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Published in Print: March 19, 2008, as Illinois Teachers’ Fund Player in Federal Case

Illinois Teachers’ Fund Player in Federal Case

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The federal trial in Chicago of a politically connected businessman named Antoin “Tony” Rezko has attracted attention nationally because of Mr. Rezko’s association with U.S. Sen. Barack Obama.

What has been obscured, though, except for those paying close attention in Illinois, is the central role in the case of the state Teachers’ Retirement System and, specifically, its board of trustees.

Federal prosecutors allege that Mr. Rezko, who has extensive interests in pizza franchises and real estate, conspired with a member of the retirement-system board to steer investment contracts to financial firms in exchange for contributions to Illinois Gov. Rod R. Blagojevich, a Democrat, who is not charged in the case.

Stuart Levine, a Highland Park, Ill., lawyer who served on the Teachers’ Retirement System board under two governors, has pleaded guilty in the case and is expected to be the prosecution’s star witness against Mr. Rezko.

The TRS manages nearly $42 billion in retirement assets for 344,000 current and retired teachers in Illinois public schools, except for those in Chicago, which has its own pension fund. Retirement-system officials have sought to assure members that there were no losses from any of the alleged wrongdoing.

In court documents, the U.S. attorney’s office in Chicago lays out the allegations it is seeking to prove in the trial, which began March 3.

“In the course of the scheme, Rezko, Levine, and the other co-schemers solicited and demanded millions of dollars in undisclosed kickbacks and payments, and received and directed hundreds of thousands of dollars in actual undisclosed kickbacks and payments, for the benefit of Rezko, Levine, and their nominees and associates, from investment firms seeking to do business with TRS,” says a document filed by the prosecution in December.

Mr. Rezko, 52, of Wilmette, Ill., has pleaded not guilty to multiple counts of mail and wire fraud. A document filed by his lawyers says that “the scheme alleged in this case is the figment of the imagination of one witness—Stuart Levine.”

Ties to Democrats

Sen. Obama, who is in a tight contest for his party’s presidential nomination, is not accused of any wrongdoing and is not mentioned by name in the prosecution’s documents. But the Illinois Democrat’s name has surfaced tangentially at the trial.

Mr. Rezko has been a fundraiser both for Sen. Obama and Gov. Blagojevich, as well as a real estate adviser for the senator and participant in a heavily scrutinized property transaction near Mr. Obama’s Chicago home.

Gov. Blagojevich is much more directly linked to the case.

The governor, identified in the prosecution’s documents as “Public Official A,” allegedly had a conversation with another longtime Democratic fundraiser in which Mr. Blagojevich said that Mr. Rezko was one of his “point people in helping his friends and coordinating fundraising,” the prosecution’s document states. The governor also allegedly said that “he could award contracts, legal work, and investment banking to help with fundraising.”

Mr. Rezko and Mr. Levine are accused of devising a scheme to use Mr. Levine’s influence on the TRS board to attract political contributions for Gov. Blagojevich, who was first elected in 2002, and for their other interests.

Mr. Levine used his influence on the board to steer investment decisions to the two men’s preferred firms. For example, in one deal, an unspecified firm received a $50 million investment from the TRS, and an associate of Mr. Rezko allegedly received a $375,000 finder’s fee in the deal. Some $250,000 of that fee then went “for the benefit of Rezko,” the prosecution documents say.

Documents filed on behalf of Mr. Rezko take issue with much of the prosecution’s case, and they question Mr. Levine’s credibility.

“Whether due to his drug use, his pomposity, or his overeagerness to cooperate with the government, Levine’s version of events is seriously detached from reality,” says a document filed by Mr. Rezko’s lawyers in January.

‘Angered and Embarrassed’

The first two weeks of testimony in the case have focused on allegations of influence peddling at another state board on which Mr. Levine served, the Illinois Health Facilities Planning Board. The allegations surrounding the Teachers’ Retirement System are expected to come up in court as the trial continues.

Eva Goltermann, the spokeswoman for the TRS, said no one at her agency could comment during the trial. But in communications with members and the public going back to 2005, TRS Executive Director Jon Bauman said that the system had cooperated with the federal investigation, and that the alleged misconduct had “angered and embarrassed all of us.”

No investment losses occurred as a result of the alleged conduct, Mr. Bauman told TRS members in 2005, and the system earned 11 percent on its investments that year.

PHOTO: Lawyer Stuart Levine leaves federal court on Oct. 27, 2006, in Chicago, Ill. Levine, of Highland Park, Ill., served on the Teachers’ Retirement System board under two governors and is expected to be the prosecution’s star witness against Antoin “Tony” Rezko.
—M. Spencer Green/AP - File

Vol. 27, Issue 28, Page 15

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