Governor's adviser charged in fraud cases as Nov. 7 election nears

Democratic Gov. Rod Blagojevich's lead in next month's gubernatorial election became less assured Wednesday with the fraud indictment of one of his top fundraisers and private advisers, Antoin "Tony" Rezko.

The 51-year-old businessman from Wilmette engaged in kickback schemes with a Republican ally whom he got re-appointed to an influential state board, federal prosecutors in Chicago said. The Republican, Stuart Levine, was a Blagojevich appointee to the Teachers Retirement System and also a member of the state board that reviews hospital construction projects.

The 60-year-old Levine, a Highland Park resident who resigned from the panels, was charged previously in an earlier version of the indictment with other defendants. He is cooperating with authorities.

Between spring 2003 and at least July 2004, Rezko and Levine sought millions for themselves and others through kickbacks from firms that wanted to do state business, said U.S. Attorney Patrick Fitzgerald, who characterized the shakedowns as a "pay-to-play scheme on steroids." He said their efforts netted only $250,000, in part because the FBI closed in on Levine before all of the transactions could be realized.

"It never ceases to amaze me, the amount of greed you find in these investigations, particularly amongst people who are affluent," Robert Grant, Chicago 's top FBI official, said during a news conference with Fitzgerald. "Abusing the public trust is not a game."

In a second, unrelated grand jury indictment unsealed Wednesday, Rezko also was charged with fraudulently obtaining $10.5 million in loans for a chain of pizza restaurants in the Chicago and Milwaukee areas.

The higher-profile indictment involving Levine says Rezko used his "relationship with certain state officials" to ensure the pair was able to influence the two state boards on which Levine served. Rezko secured Levine's re-appointment to TRS, which was approved by a "high-ranking state official," the indictment said. Two other board members were appointed "who voted with Levine on matters of interest to Rezko and Levine," the document said.

The TRS board manages more than $35 billion in retirement assets for Illinois teachers outside the Chicago school system. Around April 2004, Rezko and Levine told a firm seeking $220 million in investment funds from TRS that the company would have to pay $2 million in sham consulting fees or make a $1.5 million contribution to "a certain public official," the indictment said.

Fitzgerald declined to say whether Blagojevich, a first-term governor who seeks re-election on Nov. 7, is among the several unnamed figures in the 65-page document. But a source familiar with the case said the governor and another member of his "Kitchen Cabinet" members are referenced anonymously.

A relaxed-looking Blagojevich, at his own news conference Wednesday evening, said the indictment does not accuse him of having knowledge about any wrongdoing. He said his campaign fund would donate to charity an estimated $60,000 to $70,000 in Rezko contributions; Rezko is thought to have indirectly raised millions for Blagojevich.

Blagojevich said he has not talked to Rezko in "several months" but previously received assurances from his supporter that he was not involved, as rumors suggested, in misconduct.

"If, in fact, these allegations related to Tony are true, he betrayed my trust, he lied to me, he deceived me," the governor said at his campaign headquarters. "But a lot more important than that, he violated the public trust, and I feel a tremendous sense of personal betrayal."

Blagojevich said Rezko recommended good individuals, such as state economic development director Jack Lavin, for positions in his administration. Specifically on Levine, the governor again said he re-appointed the Republican in a spirit of bipartisan cooperation.

Rezko reportedly has been out of the country in recent days. An arrest warrant was issued for him, and he must appear in court for an arraignment hearing Friday in U.S. District Court in Chicago. In the TRS case, he faces 24 criminal counts, including charges of mail and wire fraud, aiding bribery, money laundering and attempted extortion.

A single count of mail fraud potentially carries a prison sentence of 20 years. Prosecutors also seek $250,000 in forfeiture from Rezko. His defense attorney, Joseph Duffy, did not return a phone message seeking comment.

Asked about the timing of the indictment, Fitzgerald stressed that the U.S. Attorney's Office in Chicago - which also is investigating the Blagojevich administration for allegations of hiring fraud - was not trying to influence the outcome of the Nov. 7 election. The contest pits Chicagoan Blagojevich against Republican Judy Baar Topinka and Green Party nominee Rich Whitney.

"We're not going to stop momentum or take a siesta for election season," Fitzgerald said. "We're just going to bring the cases. When they're ready to go, they go. We're not doing it for political reasons, and we're not going to not do it for political reasons."

Topinka's campaign, which lags behind Blagojevich in fundraising and in opinion polls, sought to gain an advantage.

"I certainly hope that voters understand that this indictment is a reflection of the way Gov. Blagojevich conducts business," Topinka's running mate, Lt. Gov. candidate Joe Birkett, said. "I hope public corruption is on the radar screen for voters. The governor (previously) said he stood by Tony Rezko and wasn't even going to ask him questions about the (kickback) issue.

Some political experts agreed that Topinka could get a boost, but they cautioned that the three-term state treasurer from Riverside may not have the money, time or temperament to capitalize on the issue with just four weeks to the election.

"If Topinka is able to present this as part of a larger pattern, then I think she's got a chance," said Kent Redfield, a political scientist at the University of Illinois at Springfield. "She needs the money to put it out there. I'm pessimistic that she's going to be able to do it."

"Typically the way you seize on a development like this is to buy the message and shape it through TV ads," said Mike Lawrence, press secretary to former Gov. Jim Edgar. "I think they have to get this into a TV commercial if they have the money."

With her limited funds for TV advertising, Topinka has launched ads that attack Blagojevich's ethics.

There have also been numerous news stories detailing allegations of questionable contracts, hiring practices and other ethical lapses in the Blagojevich administration. Yet, a recent Copley News Service poll showed voters don't think Topinka is substantially more ethical than Blagojevich.

Another problem for Topinka, the experts said, is that months of negative TV ads by Blagojevich have created a negative impression of Topinka.

"She hasn't been able to defend herself, much less give people positive reasons for why 'I'm better than this guy,'" said Charles Wheeler III, director of the public affairs reporting program at UIS. "The lesser of two evils is not a compelling motivation to energize people and get them to the polls."

After watching Topinka's campaign for months, Roosevelt University political scientist Paul Green said he gives Topinka only about a 50-50 chance of being able to capitalize on the Rezko indictment. Short of an indictment of the governor himself, Green said, the charges against Rezko are the closest link between Blagojevich and corruption allegations.

"I don't think it can get much closer to him," Green said. "She has time to make this issue stick. When someone gives you raw meat, you've got to chomp on it."

The Teachers' Retirement System issued a news release Wednesday that assured members their assets are safe.

"We are steadfast in our mission to protect the retirement security of TRS members who entrust us with their financial futures," TRS executive director Jon Bauman said in a written statement. "Rezko and Levine are accused of using pay-for-play schemes to enrich themselves and others instead of serving in the best interests of the teachers and citizens of Illinois. Their actions are shameful."

Doug Finke of Copley News Service in Springfield contributed to this report.