Prosecutors Layout Tony Rezko's Kickback Schemes

The AP reports:

The two men probably looked like any other executives chatting at the posh Standard Club in downtown Chicago.

But these men, federal prosecutors say, were going over a scheme that involved what they hoped would be a $10 million payday just weeks away - ill-gotten cash from firms hoping to handle millions of dollars in investments from a downstate teachers' pension fund and other Illinois state boards.

One of the men, Stuart Levine, a trustee on the pension fund board, was nicknamed "the rabbi." The other was Antoin "Tony" Rezko, friend and political adviser to Gov. Rod Blagojevich. Levine had brought a chart with the details and he figured the alleged scams would bring them each $3.9 million, according to prosecutors. He was excited after talking it over with Rezko.

"Full steam ahead and whatever I want," Levine told an alleged accomplice the next day, according to a government wiretap of his phone calls from April 2004.

Rezko faces a highly anticipated Feb. 25 trial on charges of money laundering, attempted extortion, fraud and aiding bribery. Rezko's close ties to the governor have heightened interest in the case, though Blagojevich has not been accused of wrongdoing.

A 78-page document prosecutors filed last month outlining their case against Rezko sounds like stuff from a pulp mystery novel.

The tale it weaves focuses on efforts to illegally skim millions in bogus "finder's fees" from various firms, and it features not only the rabbi. There's a pal nicknamed "the pope" and "the big guy" - Blagojevich - who on a private plane ride allegedly tells Levine: "You stick with us and you will do very well for yourself."

There are sham contracts and plans for straw companies to receive funds. One $10,000 payout goes into a political campaign account, prosecutors say. There's a cutesy literary reference to the "Bobbsey Twins" - Rezko and Christopher Kelly, the governor's chief fundraiser who was indicted last month on charges of filing false tax returns.

There's also a dizzying array of unidentified "co-schemers" and "individuals" - including an investor who pushes back after being approached for either a $1.5 million campaign contribution to Blagojevich or an unnecessary consulting fee of $2 million.

The alleged schemers back off, prosecutors say, though Rezko vows the investor never will do business with Illinois boards again and that the man "means nothing" to Blagojevich.

Attorneys for Rezko and Kelly did not return phone calls seeking comment. Rezko attorney Joseph Duffy has said previously his client will be vindicated.

Levine, a Teachers Retirement System trustee at the time, has pleaded guilty to fraud and is a likely witness at the upcoming trial. His relationship with Rezko is the central theme of the prosecution's filing.

Rezko is a Syrian immigrant who built a real estate and pizza empire based out of Chicago. He found himself in the governor's inner circle when Blagojevich took over and Levine needed his help. A Republican patron who lavished his wealth on Blagojevich's predecessor and his 2002 opponent, Levine had been appointed to the TRS board and a regulatory body, the Illinois Health Facilities Planning Board, by Republicans and hoped Blagojevich would reappoint him.

In a telephone conversation taped by the government, Levine's reason for "accommodating" the new administration through Rezko was simple.

"He could knock me out and I need his people to get the stuff done," Levine said, meaning he could be bounced off the boards without Rezko's backing. "But I brought him stuff that he didn't know existed and he's makin' money."

Levine told Rezko at the Standard Club meeting that they could split nearly $8 million to start the scheme, according to the government.

They were just weeks away from kickoff, when Levine planned to orchestrate $660 million in investments by TRS, which invests pensions for public school teachers outside Chicago. The businesses getting those investments would pay kickbacks disguised as then-legitimate finder's fees to fake consultants who brought TRS and the investment firm together.

According to the government filing, Levine expected $9 million in fees that day, and was planning on another $1 million kickback through his seat on the health facilities board.

Levine told Rezko they could split $7.8 million; the rest of the money apparently would have to be shared with co-schemers.

But the jig was up before it began, according to the government. The TRS meeting was scheduled for May 24, 2004. The FBI came knocking May 20, and Levine suddenly lost his appetite for intrigue, prosecutors contend.

TRS voted to prohibit most finder's fees in 2005, after Levine's arrest.

Levine became a TRS trustee in 2000. Appointed by former Gov. George Ryan, Levine had attempted diverting finder's fees in the past, according to his plea agreement.

But Blagojevich came in, promising to clean house, and Levine knew his time was short. He would not get reappointed to the TRS board unless he shared the spoils with Blagojevich's people. And soon, with board appointments expiring, Rezko would be able to stack the boards with his candidates, Levine said. After the April 2004 meeting with Rezko, he thought his new friend was grateful to have Levine as a "player."

"I could have succeeded without him, but of course only for a limited period of time," Levine said in a taped conversation. "He said, 'Well, what do you need to do to proceed?' I said, 'Your permission.' (He) loved that."

All of it was falling into place. The prosecution filing lays out six deals with TRS investment firms Levine was orchestrating that he hoped the board would approve at the May 2004 meeting.

Levine and Rezko, the filing says, also wanted to wring some cash out of the Health Facilities Planning Board, which approves plans for new or expanded medical facilities. They were lining up votes for a Lake County hospital - which board staff recommended denying - in exchange for a $1 million kickback from the builder.

Levine even went so far as to intervene during the voting. When two members holding needed "yes" votes balked, Levine allegedly pulled them aside during a recess, telling one, "Tony wants this today."

The kickback was never paid. But one piece of the scam did work. A $50 million TRS investment in August 2003 brought a $375,000 finder's fee, $250,000 of which allegedly went to a Rezko associate.

Prosecutors claim that at least $10,000 of that went as a contribution to a political candidate tied to Rezko.

TRS executive director Jon Bauman told The Associated Press that TRS never agreed to any "inferior investments." Bauman believes he is identified as "Individual N" in the prosecution filing - a TRS staffer whom prosecutors claim was pressured by Levine to give more favorable reviews to some firms.

Bauman said it's true that prospective contractors get looked at more quickly if a trustee suggests them, but every firm that applies for an investment is held to the same standard. He has said TRS staff rebuffed "extreme pressure" to back subpar proposals, but would not comment specifically on Levine's involvement.

The strange political hybrid that allegedly masterminded the scheme began when Levine and another supposed conspirator approached Rezko and Kelly in 2003 about Blagojevich's proposal to consolidate several pension funds, including TRS, according to the filing. The merger would have left Levine on the street.

Rezko and Kelly stopped the merger and made sure Levine was reappointed when his term ended in 2004 in exchange for a piece of the action, the government says.

Neither Blagojevich nor Kelly is identified by name in the document, but instead are referred to as "Public Official A" and "Co-Schemer B," according to attorneys and a person familiar with the investigation who asked not to be quoted by name because of grand jury secrecy.

Blagojevich plays an intimate role in the filing. After reappointing Levine to the health board, Levine thanked him during the plane ride. Blagojevich instructed Levine to discuss board matters only with Rezko or Kelly, but then urged him to "stick with us" and he would benefit.

Blagojevich also asked former Democratic national fundraiser Joseph Cari, previously convicted in the scheme, to raise money for him, saying he could reward campaign donors with "contracts, legal work and investment banking," the prosecution's filing says. Kelly allegedly told Cari he "could have any contract or state appointment he wanted" if he agreed, though Cari refused.

Blagojevich denies he is Public Official A and has denied that the conversation with Cari ever occurred.

No word yet from Barack Obama on this one.