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Blagojevich Arrested As State Readies $1.4B

CHICAGO - Illinois Gov. Rod Blagojevich and his chief of staff, John Harris, yesterday were arrested and hit with federal corruption charges in a stunning complaint that alleges the governor engaged in pay-to-play schemes and conspired to trade or sell his selection of a Senate replacement for President-elect Barack Obama for personal gain.

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The governor's arrest comes as the state is preparing tomorrow to sell $1.4 billion of general obligation certificates to speed up payments on a $4 billion backlog of bills. State budget director Ginger Ostro sought to calm any potential investor concerns by distributing an addendum yesterday to the preliminary offering statement.

The "official notice" alerting potential investors to the governor's arrest and charges said: "None of the allegations have any relationship to or impact on the state of Illinois' cash position, the need for short-term financing, or the ability of the state to repay the short-term financing."

Blagojevich, who turns 52 today, and Harris, 46, each were charged with conspiracy to commit mail and wire fraud and solicitation of bribery in a two-count criminal complaint unsealed yesterday following their arrests, according to U.S. attorney for the Northern District of Illinois Patrick J. Fitzgerald. In an appearance before U.S. Magistrate Judge Nan Nolan, both men were released on their own recognizance.

"This is a sad day for government. Gov. Blagojevich has taken us to a truly new low," Fitzgerald said at a news conference with Robert D. Grant, special agent in charge of the Chicago office of the Federal Bureau of Investigation. "The breadth of corruption laid out in these charges is staggering. They allege that Blagojevich put a 'for sale' sign on the naming of a United States senator; involved himself personally in pay-to-play schemes with the urgency of a salesman meeting his annual sales target; and corruptly used his office in an effort to trample editorial voices of criticism."

"The conduct would make Lincoln roll over in his grave," he added, calling the governor's alleged activities a "political corruption crime spree."

Grant said he woke the governor up this morning with a phone call to his home on Chicago's north side at 6 a.m. Central Time to inform him federal agents were outside his door waiting to take him into custody. Grant said during the news conference he couldn't say if Illinois was the most corrupt state - a question he had considered, given that former Gov. George Ryan was convicted of corruption in 2006 - but he finished by saying "it's certainly one hell of a competitor."

The Democratic Blagojevich - first elected governor in 2002 on the platform of "no more business as usual" - remains the governor although local elected officials and all five state constitutional officers called on him yesterday to resign and hand over the office to Lieut. Gov. Patrick Quinn. If he does not resign, impeachment proceedings are expected.

State Senate President Emil Jones, D-Chicago, and House Speaker Michael J. Madigan, D-Chicago, said they would convene special sessions on Monday to act on legislation that would provide for a special election to fill Obama's Senate seat.

The 76-page FBI affidavit - which includes details of an alleged scheme involving a proposed Illinois Finance Authority financing for the Tribune Co. in connection with its sale or renovation of Wrigley Field - stunned the Illinois political universe. It also drew national and international attention because of the allegations involving Blagojevich's alleged abuses - some caught on federal wiretaps -in filling the Senate seat recently vacated by Obama.

Most astonishing to many is Blagojevich's brazen behavior in recent months as it has long been clear from public court documents and testimony that federal authorities were closing in on him as part of an ongoing five-year-old corruption probe known as Operation Board Games.

Past allegations have focused on pay-to-play schemes in which cronies of Blagojevich sought campaign contributions for the governor and personal profit through their power to influence the awarding of state pension investment business, board appointments, and jobs.

Allegations included in the affidavit recount testimony from the trials of convicted defendants Antoin Rezko, Blagojevich's former fundraiser, and Stuart Levine, who leveraged his positions on a state investment board and on a state regulatory agency that governs hospital construction projects for personal gains and campaign contributions, and convicted defendant Ali Ata, the former head of the IFA. Ata testified at Rezko's trial earlier this year that the governor gave him his job in exchange for campaign contributions.

The federal affidavit, however, focuses on more recent alleged criminal activities - information garnered as recently as earlier this month from taped recordings of Blagojevich - that show he accelerated his attempts to accumulate $2.5 million in campaign funds before new ethics legislation takes effect Jan. 1.

The indictment made public for the first time the allegations related to the Senate appointment and charges that the governor attempted to withhold state assistance to Tribune in connection with its sale of Wrigley Field - home of the Chicago Cubs - in an effort to persuade the Tribune to fire editorial board members critical of him.

In making clear at the news conference yesterday that the investigation remains ongoing and authorities have many avenues still to pursue, Fitzgerald said the government sought to act now because it was aware of ongoing criminal activity and the Senate appointment was expected to be made in the coming weeks.

THE CHARGES

On the Senate seat allegations, the affidavit provides details of conversations the governor had with Harris and other unnamed officials between Nov. 3 and Dec. 5 on potential candidates and their ability to not just benefit the state but also the governor and his wife.

Blagojevich considered appointing himself, believing such a move would improve his resources if indicted, allow him to remake his image, launch a possible run for president in 2016, help his wife win lucrative board appointments, and help him generate speaking fees.

In a Nov. 5 recording, Blagojevich said to an adviser: "I've got this thing and it's [expletive] golden, and uh, uh, I'm not just giving it up for [expletive] nothing. I'm not gonna do it," according to the affidavit. He was also considering pursuing the Health and Human Service cabinet post or an ambassadorship.

In a Nov. 11 conversation with Harris, the governor said he knew Obama wanted "Senate Candidate 1." Obama had publicly endorsed his friend and adviser Valerie Jarrett for the position, although she soon withdrew her name from consideration. The governor said on tape, allegedly, "they're not willing to give me anything except appreciation."

Blagojevich, through intermediaries, sought campaign contributions from one unnamed candidate known as Senate Candidate 5.

In a Dec. 4 conversation with Harris, the affidavit said the governor said his choice would be based on three criteria "our legal situation, our personal situation, my political situation." Publicly, the governor was saying when asked by reporters during that time that his choice would be to pick the best candidate to serve the people of Illinois.

The affidavit also provides details of a scheme caught on tape alleging the governor sought to use his power and ability to influence aide to the Tribune Co. to pressure the paper to fire critical editors. The Tribune Co.was exploring the possibility of seeking financing assistance from the IFA as part of its efforts to pay for the renovation or sale of Wrigley Field.

Harris allegedly told the governor in a Nov. 6 call that the Tribune was seeking a tax mitigation scheme under which it could save $100 million capital gains taxes if the IFA would take title to the ballpark. The affidavit said the governor was recorded directing Harris to tell Tribune associates that assistance would be withheld unless members of the editorial board who have been sharply critical of the governor were fired.

In a later conversation, Harris told the governor that the Tribune's financial adviser had assured him changes would be made to the editorial board. Blagojevich then allegedly told Cubs representatives he supported the IFA transaction and said it important to get done at the agency's December or January meeting while his appointees remained there, as he was contemplating leaving office.

The IFA said in a statement yesterday it was preliminarily approached by the Tribune and the Cubs about a potential taxable bond financing involving Wrigley Field. The IFA was one of several alternatives that were being evaluated by the Tribune in the last year or more. No application was ever formally submitted to the IFA.

The Tribune agreed to delay running an exclusive story until last week that former Blagojevich aide John Wyma was cooperating with federal authorities and had taped the governor, giving federal authorities more time to continue their probe, Fitzgerald said.

The various pay-to-play charges aimed at raising money include allegations that in October the governor and Harris and others sought help in raising $100,000 in campaign contributions from a business seeking state help. Another contractor who expected to win work associated with the Illinois State Toll Highway Authority's newly approved $1.8 billion bond-financed construction program was allegedly expected to raise $500,000.

The governor also allegedly sought through an aid a $50,000 contribution from the chief executive officer of Children's Memorial Hospital. The hospital was in line to receive an $8 million grant When the contribution was not received, the governor discussed with an aid possibly rescinding the grant.

In a significant development that shows the escalation of the ongoing probe, federal investigators began recording the governor in his personal office and a conference room at his campaign office - Friends of Blagojevich - after receiving court approval on Oct. 21. The government received approval on Oct. 29 to record conversations on Blagojevich's home line.

On tape, the governor told a lobbyist "good job" on his efforts to collect a contribution from an unnamed contributor who stands to benefit from legislation sitting on the governor's desk that directs a percentage of casino revenues to horse tracks.

REACTION

While Blagojevich shares the same party label with the state's other constitutional officers and most local Chicago and Cook County officials, he has long been estranged from many.

Both Democrats and Republicans yesterday appeared stunned by the breadth of the allegations and most called for him to step down. Attorney General Lisa Madigan said in a statement: "The conduct is especially outrageous and truly demonstrates a new level of corruption given that Gov. Blagojevich has been the subject of ongoing criminal investigations for years." Madigan added that she is reviewing possible legal steps if the governor does not resign.

Illinois Comptroller Dan Hynes said: "While this investigation is still ongoing, our state cannot afford to remain engulfed in this unfolding scandal. Our government's ability to deal on a daily basis with the fiscal and economic crises we currently face demands leadership and integrity. Our governor cannot provide either, and he needs to do what's right for the people of Illinois."

State Rep. Jack Franks, D-Woodstock, said if the governor does not step aside he would seek impeachment hearings.

Chicago Mayor Richard Daley said at a news conference when asked "If it's true, it's a very, very sad comment because the selection of the U.S. senator is vitally important to the future of this state and of this country."

Illinois Treasurer Alexi Giannoulias said: "Today's indictment further demonstrates that we need to reform a deeply flawed system where political money is traded for favors and government is clearly for sale."

Michael Madigan, speaker of the Illinois House, said in a statement: "Today's events are shocking and disappointing. It represents a new low for conduct by public officials. I believe in the rights of individuals to due process, but I also believe action must be taken to avoid certain functions of state government from being irrevocably tarnished by Governor Blagojevich's continued exercise of power." He added that he would discuss impeachment with House Republican leaders.

The governor's press office released a statement saying: "Today's allegations do nothing to impact the services, duties or function of the State. Families will continue to receive healthcare, seniors and persons with disabilities the support and services they need, the hundreds of thousands of unemployed Illinoisans will still receive assistance. Our state will continue to ensure health, safety, and economic stability for the citizens of Illinois."

At a news conference with former Vice President Al Gore, Obama appeared hesitant to say much on the subject: "Obviously, like the rest of the people of Illinois, I am saddened and sobered by the news that came out of the U.S. attorney's office today," he said, according to published reports. "But as this is an ongoing investigation involving the governor, I don't think it would be appropriate for me to comment on the issue at this time."

He added: "I had no contact with the governor or his office and so I was not aware of what was happening. And as I said, it's a sad day for Illinois. Beyond that, I don't think it's appropriate to comment."

Fitzgerald yesterday said federal officials are not making any allegations that Obama knew of shakedown attempts.

If convicted, Blagojevich faces a maximum penalty of 20 years in prison on the conspiracy to commit mail and wire fraud and 10 years on the solicitation of bribery. Each count carries a maximum fine of $250,000.

Blagojevich’s attorney Sheldon Sorosky said the governor would fight the charges and had no plans to resign. “"He didn't do anything wrong," Sorosky said following the governor’s arraignment.

Caitlin Devitt contributed to this story.

 

 

 

 

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