Operation Board Games investigation winding down with Cellini conviction

By Jamey Dunn 

Springfield businessman William Cellini, a longtime Illinois political insider, was convicted on two federal felony charges today in Chicago.

Cellini was accused of attempting to extort campaign contributions for former Gov. Rod Blagojevich from Thomas Rosenberg, an investment firm owner and movie producer, in exchange for business handling pension investments for the state. Blagojevich was convicted on 17 corruption counts in June.

A jury found Cellini guilty of conspiracy to commit extortion and aiding and abetting bribery. He was found not guilty on two other charges, attempted extortion and mail and wire fraud.

Cellini’s lawyers painted him as and innocent go-between, saying he had nothing to do with any plans to squeeze campaign funds from Rosenberg but only delivered information to him. “We made our points. Obviously I’m very grateful that the jury appears to have agreed and at least has thrown out the most serious charges against Mr. Cellini,” Attorney Dan Webb told reporters in Chicago today.

“Shaking someone down and threatening them with loss of business is a crime,” U.S. Attorney Patrick Fitzgerald said today in Chicago. He said the conviction should make power brokers in Springfield and Chicago think twice before committing any illegal backroom deals. “The fact that Bill Cellini was convicted today sends a very, very loud message there.” Fitzgerald said that the investigation dubbed "Operation Board Games" — which led to the convictions of Blagojevich, his confidante Tony Rezko, Stuart Levine, who testified against Cellini, and others — is not officially closed because some defendants have appealed their convictions. However, he said he was not “predicting anything in the future” in regards to the investigation.  

“I think clearly the whole corruption problems that occurred under the Ryan administration and then under Blagojevich — we have to root out every single manifestation, and that’s what I’ve tried to do since January 29 of 2009,” Gov. Pat Quinn told reporters in Chicago today. “We’ve passed ethics laws. We’ve established strong standards of conduct, and we enforce them,”  Quinn said that “more than anything,” his “mission” is to “clean up Illinois government.”

More info on the Cellini trial see: 

The verdict and reactions from the Chicago Sun-Times.  

A reaction from Cellini's former Gov. Jim Edgar. 

Coverage from the Chicago Tribune.

A timeline of Cellini's life from the State Journal-Register.

Chris Kelly pleads guilty to O'Hare scheme - UPDATED UPON HIS DEATH

By Bethany Jaeger
Christopher Kelly, a close adviser and fundraiser for former Gov. Rod Blagojevich, died Saturday, September 12, just days before he was to report to federal prison to serve at least eight years for two of three criminal cases against him. He was 51.

Law enforcement officials reportedly were looking into a drug overdose.

Kelly would have been a key figure in the ongoing corruption trial of Blagojevich, scheduled to go to court in June 2010. Kelly was indicted as part of “Blagojevich Enterprise,” an extensive scheme that allegedly began in 2002 to use the governor’s office for private and political gain, including auctioning off the U.S. Senate seat once held by President Barack Obama. Kelly was indicted along with the former governor; his brother, Robert Blagojevich; former campaign manager and lobbyist Alonzo Monk; Springfield lobbyist William Cellini; and former chief of staff John Harris. Kelly pleaded not guilty to those charges.

Shortly before his death, however, he pleaded guilty today to two counts of mail fraud in one of three federal indictments against him. But it's unknown whether he was cooperating in the ex-governor's ongoing corruption trial.

Read his plea agreement here. The Burr Ridge resident UPDATED: was supposed to report to jail September 18 and agreed to forfeit $450,000 for a scheme of rigging roofing contracts with two major airlines and using illegal kickbacks for personal use. On top of a three-year prison sentence for a separate tax fraud case, his plea Tuesday calls for a nearly five-year sentence.

Kelly pleaded guilty to rigging bids to steer $8.5 million in inflated contracts for roofing work done on American Airlines and United Airline facilities at O’Hare International Airport between 1998 and 2006. The scheme benefited BCI Commercial Roofing Inc. in Markham, of which he is president and owner.

About $1 million of the kickbacks went to repay gambling debts and a home loan, according to the plea. Some of the kickbacks also went to entities associated with Tony Rezko.

Kelly originally was charged with 11 counts of mail fraud and six counts of money laundering for the scheme.

• His December 2007 indictment charged him with using corporate funds from his roofing and consulting firms to pay illegal gambling debt. He received three years in prison for those charges.
• His February 2009 indictment includes the O’Hare kickback scheme. His plea seeks nearly 4.5 years more on two counts of mail fraud.
• He still faced trial for his involvement in Blagojevich’s ongoing corruption case, scheduled for court June 2010. That indictment is here.

Personnel issue dominates reform hearing

By Bethany Jaeger
Illinois Democrats and Republicans appeared split on whether to use legislation to fire two executive staff members of a hospital planning board plagued by corruption early in former Gov. Rod Blagojevich’s administration in 2003 and 2004. Controversy is nothing new to the Health Facilities Planning Board, and that’s not unique to Illinois. See the National Conference of State Legislators for background on the widespread debate.

Today’s debate, while tense and awkward at times, opens the door for more systemic questions about whether the legislature should fire individuals by name through legislation and whether the legislature can effectively remove politics from the hospital planning process altogether.

The process typically is designed to review hospital construction projects in an attempt to control costs and maintain access to critical health care services. Today’s bicameral legislative committee on government reform, however, didn’t focus on reforming the process (that was the focus of a previous legislative task force — its report is here). Members instead focused on whether the General Assembly should use legislation to terminate two high-level employees. Both are subject to harsh criticism from a hospital executive who blew the whistle on what turned out to be deep-rooted corruption in 2003.

House Republicans, led by Minority Leader Tom Cross, want to fire Jeffrey Mark, executive secretary of the Health Facilities Planning Board, and David Carvalho, a deputy director of the Illinois Department of Public Health that oversees the employees. “In our efforts to continue to fumigate state government, this is another board that needs to be sanitized and start fresh with new players from top to bottom,” Cross said.

Cross added, however: “While we are not alleging that either of the two that held these positions themselves did anything illegal, corrupt activity happened under their watch. They were there before, during and after corrupt activity occurred.”

Both were hired in 2003 and served for six months during a scheme that convicted former board member Stuart Levine and Blagojevich fundraiser Tony Rezko of federal corruption. According to federal prosecutors, Levine and Rezko schemed with a handful of others, including Blagojevich, to rig the state panel to reward themselves and political allies.

Both Mark and Carvalho testified to the committee that they had nothing to do with the schemes and notified appropriate authorities when they noticed irregularities in the way the board operated. For instance, they cited a situation when the board stopped in the middle of taking a vote during a public hearing to sway one more member to support granting a construction permit to a particular hospital project.

“It happened on my watch, yes it did,” Mark said to the committee. “Was I aware of it? Absolutely not. Should I have been aware of it? I’m not sure.” He said he was a subordinate who immediately reported questionable practices to the agency’s lawyer and inspector general. He later cooperated with the U.S. attorney’s office during the investigation.

Carvalho said he, too, conveyed his concerns lawyers and the inspector general. He also said Rezko’s trial revealed he and Levine, in fact, were trying to get rid of him because he was a “pain in the butt.” “What I have tried to do throughout the process is to stand in the way of people, both who were members of the board and people who were applicants, who were trying to get from this process what was not due them under the rules. And today I do feel like that person standing in front of a steamroller for simply doing my job.”

One who did report the suspicious activity directly to federal authorities was Pam Davis, president of Edward Hospital and Health Services in Naperville. She cooperated with the FBI for eight months by secretly recording phone calls and meetings related to her repeated application for a construction permit to build a new hospital in the rapidly growing village of Plainfield. She was pressured to hire a specific construction firm owned by Jacob Kiferbaum, who was scheming with Rezko. “If I did not use their services, I would never have this hospital approved,” she said. The Plainfield hospital project still has not been approved by the board.

Davis stopped short of alleging that Mark and Carvalho acted illegally, but she supports the House Republicans’ efforts to oust them from public office for allegedly protecting the status quo with outdated and unfair regulations and for failing to speak out during irregularities in the board’s proceedings. “While not pointing to any legalities by either of these two public officials, I can only imagine that the corrupt board members felt totally emboldened and powered by this lack of transparency.”

Carvalho said during his testimony: “Contrary to the suggestions of the CEO, the staff of the Health Facilities Planning Board, and I, in particular, are, in fact, grateful to her for her courageous efforts to expose the corruption of that prior board.”

Mark said: “I observed the same things she observed.” He said he felt “confused and surprised, and as I stated before the committee, I consulted the appropriate authorities.”

Mark was recommended for his position more than five years ago by Rezko. “It’s a matter of public record that my name was submitted by Tony Rezko,” Mark said after the hearing. “I met the man once prior to him taking my name. People can perceive whatever they want. I think my background and my record speak for itself. I’m very proud of what we’ve accomplished the last five years. I’m very not proud of what occurred during my first six months in this position.”

Sen. Susan Garrett, a Lake Forest Democrat who has been working on the health planning process for a year, said the current controversy could be rooted in bitterness over the panel’s decision to repeatedly deny Davis’ proposal for a Plainfield hospital. “It appears that the process for decades has been political, and that has been the downfall of this whole health facilities planning process. It was our hope and intent to remove the politics,” Garrett said.

“As somebody who is trying to be impartial and bipartisan, we thought we resolved that,” she added. “And I don’t think that has happened. And, quite frankly, I’m not sure today resolved any of the issues that were brought up three days ago or three years ago or three decades ago.”

The measure, SB 1905 (Senate-approved version here), is slated for consideration in a House committee Wednesday afternoon.

Quinn previously tried to name a new chairman of the board, Dr. Quentin Young, in April, but Young soon resigned because of a possible conflict of interest. (He realized that his former practice owns part of a property that rents space to a health care provider. State rules prevents the chair from having financial ties to any facility licensed by the state.)

New leadership for a board with history of corruption

by Jamey Dunn

Gov. Pat Quinn announced today his pick to run the state health planning board that has been recently plagued by scandal.

At a Chicago news conference, Quinn named Dr. Quentin Young, his one-time personal physician and an advocate for health care reform, to chair the Illinois Health Facilities Planning Board. Young has served as chairman of the Department of Medicine at Cook County Hospital and president of the American Public Health Association. He is currently the national coordinator for the universal health care advocacy group, Physicians for a National Health Program.

The board approves major construction projects and equipment purchases for health care facilities in Illinois. They could include such improvements as “who gets to have an MRI machine and who gets to build a new wing,” according to Chris Mooney, political studies professor with the Institute of Government and Public Affairs at the University of Illinois at Springfield.

The choices the board makes have a substantial financial impact on many in the health care industry. Because of that, Mooney described the board as “a place that has attraction to those who are interested in making money.”

That apparently was the attraction that drew former board member Stuart Levine, and former Gov. Rod Blagojevich fundraiser, Tony Rezko to seek control of the board. The two used their influence over the body, which also considers proposals for new hospitals in Illinois, to pressure interested parties for kickbacks. Levine, a former board member, has pleaded guilty to corruption charges, and Rezko, a friend and adviser of former Gov. Rod Blagojevich, has been convicted on corruption regarding their dealings with the board.

Mooney said that past corruption on the board does not mean that there will continue to be problems under new leadership.

“Obviously some pigs went to that trough,” He said. “But that doesn’t mean that would always be the case.”

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.

Who
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.

What
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.”

Prepare for the stimulus

By Bethany Jaeger, with Jamey Dunn contributing
Jack Lavin prefers not to be called this state’s “stimulus czar,” but his first two days on the job as Gov. Pat Quinn’s chief operating officer (corrected) have been dominated by projections of the amount of money Illinois will capture from the $787 billion federal stimulus package.

But Lavin also responded to concerns that his appointment could be clouded by his past ties to former Gov. Rod Blagojevich and convicted felon Tony Rezko. Rezko was one of the people who recommended Lavin for his previous job as director of the Illinois Department of Commerce and Economic Opportunity during Blagojevich’s administration. Lavin and Quinn reportedly have been friends. Lavin pointed to his record. Here’s what he had to say:

I worked for those two men. They made some bad decisions. I had no part in any of those decisions, and I think my track record at DCEO speaks for itself. And it was a track record of working with business leaders, labor leaders, local governments, local mayors, legislators on both sides of the aisle, the congressional delegation. If you ask them, they will all say that we treated people with respect and integrity. We returned their calls, and that’s just the kind of thing and the kind of collaboration and partnership that we had at DCEO that we need now across all agencies, and working with the legislature, to be on the road to economic recovery.

Lavin testified to a special Senate committee this evening that Illinois could receive about $7 billion for programs and state operations, as well as about $2 billion for transportation-related and capital projects.

While the National Governor’s Association and the National Conference of State Legislatures ranks Illinois 6th in the nation for the amount of money it's estimated to receive in stimulus funds (projected to be about $8.8 billion), it’s clear that the incoming money won’t stretch far enough to cure the state’s $9 billion budget deficit next fiscal year. Estimates also are very fluid and vary.

The anticipation of the federal funds sparks a few concerns among legislators. 1) Lawmakers fear that the essentially one-time stimulus funds will build expectations and a false sense of hope that the state could maintain the increased funding levels once the federal money runs run out. 2) It’s widely acknowledged that the stimulus money could help, but it’s not even close to the amount of money that the state and service providers need to completely heal from the recession and consecutive years of deficits. 3) State agencies, particularly the Illinois Department of Transportation and the Illinois Environmental Protection Agency, are concerned about having enough staff on hand to handle stimulus-funded projects. Both said they could hire temporary workers or consultants to get through increased work load.

Lavin said while those concerns are valid, the stimulus package is designed to plug budgetary holes and avert layoffs, particularly in education. And then, in theory, as the state’s economy begins to recover, the state would be able to pay for some of these ongoing costs and new programs. (Some of the stimulus money will help expand or fund existing programs by using existing funding formulas, while other portions will create new programs.)

Higher education officials also expressed the concern that the $2 billion in stimulus funds could lead to a game of shuffle. Judy Irwin, executive director of the Illinois State Board of Higher Education, said there’s a possibility that money could be cut from education in the state budget to make up for shortfalls in other state operations, and then the federal stimulus money would be used to fill in the cuts to education. If that happened, schools would end up not getting much more money than they do now, she said.

Republicans and Democrats voiced concerns that schools in their home districts are expecting large funding increases that they may never see. “The frustration is that there really isn’t going to be a lot of money. …While it looks like there’s a lot of money going to schools, it’s really not going to be there,” said Sen. Dave Syverson, a Rockford Republican.

We’ll have much more about the details of the stimulus funds and how the state decides to divvy up the money. In the meantime, here’s a quick list of highlights, provided by Lavin’s testimony. Also, the state on Friday will launch a stimulus-specific Web site: www.recovery.illinois.gov.

General stimulus highlights for Illinois
About $7 billion for programs and state operations, according to Lavin’s estimates.
That includes funding for existing programs, using existing funding formulas:

• $2.9 billion for Medicaid
• $2 billion for school aid
• $110 million for workforce investment programs (to help people get trained to take on another job)
• $276 million for “green” jobs and weatherization programs

The stimulus also could bring in about $2 billion for infrastructure and capital, including:

• $935 million for rebuilding highways and bridges
• $371 million for transit assistance
• $260 million for wastewater and clean drinking water
• $222 million for public housing
• $24 for education technology
• $110 million energy programs, some of which can be used for operations and some of which can be used for capital

The state also will have a chance to compete for grants, including through the Department on Energy. That’s where Mattoon could compete for funding to rekindle the FutureGen project that got scrapped under President George Bush last year. Other projects of homeland security, broadband infrastructure and Army Corps of Engineers also could be eligible for grants.

Operation Board Game snags another piece

The U.S. attorney’s office in Northern Illinois is advancing its way around Gov. Rod Blagojevich’s inner circle, and Thursday’s indictment of GOP political bigwig William Cellini could be just another attempt to recruit one more person to testify against the governor, says Kent Redfield, political scientist with the University of Illinois at Springfield.

U.S. Attorney Patrick Fitzgerald indicted Cellini today on four charges of federal corruption. The 21-page indictment spells out a classic pay-to-play scheme of trading political campaign cash for state business. But Cellini’s attorney, Dan Webb of Winston & Strawn in Chicago, already combats the charges as “unfair and unjust” and based on shaky evidence.

The feds allege that Cellini was one of many people who conspired to rig state boards to hire investment firms that would, among other financial benefits, donate to the political campaign of Public Official A, previously identified as Blagojevich. The scheme allegedly happened between spring 2003 and summer 2005. Other conspirators already charged include Blagojevich insider Tony Rezko, former state board member Stuart Levine, attorneys Joseph Cari and Steven Loren and construction contractor Jacob Kiferbaum. Cellini’s indictment lists two more: Co-Conspirator A and a Teachers Retirement System Staffer A, yet to officially be identified. Co-Conspirator A is widely thought to be Christopher Kelly, who already was indicted on separate charges of tax fraud.

Cellini’s indictment alleges that he participated in a scheme to pressure Chicago businessman Thomas Rosenberg to give money to Blagojevich’s political campaign. The alleged ultimatum was that Rosenberg’s company, Capri Capital, had to raise money or donate to Blagojevich’s political fund to get a $220 million business deal with the Teachers’ Retirement System. The system oversees and handles investments for public pensions of teachers and administrators outside of Chicago. Private investment firms handle TRS assets. Through a statement, TRS administrators declined to comment but said the staff will “continue to uphold their fiduciary duty to our participants.”

According to Cellini’s indictment, the schemers decided it was too risky to continue pressuring Rosenberg when he threatened to go to authorities. But after that, Cellini, Rezko and others “discussed the possibility of removing the U.S. attorney for the Northern District of Illinois in an effort to stop any investigations into the co-conspirators and others,” according to the indictment.

Webb’s statement describes Cellini as “completely innocent of these charges, and he will fight this case because he has done absolutely nothing wrong.” It highlights the point that while a grand jury found Rezko guilty of 16 counts of corruption, they found him not guilty on one of the most serious charges of attempted extortion, relating to the charges involving Rosenberg. It states that Rosenberg testified in Rezko’s trial that “Bill Cellini never asked him for any money and that Rosenberg never paid any money to Cellini or anyone else.”

Redfield says if the assumption is that the U.S. attorney’s ultimate goal is to get all the way to Blagojevich, indicting Cellini makes sense. But there's no guarantee it'll work.

“At this point, Cellini thinks that this is not a slam dunk,” says Redfield. “And he’s willing to be indicted rather than to cooperate.”

And if the federal grand jury agrees with prosecutors’ assessment of Cellini’s involvement in the scheme, why would a successful, wealthy political insider at all levels of government work to secure funds on behalf of Blagojevich, a Democratic governor? Redfield says it’s all about power. “I don’t think it was so much about fighting for the governor as it was about power in the board and playing the game. He was as mover and shaker when [Jim] Thompson, [Jim] Edgar and [George] Ryan were governors. That’s what he knows and what he does … Power is addictive.”

Rezko's guilty verdict affects many

Tony Rezko is immediately headed to jail after a jury found him guilty on 16 of 24 counts of federal corruption charges, including mail fraud, wire fraud and money laundering. He will serve time until his sentencing, scheduled for September 3.

The Wilmette businessman was a top fundraiser and unofficial adviser to Gov. Rod Blagojevich, who was mentioned in the 13-week trial as “Public Official A” but who has not been charged with any wrongdoing.

This will be the gift that keeps on giving for those who oppose Blagojevich, and it will have widespread implications for the governor, the state legislature and federal prosecutors.

For starters, Rezko’s guilty verdict damages the governor’s credibility when he says he wants to “improve” recently approved ethics legislation, says Kent Redfield, political science professor at the University of Illinois at Springfield and director of the Sunshine database for campaign contributions. He says the verdict heightens the chance that legislators would override any changes the governor makes to the ethics reform. (See more here.)

The verdict also makes it more likely that legislators will continue to talk about impeaching the governor. The state Constitution gives the Illinois House the power to investigate impeachment, which already has started behind the scenes to “be prepared,” said House Speaker Michael Madigan last week during a Statehouse news conference. “We’ve already done research on impeachment. Our attorney, Mr. [David] Ellis, is chock-full of conclusions.” The Senate would have to approve an impeachment by a two-thirds majority.

Even if no impeachment trial unfolds, Redfield says the Rezko verdict damages the governor’s credibility and makes him weaker politically, as more people could be willing to take him on or ignore him.

It also could get worse legally. The guilty verdict gives federal prosecutors, led by U.S. Attorney Patrick Fitzgerald, leverage when trying to negotiate with Rezko to see if he’ll cooperate with ongoing investigations involving the governor’s administration and political campaign. “They really weren’t going to convict or decide whether or not to indict the governor based on these specific convictions,” Redfield says. “This gives them leverage along with the other charges that Rezko hasn’t even been tried on yet to try and see if he’s willing to make a deal.”

Rezko received two different indictments on the same day in October 2006. The first, which led to today’s verdict, linked him to an intricate scheme of so-called pay-to-play politics between 2001 and 2004. He was found guilty on some of the charges that he collaborated with at least five other people to use political clout to influence two high-powered state boards, allowing him to collect illegal fees and force political campaign donations. But the jury found Rezko not guilty on one of the most serious charges of attempted extortion, or illegally acquiring extra money from a company seeking to do business with the state.

The second indictment made allegations of business fraud involving a pizza franchise. Redfield says prosecutors could use those allegations to pressure Rezko to cooperate before the trial of Chistopher Kelly airs some more dirty laundry this fall. Kelly, a close Blagojevich friend and former campaign manager, was indicted in December 2007 for tax fraud by allegedly hiding more than $1 million of income over five years.

Prosecutors’ case against Rezko relied on one of the governor’s appointees, Stuart Levine, as the star witness. Levine pleaded guilty to mail fraud and money laundering in October 2006, but his testimony during Rezko’s trial revealed long-term drug abuse and an unreliable memory. Fitzgerald said in a Chicago news conference, seen from media coverage available on the Web, that he would not comment on Levine, as he could be a witness in other proceedings.

Rezko’s attorneys intend to appeal, according to news accounts.

The governor held a Chicago news conference later this evening. Here's the statement we received from the governor's office and the statement Blagojevich read during the news conference:

Tony Rezko is a friend and was a supporter. On a personal level, I am deeply sad for what has happened to Tony. I am profoundly sad for his children and his wife Rita. My heart goes out to all of them. The jury’s decision is yet another reminder that ours is a system of government that is ruled by laws, and not by men. I respect the decision made by the jury. As for me, I will continue to get up every single day to work as hard as I possibly can for the people. Tomorrow I will meet with the legislative leaders so that we can balance the budget in a way that is fair and helps people. And I am working on passing a capital bill that will stimulate our economy and create more than 500,000 jobs.

We've been here before

The Illinois Senate has passed an ethics reform package aimed at preventing pay-to-play politics that stain Illinois government. Even if the House approved the same exact language to prohibit state contractors and their families from donating to officeholders who grant the contracts, all eyes are on Gov. Rod Blagojevich to see not if, but how he’ll change the legislation to “improve” it.

“It’s a beginning, but it does not go nearly far enough,” wrote Rebecca Rausch, Blagojevich’s spokeswoman, in an e-mail after the Senate unanimously approved Sen. Don Harmon’s measure today. “We urge the House to take this opportunity to make the bill broader and more comprehensive.”

Harmon, an Oak Park Democrat, said during floor debate that he intentionally kept the scope of the measure narrow to avoid curtailing speech, or preventing people from donating to political campaigns to show support. He also did not include a provision that would have prevented contractors from donating to statewide political campaigns, which also fund constitutional officers. That provision was desired by Senate President Emil Jones Jr., who called it a "loophole."

Democrats and Republicans lauded the effort and said this is a good first step, but it’s only a first step, as Sen. Christine Radogno said. She’s a Lemont Republican and persistent voice on ethics reform.

Sen. Jeff Schoenberg, an Evanston Democrat, said, “We have moved a major boulder off the road to achieve the level of progress that we hope to achieve.”

But he said before getting too self-congratulatory, legislators need to keep in mind there’s more to do: better define the roll of independent advisors in the executive branch and provide greater accountability and transparency for how pension investment decisions are made. Both target problems under the microscope at the federal corruption trial of Tony Rezko, an unofficial advisor to the governor who is charged with rigging state boards to steer state contracts to political campaign donors. The jury is currently deliberating whether federal prosecutors proved its case against Rezko.

Senate Minority Leader Frank Watson said he hopes Harmon’s measure does win House approval — Harmon said he felt confident the other chamber would concur with his changes — but Watson cast doubt over whether the reform would become reality. He spoke directly about Blagojevich. “I think [the governor] ultimately has to sign it," he said. "We don’t need any help, we don’t need an amendatory veto, we don’t need him to make it better.”

An amendatory veto would send the measure back to the General Assembly, where the two chambers continue to function as two gears — sometimes turning in sync but most often stopping the other from moving. Harmon said he’s also confident the measure would gain enough votes to override the governor’s changes.

We’ll update you when we hear back from the House sponsor, Democratic Rep. John Fritchey of Chicago.

Beginning of the end?

By Bethany Jaeger
State legislators and the governor have 12 calendar days before the state Constitution requires them to approve a state budget for day-to-day operations. There’s a strange feeling in the Capitol, almost a calm before the storm, that casts a shadow over the possibility that they’ll adjourn on time. There’s always an end-of-session rush to try to meet the deadline or face the need to acquire more votes — read, Republican input. But there’s no telling whether the brooding storm will produce a workable budget plan or whether lawmakers will fail to compromise and take the state into another overtime session. Either way, the next two weeks will be chalked up with wish lists with controversial funding sources (or lack thereof). Budget hearings in the House start tomorrow, when the Senate also returns to the Capitol.

Race to the Capitol
The state’s operating budget is one challenge. The other is a capital program for infrastructure projects across the state, which has been held up for years. Legislators could soon receive a proposal for such a plan. Leaders are expected to meet with Gov. Rod Blagojevich’s appointed negotiators Tuesday, and they could unveil an actual proposal soon, says Rep. Jay Hoffman, a Collinsville Democrat and floor leader for the governor.

Local governments, school districts and transportation departments anxiously wait for billions of dollars of state capital funds. Representatives of the horse racing industry and the 40,000 employees it includes say they have a way to fund that capital plan.

The horse racing industry leaders are back at the state Capitol to plead for state assistance. This time they’re trying to convince lawmakers that if the state helps them, they can turn more profits and help fund a $20 billion infrastructure program for the entire state.

The argument is that horse racing in Illinois is losing horses, trainers, agribusiness, and lots of money tied to the industry to other states. Many of those states subsidize the industry and offer larger prizes for winning a race. Blagojevich signed a measure into law nearly two years ago that would have shaved 3 percent of the profits from the state’s casinos to support the ailing horse racing industry, but the measure immediately landed in court.

In addition to the challenge of deciding how to revive the horse racing industry, lawmakers have to weigh the complicated option of using gaming to fund a statewide capital plan. Numerous industry insiders and a few pro-gaming legislators held a news conference in the Statehouse Monday afternoon to pinpoint HB 4194 as the solution.

Democrats Reps. Lou Lang of Skokie, Bob Molaro of Chicago, Hoffman of Collinsville and Republican Rep. Roger Eddy of Hutsonville joined the packed news conference. The controversial measure, sponsored by Lang, would create a Chicago casino, expand slot machine positions at the state's nine existing riverboats and allow slot machines at horse racetracks. It’s estimated to generate $2 billion that could be used for capital. But not only would it take a while for the state to actually collect the money, no one really knows whether the plan could raise that much money given the slowing economy. While Lang said the measure would have enough votes to advance to the Senate, lawmakers hesitate to support any revenue-generating idea without a specific and trusted process for distributing that money. Trust wears thin in the Statehouse, to put it nicely.

Leaders plan to meet Tuesday with former U.S. House Speaker Dennis Hastert, a Republican, and Southern Illinois University President Glenn Poshard, a Democrat, who have toured the state to urge lawmakers to compromise on the governor’s $25 billion capital plan.

Hotel fraud?
By Patrick O’Brien
A chronically troubled hotel with deep Illinois connections is headed for more trouble.

State Treasurer Alexi Giannoulias said in a Statehouse news conference Monday that an internal audit showed former owners of a Springfield hotel cheated the state out of millions of dollars. He turned the case over to state and federal investigators to find out if any laws were broken.

“I have a feeling this is just the tip of the iceberg,” he said.

Giannoulias paid auditors to review financial records of the President Abraham Lincoln Hotel and Conference Center in Springfield after the state took over the hotel from local businessman Bill Cellini last spring. Cellini has been named but not accused of wrongdoing in the ongoing corruption trial of Tony Rezko, political fundraiser and advisor for Gov. Rod Blagojevich.

The state gave investors a multimillion loan to renovate the hotel in the 1980s, but they rarely reported a profit and, therefore, didn’t have to make loan payments most years.

Giannoulias said investors diverted about $2 million in hotel profits for personal use, including paying more than $700,000 for legal representation against the state. Under the terms of loan, the hotel conducted its own financial audits that were then turned over to the state for review, according to Giannoulias. This allowed the pocketing of hotel profits to go unnoticed, he said.

Giannoulias said investors owe $30 million on the loan, but since the state took over the hotel, it generated a $1.2 million profit in one year. He turned the case over to the Illinois attorney general and to the FBI.

Hell freezing over?

By Patrick O’Brien
An ethics reform package aimed at cleaning up state contracting practices, including alleged practices under the spotlight of a federal corruption trial of Tony Rezko, could make its way through the General Assembly very soon.

The so-called pay-to-play measure would ban political contributions to statewide officeholders from any business with more than $50,000 in contracts awarded by that office. The business’ contracts with the state would be canceled if they broke the law. Family members of the contractor also would be banned from donating to the officeholders.

Senate Majority Leader Debbie Halvorson, a Crete Democrat, all but dared Gov. Rod Blagojevich to veto or alter the bill in an attempt to “improve” it, as he has with other legislation. “Let him try it,” she said a Statehouse news conference Wednesday. Chicago Democratic Rep. John Fritchey, the House sponsor, vowed that his chamber would override a veto, while the Senate sponsors said they would attempt to get enough votes but couldn’t promise them.

A deal is a long time coming. Lawmakers have debated this version of ethics reform for three years. But the measure gained momentum this year because of the Rezko trial, which includes allegations of exchanging campaign contributions for state contracts and jobs. It's also an election year. “There’s a good chance it may be snowing in hell right now,” Fritchey said of the timing.

Sen. Don Harmon, an Oak Park Democrat and sponsor, said the bill will be heard in a committee next week. He said Senate President Emil Jones, a Chicago Democrat and Blagojevich ally, wanted the bill “improved” even more but that Jones wouldn't stop the measure from advancing to the House. Fritchey said he expected the proposal to move soon.

Working for the weekend?
By Patrick O'Brien
The Illinois House could be in Springfield all weekend to approve a constitutional amendment that would give voters the right to recall elected officials.

House Speaker Michael Madigan said members could be in the Capitol until Sunday as they wait for the Senate to pass its own version of a recall proposal. If the House approves the Senate version by Sunday, there’s a chance it could still land on the November ballot for voters to consider. If the House changed the Senate version, they would miss the May 4th deadline to approve constitutional amendments in time to appear on this year’s ballot. (To be clear: The question on the ballot would ask voters whether the state should change its Constitution to allow a recall, not whether they should recall the current governor)

The Senate proposal would allow voters to recall elected officials, including local politicians and judges. It also would link the lieutenant governor and the governor, which Sen. Rickey Hendon said was because the two officeholders are elected in the general election together (although they're not considered running mates in the primary elections). Under Hendon's proposal, if the governor were recalled, the lieutenant governor would be, too. The House version, sponsored by Rep. Jack Franks, a Woodstock Democrat, is directed only at statewide officeholders, not local officials and judges. That measure is stuck in the Senate.

Missed opportunities

Gov. Rod Blagojevich escaped what would have been a media frenzy today by sneaking around Springfield for the annual Governor’s Prayer Breakfast and, according to the first lines of his speech, holding another meeting in the governor’s mansion about a state capital plan. His office provided audio of the nine-minute speech, and spokeswoman Rebecca Rausch said he then met with labor leaders about capital. He was back in Chicago by noon. The Statehouse press corps didn’t know about the events until after the fact. The quick in-and-out allowed him to avoid reporters who would have followed his every move to ask him to respond to Tuesday’s news — a political insider pleaded guilty and indicated that Blagojevich knew of an illegal deal to exchange a high-level state job for campaign contributions.

Ali Ata, former executive director of the Illinois Finance Authority, pleaded guilty to lying to federal investigators and fudging his federal income tax return. The federal probe is separate from but related to the case called “Operation Board Games,” involving Antoin “Tony” Rezko’s alleged influence in state business and campaign fundraising. Here’s that indictment, again.

Ata’s plea agreement indicates Rezko was instrumental in hiring Ata as executive director of the Illinois Finance Authority in exchange for his hefty contributions to Blagojevich’s political campaign. The state agency formed in 2004 and finances about $3 billion in projects for economic development each year.

The plea agreement said Ata met with Rezko and “Public Official A,” identified as Blagojevich, before Blagojevich was elected governor in 2000 or 2001 to talk about supporting his political campaign. They later talked about granting a state position in return.

Donations came in chunks as large as $25,000, as seen in Illinois State Board of Elections records. You can search all of Ata’s campaign donations here. Type in his name and scroll down to see his July 25, 2005, donation of $25,000 to Friends of Blagojevich.

In one conversation, Ata said he would accept a position within the administration, and Blagojevich allegedly said it had “better be a job where [Ata] could make some money,” according to the plea agreement. Ata allegedly was told he could head the Illinois Finance Authority as long as he agreed to report to Rezko. He officially was appointed in January 2004.

The plea agreement says Ata believed that he needed to please Rezko to keep his job. That involved donating about $125,000 to Rezko between 2003 and 2004, while he led the state agency.

Ata faces up to eight years in federal prison and up to $500,000 in fines. He’s fully cooperating with federal authorities.

Public reaction
The more that unfolds in the federal investigations surrounding the Blagojevich Administration, the more ears might perk up at the sound of “recall.” That would allow voters to kick someone out of office, but it requires a change in the state Constitution, either through an individual amendment or through a constitutional convention. Support for both could be growing, according to a survey by the Institute of Government and Public Affairs at the University of Illinois at Springfield. A convention would allow elected delegates to rewrite the entire state Constitution. And a majority of the public would have to approve the new charter.

Debate within the Capitol includes whether such emotional voting would lead to undesirable consequences in the long run. Whether the public likes or dislikes Blagojevich, changing the state Constitution to allow a recall of constitutional officers or state lawmakers — or any elected official, as proposed in the state Senate — could forever change the way elected officials behave. Supporters say that change is good because it would remind public officials that they always are accountable to the people who elected them. Opponents argue that change is bad because it would make public officials even more paranoid about voter dissatisfaction and, in turn, lead them to do whatever it takes to ensure they’re reelected.

For more information about a constitutional convention, see previous Illinois Issues articles:

November 2007 feature about Con-Con logistics, by Pat Guinane

December 2007 Q&A with Wayne Whalen, a delegate in the 1969-1970 Con-Con

Illinois Issues Blog entries about Con-Con

See more in the upcoming Illinois Issues magazine in the first week of May.

Rezko redux?

By Patrick O’Brien
As the presidential race remains heated across the country, Tony Rezko’s federal corruption trial still could play a role in determining the Democratic nominee. U.S. Sen. Barack Obama is still trying to distance himself from Rezko. He even returned direct and indirect campaign contributions from or related to the political networker to shed a real or perceived relation.

Rezko is scheduled to go to trial March 3, the day before large primaries in four states, including Texas and Ohio, that should go a long way in determining the presidential nominee.

Former Gov. Jim Edgar says he doesn’t think the Rezko affair will hurt Obama as much as it will plague embattled Democratic Gov. Rod Blagojevich. Rezko has been a longtime friend and adviser to Blagojevich.

Edgar says he hasn’t seen anything that he would consider a “smoking gun” between Obama and Rezko, adding Rezko has donated to a lot of politicians. “I took a campaign contribution from Tony Rezko, and I don’t remember him ever asking for anything,” Edgar said Thursday after sitting on a post-election panel sponsored by the Institute of Government and Public Affairs and the Center for State Policy and Leadership in Springfield.

“We all have acquaintances and friends where they’ve done something we wished they didn’t do, but that doesn’t mean we’re in the same boat as them,” Edgar said.

Pundits believe the upcoming primary schedule is much more favorable to Obama than to his opponent, Sen. Hillary Clinton, but as the trial date nears, Obama’s links to Rezko are sure to be scrutinized again by the national press. In addition to being a campaign contributor, Rezko also sold land to Obama adjacent to his Chicago home, a deal Obama later admitted was a mistake. The deal occurred while U.S. Attorney Patrick Fitzgerald was investigating Rezko for fraud and extortion.

Democratic Sen. John Sullivan of Rushville, who has worked on Obama’s behalf in Iowa, Minnesota and South Carolina during the primaries, also spoke on the panel and said he didn’t think the Rezko story would mean anything to voters from out of state. Sullivan said the “average person out there” doesn’t know who Rezko is and that media attention to the case has exceeded the public’s interest.

Kent Redfield, director of the Sunshine Project and interim director of the Institute for Legislative Studies at the University of Illinois at Springfield, has another perspective. He says the incident “raises some doubts nationally because they don't have the context.” He adds that Illinois voters are more used to “rough and tumble politics” than voters in other states.

Inner circle

A federal investigation stung another member of Gov. Rod Blagojevich’s inner circle without mentioning the governor. Christopher Kelly, the governor’s close friend, former campaign manager and early advisor on gaming issues, was federally indicted for tax fraud by allegedly hiding more than $1 million of income over five years. The indictment says he used corporate funds from his roofing and consulting firms to pay illegal gambling debt and bookies.

The governor issued a statement: “Chris Kelly is my friend. I am saddened to hear these allegations about Chris's personal life. I know the pain it must be causing him and his family. My thoughts and my prayers are with them during this difficult time. In fairness to Chris, I believe it is important to let the legal process play out and not rush to judgment.”

Kelly’s indictment was coupled with an expansion of a separate investigation that indicted Antoin “Tony” Rezko, Blagojevich fundraiser and businessman, in October 2006. Rezko pleaded not guilty to allegations that he received kickbacks and illegal fees from investment firms seeking business with the state.

Breathe

Many journalists held their breaths today as they waited to hear how close a federal investigation of state contracting schemes would come to Gov. Rod Blagojevich. In a Chicago federal court building this afternoon, one of the governor’s appointees, Stuart Levine, pleaded guilty to mail fraud and money laundering.

Levine, a significant GOP fund-raiser, was appointed by former Gov. George Ryan to sit on two regulatory boards, the Teachers Retirement System, which pays the pensions of teachers outside of Chicago, and the Health Facilities Planning Board, which oversees construction projects of hospitals and other medical buildings. He was originally appointed to the planning board during Gov. Jim Edgar’s Administration and was reappointed by Ryan, then Blagojevich.

Levine’s plea agreement lays out details of an intricate scheme described in the indictment of Levine and Antoin “Tony” Rezko, Blagojevich's political advisor (see more on our news page). Levine worked with at least five others in schemes between 2001 and 2004.

The details are many, but, alas, reporters see only a slew of unnamed individuals — A through L and investment firms 1 through 9. By using code names, prosecutors haven’t yet tipped their hands on how close the schemes come to the governor’s inner circle.

Levine has been cooperating with the feds for months, which could reduce his sentence, and he won’t be sentenced until the ongoing investigation concludes.

There are a lot of people involved, and a lot more details will rain down before it’s all over. In short, reporters aren’t the only ones holding their breaths this fall.

Rezko repercussions

In the aftermath of a long-rumored federal indictment of Antoin “Tony” Rezko this week (see our Illinois Issues news item), Gov. Rod Blagojevich is being asked to answer questions about his chief fundraiser, advisor and friend.

Federal prosecutors announced Rezko’s two indictments (see 1 and 2) Wednesday afternoon, detailing pay-to-pay schemes with at least five others who allegedly used their positions on public boards to pressure investment firms into paying illegal fees and making political contributions.

The governor responded in a press conference Wednesday night, streamed live on the Internet. Blagojevich said, “On a personal level, what is so disappointing to me and so surprising to me is that he would engage in a criminal conspiracy to personally enrich himself, and do that behind our backs and then repeatedly deceive us, deceive me, lie to us and reassure us that the rumors about him weren’t true.” He also said he would donate about $60,000 to $70,000 of Rezko’s direct campaign contributions to charity.

Meanwhile, candidates for Illinois' legislative seats and statewide offices are jumping at the chance to claim their righteousness this election season.

The Republican gubernatorial candidate, three-term state Treasurer Judy Baar Topinka, stopped by the Capitol Thursday with her running mate, DuPage County state’s attorney Joe Birkett, to say the governor should answer questions about the gifts he received from Rezko. She also touted her ethics plan.

“Things do not have to be this way,” Topinka said. “We can have good, honest government in Illinois. There’s no reason why Illinois has to be different from other states on that front. I just want to be a governor who will do a good job and do the right thing.”