Chicago Lawyers Plead Guilty to Roles in Kickback Schemes

Joseph Cari and Steven Loren saw gold in Illinois teachers’ union pensions.  Where the two Chicago lawyers went wrong was trying to mine it.  On September 15, 2005 the pair pleaded guilty in federal court to charges related to an ongoing criminal probe into pension kickbacks involving the Teachers Retirement System (TRS) for the State of Illinois.  The system, with more than $30 billion in assets, serves hundreds of thousands of active and retired school employees represented by the Illinois Federation of Teachers and the Illinois Education Association – unions, respectively, affiliated with the American Federation of Teachers and the National Education Association.  Cari and Loren, free on bail, now are helping the prosecution, apparently willing to testify against a bigger fish, who like them, had been indicted in August.


Cari, 52, a managing director of a private equity firm, pleaded guilty to acting as an intermediary for attempted extortion by a former TRS board member, Stuart Levine.  Levine tried to extort a kickback of $850,000 from a Virginia-based investment firm, JER Inc. in return for an $85 million investment.  When JER balked, Levine attempted to pull the contract off the agenda for a TRS board meeting. A TRS staffer, however, objected, and JER won the contract, minus the mandatory bribe.  Cari, acting on Levine’s behalf, repeatedly demanded that JER enter into a sham consulting contract to disguise the kickback, adding, “This is how things are done in Illinois.”


Loren, 50, an attorney who had consulted for the TRS, pleaded guilty to one count of obstructing the IRS in a separate kickback case.  The indictment alleges that back in August 2003, on Levine’s instructions, Loren prepared a sham consulting agreement to justify a $375,000 finder’s fee.  Levine improperly steered $50 million in retirement funds to an investment firm, Glencoe Capital Partners, a move the TRS board approved and Levine seconded.  Prosecutors allege that the placement agent, identified as Sheldon Pekin, agreed to Levine’s demand that he share $250,000, or two-thirds of that fee, with a businessman selected by Levine.  Pekin insists, through his attorney, that he had been misled.     

Levine, clearly the driving force in this influence-peddling fiefdom, was indicted in August on 13 counts of wire fraud, mail fraud, soliciting a bribe, and attempted extortion.  In a separate charge, he told a physician, Robert Weinstein, that he’d steer about $700,000 toward him either from JER or Cari’s firm.  If that weren’t enough, Levine a few months earlier had been charged with misusing his role as vice chairman of the state’s hospital planning and construction board; he had tried to block certain hospital projects unless his friends in construction and finance got some of the action.  Levine, 59, pleaded not guilty in this case.  He’s a character to be reckoned with, but with Cari and Loren now playing for the Justice Department, his day of reckoning appears at hand.  (U.S. Department of Labor, Office of Inspector General, Semiannual Report to the Congress, 4/1/05 – 9/30/05; other sources).