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Probe is closer to governor
Prosecutors: ‘Public Official A’ tied state business, donations

December 22, 2007

THE ASSOCIATED PRESS
By MIKE ROBINSON and JOHN O’CONNOR


CHICAGO — A federal corruption probe moved closer to Gov. Rod Blagojevich on Friday as prosecutors issued a document in which the governor allegedly boasted to a key witness that he “could award contracts, legal work and investment banking” to boost campaign fundraising.

Blagojevich is not quoted by name but is referred to as “Public Official A” in the 78 pages that prosecutors filed as they prepared for the trial of Antoin “Tony” Rezko, one of the governor’s top fundraisers.

Rezko, a real estate developer, is set to go on trial Feb. 25, charged with joining in a wide-ranging fraud scheme that included shaking down money-management companies seeking state business from the $30 billion Illinois Teachers Retirement System.

The fund pays the pensions of 125,000 retired downstate and suburban school teachers.

Attorneys who asked not to be quoted by name because of grand jury secrecy have said Blagojevich was Public Official A.

Blagojevich’s spokeswoman denied the conversation cited in the document took place.

“No such conversation ever occurred. This administration does not do business that way,” said Abby Ottenhoff.

She dismissed the suggestion that Public Official A was Blagojevich, saying, “Based on the description in the filing, it is not the governor.” But among other things, the document says Public Official A appointed millionaire campaign contributor Stuart Levine to the Illinois Health Facilities Planning Board — something Blagojevich did.

The statement about using state business to help raise campaign money came in a meeting with Joseph Cari, a Chicago attorney and former finance chairman of the Democratic National Committee, according to the document. Cari has pleaded guilty to one count of attempted extortion and has become a government witness.

The meeting may have taken place in October 2003 aboard a plane chartered by Levine to take Blagojevich to New York to meet with potential campaign contributors.

“Public Official A stated that he had a lot of ways of helping his friends and that Rezko and Co-Schemer B were his point people in helping his friends and coordinating fundraising,” according to the document.

“Public Official A also informed Cari that he could award contracts, legal work and investment banking to help with fundraising,” the document says. “Public Official A ended the conversation with Cari by noting that he wanted to continue the dialogue with Cari about fundraising and that Rezko and Co-Schemer B would follow up with Cari.”

Co-Schemer B is Chicago roofing and consulting millionaire Christopher Kelly, according to a person with knowledge of the investigation who would not speak for attribution because grand jury material is secret.

Kelly headed fundraising for both of Blagojevich’s successful campaigns for governor. He was indicted Dec. 13 on charges of making false tax statements and structuring a bank transaction in illegal fashion to avoid the scrutiny of federal regulators. He pleaded not guilty Friday.

The newly filed document also recounts a conversation that allegedly took place on a flight to Chicago from New York in the fall of 2003 after Blagojevich had reappointed Levine to another big-money panel — the Health Facilities Planning Board.

Board approval is required for construction of new hospitals and other medical facilities in Illinois. Levine has admitted that he used his power as a member of the board to shake down two hospitals and swindle a medical school.

In the conversation aboard the airplane, Levine thanked Blagojevich for reappointing him to the board, according to the court papers. The document adds that Blagojevich “responded that Levine should only talk with Tony (Rezko) or ‘Co-Schemer B’ about the board,’ but you stick with us and you will do very well for yourself.”’

Levine told the government he understood Blagojevich to mean “that Levine could make a lot of money working with Public Official A’s administration.”

The document is a so-called Santiago proffer outlining what prosecutors say was a scheme by Levine, Rezko and others to defraud the state. If U.S. District Judge Amy St. Eve agrees the document indicates such a scheme was afoot, prosecutors will be able to present testimony that otherwise would be ruled out as hearsay.

Levine was originally appointed to the 11-member board of the Illinois Teachers Retirement System by Gov. George Ryan, Blagojevich’s predecessor.

Ryan had corruption problems of his own and is currently serving a 61/2-year racketeering and fraud sentence in federal prison.

According to the document, Levine was reappointed by the newly elected Blagojevich in 2003 with the help of Rezko and Kelly and swiftly gained control of the board.

“One of the important ways in which Levine was able to help favored investment funds was by using his influence to ensure that the fund had access to TRS staff,” the document says. “Levine also put pressure on TRS staff members, particularly Individual N, to ensure that TRS staff approved the funds that Levine sought to help.”

In Springfield, TRS executive director Jon Bauman told The Associated Press Friday night he be lieves he is Individual N, but he defended the pension fund’s record under his administration.

“No inferior investments were ever presented to the TRS board during my tenure, despite extreme pressure from sources cited and not cited in the proffer,” Bauman said. “To the contrary, TRS’s investments have performed in the top quartile of similar pension funds nationally during every year of my tenure. Further, documents previously filed in these matters substantiate that I personally intervened to halt the corrupt scheme in every occasion in which I became aware of its existence.”

Associated Press writer Deanna Bellandi in Chicago contributed to this report.