Cairo Association of Teachers - Newsletter

CAT Tracks for September 17, 2005 FEDERAL TRS PENSION PROBE

Another round of (bad) publicity about allegations of wrong-doing involving officials inside (and outside) the Illinois Teachers' Retirement System. From today's Southern Illinoisan

Questions, answers about alleged pension corruption

Q: What is the Illinois State Teachers Retirement System?

A: A $30 billion fund that pays the pensions of more than 325,000 retired downstate and suburban teachers.

Q: Who operates it?

A: Eleven trustees, four appointed by the governor, four elected by active teachers and two elected by retired teachers. The state schools superintendent is also a board member.

Q: What's the problem?

A: Federal prosecutors say investment firms paid kickbacks to do business with the fund and at least one was heavily pressured.

Q: What do investment firms do for the fund?

A: Invest the fund's money.

Q: Who was involved in the alleged kickback scheme?

A: Prosecutors say the scheme was engineered by former pension fund board member Stuart Levine, a millionaire campaign contributor, and carried out by Chicago attorneys Steven Loren and Joseph A. Cari - a former chief fundraiser for the Democratic National Committee.

Q: What do those people say about the charges?

A: Levine has pleaded not guilty to attempted extortion, mail fraud and other charges. Cari has pleaded guilty to attempted extortion and Loren to attempting to impede tax collectors.

Q: How did the alleged kickback scheme work?

A: Prosecutors say money changed hands in the form of fees paid to consultants for helping investment firms to get fund business.

Q: What's wrong with such fees?

A: By themselves, such fees are legal. But prosecutors say these fees were passed through to political insiders in exchange for business. They cite one Virginia-based firm that was allegedly pressured to sign a contract with a consultant they had never met who did no work.

Q: Who pressured them?

A: Cari said in his signed plea agreement with prosecutors that he did.

Q: Why?

A: He says that he did it for Levine in hopes of getting help with another business venture.

Q: Who appointed Levine to the board?

A: Former Gov. George H. Ryan. Gov. Rod Blagojevich reappointed him.

Q: Who were these consultants?

A: Prosecutors haven't named them. Cari said in his plea agreement that Levine told him "a high-ranking Illinois public official ("Public Official A"), acting through two close associates, was selecting consultants for the private equity funds that appeared before state pension funds." Cari also quoted Levine as saying that to get state pension fund business private equity funds had to have a consultant who was "hired by Levine or those associates."

Q: Who is the high-ranking Illinois official?

A: He's not named in court papers. But two individuals familiar with the plea agreements, speaking only on condition of anonymity because of the sensitivity of the case, told The Associated Press the official the documents refer to is Blagojevich.

Q: What does Blagojevich say about that?

A: He says he knows nothing about the matter and would not tolerate such conduct. "I have no involvement whatsoever in anything surrounding the alleged corruption at the teachers retirement system, and nobody close to me does either," Blagojevich said Friday. He also says he does not know the identity of the official cited in the plea agreements.

Q: Who got the money?

A: The indictment says the scheme produced "hundreds of thousands of dollars in undisclosed kickbacks and payments for Levine and his nominees and associates." Loren's plea agreement says Levine told him that fees were passed through as rewards for campaign donors who gave money for the benefit of a "high-ranking public official."

Q: What Cari and Loren have said about a "high-ranking public official" - it seems that the only basis for their statements is that they were told these things by Levine.

A: That's what's in the public record. Prosecutors won't say more.

Q: Can such statements be trusted?

A: Cari and Loren have agreed to help prosecutors in exchange for a break when they are sentenced. Defense attorneys could claim that the two men are saying whatever prosecutors want to hear. The two men could lose the sentencing break they are hoping for if prosecutors discovered that they were lying.

Q: Where is the investigation likely to lead?

A: Federal prosecutors are almost always stingy with answers to that question. Attorneys just say that wherever it leads, it's likely to go on for a long time.

Blagojevich denies wrongdoing in teacher pension scandal

By MAURA KELLY LANNAN, The Associated Press

CHICAGO - Gov. Rod Blagojevich denied any role in a scheme to shake down investment firms doing business with a state teachers pension fund, insisting Friday that he does not tolerate any unethical behavior.

"I have no involvement whatsoever in anything surrounding the alleged corruption at the teachers retirement system, and nobody close to me does either," Blagojevich said.

The Democratic governor faced some of the toughest questioning of his 2½ years in office as he addressed accusations with the potential to become a major political and legal crisis.

Two people pleaded guilty Thursday to taking part in a scheme to demand consulting fees from investment firms wanting to do business with the pension fund. They said in their plea agreements that they were told the payments were used to reward campaign donors for the benefit of a "high-ranking public official."

The official was not identified, but individuals familiar with the plea agreements said it was Blagojevich. The individuals spoke only on condition of anonymity because of the sensitivity of the case.

The individuals also identified two of Blagojevich's top political fundraisers - Christopher Kelly and Antoin "Tony" Rezko - as unnamed associates who are cited in the documents as taking part in the scheme.

Kelly's attorney Michael Monaco and Rezko's attorney Joseph Duffy did not return messages left at their offices Friday.

The U.S. attorney's office in Chicago has declined to comment on the allegations in the documents it filed.

Blagojevich said Friday he did not know the identity of "Public Official A." He called the allegations "triple hearsay" and noted they come from admitted criminals.

"I don't know who A, B, C or Z is. All I can tell you is what was written in that document does not describe how we do things," he said.

The normally easygoing governor grew visibly testy at times under a barrage of questions about alleged misconduct.

"We don't operate that way," he said at a news conference called to discuss home heating assistance. "No one who is associated with me operates that way, and if they did, they understand I wouldn't tolerate that for a split second."

He said he has not been subpoenaed to provide information in the investigation. Blagojevich did acknowledge being questioned about accusations from his father-in-law, Chicago Alderman Dick Mell, related to trading jobs for campaign contributions, but the governor said that was not the result of a subpoena.

He would not discuss what questions were asked but said federal authorities have not contacted him since. Mell retracted the allegations after being threatened with a lawsuit by Kelly.

The pension fund allegations surfaced Thursday in two guilty pleas in a federal investigation involving the Illinois Teachers' Retirement System, the $30 billion fund that pays the pensions of thousands of downstate and suburban school teachers.

Steven Loren, the Chicago-based former outside attorney for the pension fund, pleaded guilty to attempting to obstruct the Internal Revenue Service. Joseph A. Cari, former finance director of the Democratic National Committee, admitted attempting to extort money from an investment firm seeking business with the fund.

In his plea agreement, Loren said he was told that the fees some investment companies had to pay were passed on to donors working to benefit a high-ranking public official.

He said the source of the allegation was Stuart Levine, a member of the pension fund's board and a millionaire campaign donor, who has been charged with engineering corruption at the pension fund and has pleaded not guilty.

Republicans quickly portrayed the accusation as evidence that Blagojevich is corrupt and should be voted out of office.

They pointed out that Blagojevich has raised more political money than anyone in Illinois history, partly by taking contributions from people who end up getting state jobs and contracts. The pension allegations suggest some of the money was raised dishonestly, despite his denials, they said.

"I'm asking him to come forward and quit claiming he doesn't know what's going on in his own campaign," said Sen. Steve Rauschenberger of Elgin, who is running for governor. "I mean, if there's one thing that's clear ... he knows more about his campaign organization than he knows about state government."

Another candidate, Sen. Bill Brady of Bloomington, said the plea agreements reveal "the part of the iceberg that lies below the surface" of Blagojevich's administration.

Pete Giangreco, Blagojevich's spokesman on campaign matters, called such comments "baseless" and "pathetic" political charges.

Blagojevich has not formally launched his campaign for a second term. He said he isn't worried about any political fallout from these allegations.

"I have on my side the most powerful ally you could ever want, and that is the truth," he said.