Blagojevich Trial Puts Obama Closer to Senate Seat Deal

Obama/BlagojevichFrom a public relations standpoint, getting forced out of the Illinois governor’s mansion a year and a half ago was a smart career move for Rod Blagojevich. He’s been all over the TV since, doing stints on such shows as “Celebrity Apprentice” and “The Late Show with David Letterman.” But publicity may not be enough to keep him or several of his former allies out of prison. His long-awaited trial on fraud and conspiracy charges related to his attempt to sell Barack Obama’s pending Senate vacancy to the highest bidder began on June 8, the result of a five-year Justice Department probe into corruption in Chicago politics. Prosecutors wrapped up their case just before 5 P.M. Tuesday.  Evidence introduced thus far confirms widespread suspicions that former Gov. Blagojevich and his benefactors were part of a larger Chicago-Obama White House conduit.

Since his December 9, 2008 arrest Blagojevich has proclaimed his innocence. That wasn’t enough to save his job. On January 8, 2009, the Illinois House of Representatives voted 114-1 to impeach him for misconduct in office (for the record, Rep. Milt Patterson, D-Chicago, was the lone opponent). In response, the governor launched a media blitz on top TV talk shows such as “Good Morning America” and “The View,” to explain his position. It was a short campaign. On January 29, the Illinois Senate voted 59-0 to remove him from office; in a separate vote, they permanently barred him from holding state office. Lieutenant Governor Patrick Quinn almost immediately was sworn in as Illinois’s new governor. Last July Blagojevich’s former chief of staff, John Harris, pleaded guilty to federal charges, and in return for a reduced sentence, agreed to testify.

Milorad “Rod” Blagojevich, now 53, the son of Serbian immigrants, ironically had been first elected governor of Illinois in 2002 as a reformer, following a three-term stint as a U.S. congressman (5th District). His Republican predecessor, George Ryan, was destined for federal prison, along with dozens of other persons. Ryan had steered state contracts to political allies and donors, and blocked a probe of state employees issuing commercial driver’s licenses to unqualified applicants in exchange for bribes. On the heels of such a track record, Blagojevich came off as a real reformer. But he also was possessed of giant-sized ego, prone to starting or escalating clashes with the Illinois legislature, especially Democratic House Speaker Michael Madigan.

By the fall of 2008, the governor’s political stock was running low. The Chicago Tribune reported that “Blago” had the lowest ratings of any elected politician in nearly three decades of that paper’s opinion polls. And a Rasmussen poll revealed that zero percent of Illinois voters rated Gov. Blagojevich as “excellent,” whereas four percent, 29 percent and 64 percent gave him respective ratings of “good,” “fair” and “poor.” It was clear that serious cash would be needed for a re-election bid or a run for the U.S. Senate.

Senator Barack Obama’s election as U.S. president in November 2008 appeared to provide one. Under Illinois law, when a Senate seat goes vacant, the governor appoints a person to serve out the remainder of the term. Being a Democrat, Blagojevich logically would be looking for a Democrat to fill Obama’s seat. Anticipating no shortage of takers, Blago allegedly told insiders: Whoever wanted that seat should be prepared to contribute serious money to the governor and/or his allied political interests. According to a 76-page FBI affidavit released by the U.S. Attorney’s Office for the Northern District of Illinois, Gov. Blagojevich made statements caught on court-authorized wiretaps and bugs indicating Obama’s seat was for sale. The governor allegedly told an adviser on November 5, the day after the elections: “A Senate seat is a fucking valuable thing. You don’t just give it away for nothing.” After his arrest, his career all but over, Blagojevich in January 2009 settled on former Illinois Attorney General Roland Burris to fill out Obama’s term.

The larger significance of the trial is the light it sheds on the connected political worlds of Chicago and the Obama administration. One common denominator is Antoin “Tony” Rezko, a Syrian-born Chicago real estate developer/political fixer. Rezko currently is doing time in jail awaiting sentencing after federal convictions for fraud, money laundering and bribery; he’d used his considerable influence to squeeze $7 million in kickbacks from a contractor and seven money management firms seeking to do business with the State of Illinois. Rezko long has been close to Blagojevich. An article in the November 2007 issue of Chicago magazine explained: “Rezko became a virtual one-man headhunting firm for staffing the Blagojevich administration, sending along recommended candidates, many of whom ended up getting appointments.” In January 2008, Rezko would be arrested at his Mediterranean mansion in suburban Wilmette, Ill. He was convicted by a jury that June on 16 of 24 counts.

There is an organized labor angle to this. One of the money managers with whom Rezko operated was Stuart Levine, a board member of the Illinois Teachers Retirement System (TRS). Levine pleaded guilty to federal charges in October 2006 of mail fraud and money-laundering. He allegedly had conspired with Rezko to steer tens of millions of dollars to favored investment firms seeking lucrative contracts with the union-sponsored Illinois TRS and the Illinois Health Facilities Planning Board. Levine would arrange for the firms to pay kickbacks. He proved a key witness in securing Rezko’s conviction.

But Rezko was more than a crook: He was Barack Obama’s close friend and initial political sponsor. The two went way back. Back in the early Nineties Rezko offered a job to Obama when the future president was graduating from Harvard Law School. Obama took a position elsewhere, but a strong bond developed. The men often discussed politics and double-dated with their wives. They also were partners in a personal real estate deal. In 2005, the Obamas paid $1.65 million for their Hyde Park home near the University of Chicago, a sum $300,000 below the list price, while Rezko’s wife paid a $625,000 list price for an adjoining empty lot. This was at a time when Rezko was under investigation.

That raises the question: Why did Obama do business with someone like Rezko? The answer is rooted in the culture of public-private partnerships, Illinois-style. While serving as state Senator, Obama wrote numerous letters to state and local officials in support of Rezko’s attempt to obtain $14.6 million in public money to build a senior-citizen apartment complex a few blocks outside Obama’s Senate district. Rezko, along with Obama’s old law firm boss, Allison Davis, stood to collect $855,000 in “development fees.”

Tony Rezko was the “slumlord” of whom Senator Hillary Clinton spoke during one of her debates with Obama during the 2008 presidential primary debates. It was a well-chosen epithet. Though he’d done well for himself building fast food chain outlets on Chicago’s black South Side (befriending and working with boxing legend Muhammad Ali in the process), he would make his biggest score during the Nineties after Mayor Richard M. Daley took office. Rezko and business partner Daniel Mahru, through their company Rezmar, received well over $100 million in federal, state and city loans, plus private loans, to rehab some thirty Chicago residential buildings for low-income occupancy. Surprise, surprise – more than a third of the structures lay within Obama’s district. The investments didn’t pan out too well. All of the properties had run into financial difficulties, with 17 of them having gone into foreclosure by 2007. Six structures were boarded up. The occupied ones might as well have been, lacking as they often were in heating during winter months.

It doesn’t take a grand stretch of the imagination to realize that Rezko and developers in his orbit bankrolled Obama’s political career. David Freddoso concluded as much in his book, The Case against Barack Obama:

(W)hatever intentions he had, we know for sure that Obama helped cut Rezko and other developers in on millions of taxpayer funds, only to have them cash out and literally leave their tenants in the cold. The outrageous condition of Rezko’s buildings does not appear to have caused tension in their relationship. We also know that the developers returned the favor by giving Obama hundreds of thousands in campaign donations.

Rezko delivered the political goods. Through direct and bundled donations, he has provided a cumulative $250,000 for Obama’s political career. Rezko was crucial during the early stages of Obama’s Senate run. On June 27, 2003, Rezko hosted an Obama fundraiser at his Wilmette mansion. The Chicago Sun-Times would report four years later:

The cocktail party Rezko hosted in 2003 came at a critical time for Obama. He and Rezko timed it to help Obama show he had enough money to compete in the Democratic primary for U.S. Senate against millionaire Blair Hull and state Comptroller Dan Hynes.

“This was discussed a lot. They wanted to have a good showing,” said a source familiar with the fund-raiser, speaking on condition of anonymity.

“Tony was one of the biggest fund-raisers.”

At the time of the party, the state was in the process of foreclosing on a low-income apartment building Rezko’s company rehabbed in Obama’s state Senate district – a rehab project on which Obama’s law firm worked. Rezko had also abandoned many other low-income apartments, leaving numerous vacant units in need of major repairs.

The last thing the Obama White House needs to hear is Blagojevich’s dealings with their mutual friend, Tony Rezko.

Another potentially damaging link to President Obama is coming from one of his own subpoenaed top advisers, Valerie Jarrett. Jarrett, 53, even more than Rezko symbolizes the Chicago-White House connection. A lawyer by training, her official White House title is Senior Adviser and Assistant to the President for Intergovernmental Affairs and Public Engagement. But she’s much more than that. As the Washington Post described her last June:

Valerie Jarrett is not simply the highest-ranking woman serving in the White House these days. She has the kind of power that comes with long history and deep friendship, a voice in the room that confidently reflects her 20-year Chicago-based relationship with Barack and Michelle Obama. The Obamas ate their first family dinner outside of the White House at her Georgetown apartment, and there are ample photos in Jarrett’s office of her daughter, Laura, a student at Harvard Law School, with the president.

This kind of access isn’t that surprising given her clout back home in Chicago. She’s CEO of a real estate firm, The Habitat Company, having served as its executive vice president over the previous dozen years. Prior to that, she served in various capacities in the Chicago city government, including deputy chief of staff for Mayor Richard M. Daley. Jarrett also has sat on the boards of any number of nonprofit organizations and has been chairman of the Chicago Transit Board (1995-2003), chairman of the board of the Chicago Stock Exchange (2004-07) and a director of the Federal Reserve Bank of Chicago (2006-07). In Chicago, she’s a major league player. Thus, it is little wonder Obama tapped her to chair the finance committee for his 2004 U.S. Senate campaign.

Like Tony Rezko, however, Jarrett has some baggage in her real estate operations she’d rather not have the public see. The most serious problems have occurred at a Habitat-run, federally-subsidized complex inside Obama’s old State Senate district, Grove Parc Plaza. A special investigation by the Boston Globe in 2008 revealed that about 100 of the development’s 504 units were vacant and uninhabitable. Some of the buildings had collapsed roofs and fire damage. At various locations, one could see mice, battered mailboxes and kitchen-sink sewage backups.

Like Rezko as well, Jarrett is connected to Obama by way of Rod Blagojevich. She was the “Advisor B” named in the FBI affidavit against the former governor. Blagojevich’s chief of staff, John Harris, had pleaded guilty in federal court to wire fraud based on a November 2008 phone conversation in which he discussed the possibility of appointing Jarrett to the Senate with help from the Service Employees International Union (SEIU). In his guilty plea, Harris described a scheme by which Jarrett would get the Senate seat and the governor would be appointed to a major position at the Change to Win labor federation of which the SEIU, a major backer of Obama’s 2008 presidential run, is the most dominant individual union. The SEIU has denied all wrongdoing.

That leads to a top SEIU official, Tom Balanoff. Balanoff is president of the Chicago-based Service Employees Local 1, which represents around 50,000 janitors, security officers, and building and industrial service workers in various Midwest states plus Texas. He also heads the SEIU’s Illinois State Council. In other words, he’s a labor leader that no smart Democratic politician in the Chicago area can ignore. Barack Obama and Rod Blagojevich certainly haven’t. During the Democratic national convention two years ago the SEIU website described Balanoff as having “a long history working with Barack Obama, going back to his days as a community organizer on Chicago’s Southside,” adding that “Local 1 has proudly endorsed Senator Obama in each of his campaigns.” Balanoff was a featured evening speaker at the convention.

He also was a witness for the prosecution in the Blago trial late in June — and with good reason. Balanoff apparently played a major role in attempting to persuade Blagojevich to pick Obama’s replacement. In his testimony, Balanoff stated that in early November 2008, the night before the election, Obama called him and said, “Tom, I want to talk to you with regard to the Senate seat.” Balanoff noted that Obama insisted his successor had to be both good for Illinois and electable in 2010. Valerie Jarrett, Obama emphasized, met those criteria. Balanoff in turn assured Obama that he would “reach out to Blagojevich.” The future president played his hand well. He parsed his words and he assigned an emissary to talk with the governor.

Balanoff’s testimony also indicated that he had talked with Jarrett on Election Day, and that she in turn expressed interest in the Senate seat.  Two days after the election, Balanoff met with Blagojevich and said that he was representing Jarrett at Obama’s request. The governor brought up the possibility of Illinois Attorney General Lisa Madigan (and daughter of Illinois House Speaker Mike Madigan) as a candidate. But earlier testimony showed she was likely just a stalking horse for  Blagojevich’s desire to work in Washington. Balanoff testified: “[Blagojevich] said, ‘I love being governor, but my real passion is health care and if I could be Secretary of Health & Human Services I could pursue my passion.'”

Law enforcement was taking notice of all this. As National Legal and Policy Center noted back in December 2008, an internal memo from the SEIU’s Illinois office indicated Balanoff twice had spoken with Blagojevich, one of those times in person, about the possibility of naming a candidate for the Senate vacancy. The memo also had indicated that FBI agents visited Balanoff’s house at around 6 A.M., December 9, 2008, the very time frame during which agents were arresting the governor. Balanoff’s office the next day issued a press release stating that he was fully cooperating with the probe. SEIU officials at Washington, D.C. headquarters vigorously denied influencing the selection process.

If Balanoff’s testimony doesn’t damage President Obama’s political capital, testimony about another mutual ally, Rep. Jesse Jackson, Jr., D-Ill., might. The son of radical civil rights leader Jesse Jackson, the Chicago-area congressman was one of the persons to whom Blagojevich allegedly offered Obama’s soon-to-be-vacated U.S. Senate seat for a price. Jackson the Younger won office in a 1995 special election to fill the vacancy left by Mel Reynolds, who had announced his resignation that September amid criminal allegations of a sexual nature. Jackson hasn’t been charged with any offense in the Blagojevich scandal. And he’s denied involvement, writing days after Blagojevich’s arrest: “I never sent a message or an emissary to the governor to make an offer, plead my case, or propose a deal about a U.S. Senate seat, period.”

Yet court testimony on July 7 contradicts his assertion. Rajinder Bedi, a businessman in Chicago’s large Indian ethnic community, stated he met with Jackson and one of Jackson’s fundraisers, Raghuveer Nayak, in a downtown restaurant on October 28, 2008, a week before the election. At that meeting, he said, Jackson expressed a clear interest in the Senate seat. Bedi further testified that Mr. Nayak had discussed the possibility of Jackson raising at least $1 million to influence the Senate seat selection to his advantage. Jurors also listened to wiretaps showing Blagojevich’s interest in the proposal. In one conversation, recorded on October 31, former Deputy Governor Robert Greenlee said the following about Jackson: “I’m tellin’ ya, that guy’s shameless.” Blagojevich replied: “Unbelievable, isn’t it…we approached, pay to play. That, you know, he’d raise me 500 grand, an emissary came, then the other guy would raise a million, if I made him a senator.” Later, on December 4, 2008, the governor could be heard telling his brother, Robert Blagojevich, over the phone, “I can cut a better political deal with these Jacksons…but some of it can be tangible upfront.” Gov. Blagojevich then directed his brother to set up a meeting with Nayak, who would serve as Jackson’s representative. But the meeting never came off. The Chicago Tribune recently had revealed that Blagojevich was under investigation, something that had been widely suspected anyway.

One may be wondering about the direct relationship between Rod Blagojevich and Barack Obama. Actually, the two have never been that close (the above photo notwithstanding). While Obama did serve as an adviser to Blagojevich’s 2002 gubernatorial campaign, the two since have worked together with markedly less frequency. Blagojevich did not endorse Obama in his U.S. senate race in 2004 even when it became apparent that the latter would win in a landslide against his flaky GOP opponent, former presidential candidate Alan Keyes. The feeling was mutual. Obama did not invite Blagojevich to speak at the 2008 Democratic Party National Convention in Denver, even though he did extend invitations to top Illinois Democratic politicians Lisa Madigan, Dan Hynes and Alexi Giannoulias.

If Blagojevich isn’t close to Obama, he has been close to White House Chief of Staff Rahm Emanuel, successor to Blago’s congressional seat – perhaps too close. Emanuel has been implicated, though not charged, in a separate accusation concerning an attempted quid pro quo arrangement with Gov. Blagojevich. According to e-mails obtained by the Associated Press last month, Emanuel early in 2006 allegedly had agreed to sign a letter to the Chicago Tribune supporting Blagojevich in response to a recent editorial denouncing the governor’s penchant for self-promotion. In return, Emanuel’s staff asked Blagojevich’s top aide, Deputy Governor Bradley Tusk, for a special favor: the release of a delayed $2 million state grant to a school in his district. The requested funds eventually were disbursed by December — in other words, no faster than scheduling dictated. Phone records show Emanuel called Blagojevich on four consecutive days in late summer 2006, with repeated phone calls between staffs following the next week.

More apropos, when Valerie Jarrett was still in consideration for Obama’s soon-to-be-vacant seat in early November 2008, Rahm Emanuel called longtime Blagojevich friend, state lobbyist and now trial witness John Wyma, asking him to deliver a message to the governor. Recalled Wyma, “He said the President-Elect would value and appreciate Valerie Jarrett in the Senate seat.” Wyma testified that he tried to call Blagojevich at home but “missed him.” He then called John Harris, the governor’s chief of staff. “I told him it would make sense to have Valerie as a pick.” This might seem an innocuous sidebar issue, but it’s not. Wyma for weeks has been a cooperating government witness. And here he was, right after the election, making a call on Rep. Emanuel’s behalf at the very time the governor was trying to raise money for a Senate seat. In point of fact, a week before the call, Blagojevich had expressed an interest in a cabinet position in exchange for the seat.

Let’s put the pieces together. The worlds of Rod Blagojevich and Barack Obama strongly overlap in numerous shady and possibly illegal ways. And given that Blago and the president have never been on close terms, this stands to hurt Obama. Most of the subpoenas in this case originated from the defense, and that’s no coincidence. The defense has crafted a deliberate strategy of convincing the jury that Blagojevich’s actions were circumscribed by a patronage system whose rules appear illegal to non-Chicagoans. Indeed, the defense team at one point attempted to serve Obama with a subpoena, despite his presidential immunity.

In the months leading up to the trial, Blagojevich had a blast. And God knows he needed the money. This past spring he appeared on Season 9 of “Celebrity Apprentice,” claiming that he has “the skill and know-how to get things accomplished.” Series creator and host Donald Trump praised the former governor for his “tremendous courage and guts.” It was not until the fourth episode that the governor heard The Donald’s kiss-of-death signature line, “You’re fired.” The Illinois legislature effectively had said the same thing to Blagojevich a year and a half ago. The White House hardly needs a Chicago jury in the same frame of mind.


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