation or authority to fix the problem. You don't know until you ask.
Again, there's risk to doing this. You may end up getting help that takes care of the problem, or you might come up against issues right away. It's up to you whether you make a push all the way to the CEO to let them know what's going on, or whether you stop at the first sign of danger. As well as it depending on the CEO's personality, it also depends on your personality. Not everyone can do this, even if they don't get negative feedback.