Thursday, April 02, 2009

Prosecutors target “Blagojevich Enterprise” - UPDATED

By Bethany Jaeger, with Hilary Russell and Jamey Dunn contributing
Today’s 75-page federal indictment of former Gov. Rod Blagojevich and five members of his inner circle details an extensive and long-term scheme that allegedly began in 2002, before Blagojevich took his oath of office in January 2003.

U.S. Attorney Patrick Fitzgerald’s office is now going after what’s described as the “Blagojevich Enterprise,” which includes the office of the governor and Blagojevich’s campaign fund, Friends of Blagojevich. The entity, the feds allege, primarily existed to “exercise and preserve power over Illinois government for the financial and political benefit of Blagojevich,” as well as his family members and friends.

Read the U.S. attorney's press release here. A fact sheet is here. More context and online sources of how we got here at Illinois Issues magazine.

Blagojevich and his associates allegedly conducted a pattern of dishonest behavior designed to enrich themselves, which would violate the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, according to Andrew Leipold, a law professor with the University of Illinois’ Institute of Government and Public Affairs.

Blagojevich is charged with 16 counts of federal corruption, including racketeering conspiracy, wire fraud, extortion conspiracy and attempted extortion. They each carry a maximum sentence of 20 years in prison and a $250,000 fine. He also allegedly lied to the FBI, a crime carrying a maximum five-year prison sentence and another $250,000 fine. In addition to the allegations already documented in the criminal affidavit filed with his arrest Dec. 9, 2008, today’s indictment includes new details and allegations.

The indictment reads less like alphabet soup because federal prosecutors in the Northern District of Illinois have identified and, in some cases, convicted individuals as part of the ongoing probe called Operation Board Games. Joining Blagojevich in the indictment include five others:
  • His brother, Rob Blagojevich of Nashville, Tenn., who chaired his campaign fund since August 2008.
  • John Harris of Chicago, Blagojevich’s chief of staff from late 2005 until last December, when he was arrested with Blagojevich.
  • Alonzo “Lon” Monk of Park Ridge, a lobbyist and longtime Blagojevich insider and campaign manager, as well as Blagojevich’s first chief of staff upon becoming governor in 2003.
  • Christopher Kelly of Burr Ridge, a Blagojevich fundraiser and previous chair of Blagojevich’s campaign fund.
  • William “Bill” Cellini of Springfield, director of the Illinois Asphalt Pavement Association, who raised money for Blagojevich and allegedly influenced officials of the Teachers’ Retirement System. He also was associated with Commonwealth Realty Advisors, a real estate management firm that invested hundreds of millions of dollars on behalf of TRS. He was indicted in October 2008 for “allegedly conspiring with others to obtain campaign funds for Blagojevich by shaking down an investment firm seeking a $220 million allocation from TRS.” This replaces that indictment.

Before Blagojevich even became governor, he, along with Monk, Kelly and Tony Rezko, allegedly started scheming to use the governor’s office for financial gain that would be split among them once Blagojevich left office. Blagojevich allegedly let Kelly and Rezko exercise significant influence over state government operations, and they, in turn, allegedly generated millions of dollars for Blagojevich’s campaign fund and “provided financial benefits directly to Blagojevich and his family.” For instance, one part of the scheme allegedly included Rezko's real estate business paying Patti Blagojevich, the then-governor's wife, $12,000 a month, as well as another $40,000 in commission, "even though she had done little or no work," according to the indictment.

The indictment also alleges that Blagojevich had control of his campaign fund at all times, even as the chairmen of the fund changed.

UPDATED: Some more highlights of the details:
  • Before Blagojevich became governor, he, along with Monk, Kelly and Rezko, allegedly started scheming to use the governor’s office for financial gain that would be split among them once Blagojevich left office.
  • Blagojevich, Monk, Kelly and Rezko allegedly agreed to use Blagojevich’s and Monk’s offices to divide financial gain among themselves, including the kickback from the Pension Obligation Bond refinancing in 2003.
  • The feds say Blagojevich lied to FBI agents on March16, 2005, when he said he kept state government and politics separate and didn't want to know who contributed money to his campaign.
  • From 2004 to 2006, Rezko allegedly gave Monk between $70,000 and $90,000.
  • Last year, Blagojevich allegedly directed Harris to find him a paid position at various state boards, and when that didn’t work, he directed Harris to connect his wife with financial institutions. When that failed, Blagojvich directed that those institutions to no longer get state business, according to the indictment.
The federal prosecutors are seeking the forfeiture of all funds and assets held at four banks in the name of Friends of Blagojevich, although the campaign fund is not a defendant. Fitzgerald's office also seeks $188,370 from Blagojevich as proceeds of the alleged scheme and racketeering activity. The indictment lists Blagojevich’s apartment and Chicago home as “substitute assets.”

Now what?
The indictment comes after more than a month of public hearings conducted by two panels, one appointed by Gov. Pat Quinn and one convened as a special joint legislative committee between the House and the Senate. Within two hours of the indictment being filed office tonight, one of the byproducts of the legislative committee passed both chambers.

The General Assembly approved SB 364, crafted with the leadership of House Speaker Michael Madigan and Senate President John Cullerton. It’s aimed at reforming the state’s public employee pension system and requiring all trustees to abide by state ethics laws. All trustees of the Teachers’ Retirement System, specifically, would be replaced. And the governor would be able to appoint more trustees to that board.

The Teachers’ Retirement System, which serves more than 355,500 teachers outside of Chicago, was one of the first state government operations revealed by the feds to be corrupted by Blagojevich’s inner circle, according to Fitzgerald’s office. System officials immediately released a statement of opposition, saying the governor’s ability to appoint more members has potential to increase, not decrease, the opportunity for political influence.

The board’s statement said the rationale behind the measure “erroneously accused the elected members of the board of failing to prevent a corruption scheme in 2004 hatched by a former gubernatorial appointee,” meaning Stuart Levine. “The elected trustees of the TRS Board are angry and deeply troubled by the implication that they were somehow complicit in the illegal behavior carried out by Stuart Levine,” said Bob Lyons, a board trustee twice-elected by annuitants of the Teachers’ Retirement System following Levine’s resignation, according to the statement.

Lyons also said that terminating Jon Bauman, executive director of the system, on July 1 would unfairly punish a man who hasn’t been accused of committing a crime.

Cullerton said the reforms are designed to prevent “what Stuart Levine got away with for so long” by requiring consultants to register, requiring all board members to follow the same ethics standards applied to legislators and executive branch employees to prevent conflicts of interest and so-called pay-to-play politics.

Cullerton also offered his personal reaction to the former governor’s indictment. “I think it’s a sad situation because he is the father of a couple of kids. He lives down the street from me, and it’s always sad when stuff like this happens. But, at the same time, I can’t imagine what this place would be like if he were still the governor trying to solve the problems that we have with the incredible deficits that we have.”

Legislators of both parties added that the indictment should serve as yet another wakeup call to enact meaningful reforms to strengthen rules for campaign finance, state procurement, public access to information and even the structure of government. Ultimately, however, reforms can only make it harder for people who are bent on mischief, Leipold said. “Surely oversight can help, sunshine can help, reporting can help, but nothing’s going to stop things like this completely.”

Many just want to move on from the embarrassment. “There’s plenty of blame to go around,” said Rep. Bill Black, a Danville Republican. “I don’t care about what has happened. Let's get involved and care about how we clean this up. I want my grandkids to be proud of me.”

At the least, federal prosecutors continue to send a message that “business as usual” won’t be tolerated. Sen. Matt Murphy, a Palatine Republican, said: “And the prosecutor is serious. People who want to play that game better learn real quick it’s a losing proposition.”

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