Testimony Highlights Blagojevich Financial, Ethical Problems

Blagojevichs photoTo win a conviction in a criminal case requires establishing opportunity, means and motive. Recent testimony in the ongoing corruption trial of former Illinois Governor Rod Blagojevich reveals more than a few clues as to the motive part. Blagojevich and his wife, Patti, as it turns out, had about $200,000 in outstanding consumer debt at the time of his December 2008 arrest. Anxiety, if not desperation, over how to pay the money back was likely a major explanation for the ex-governor’s eagerness to peddle President-Elect Barack Obama’s soon-to-be-vacated Senate seat to the highest bidder. Worse, Mrs. Blagojevich’s real estate firm during 2002-04 apparently received roughly $150,000 or more in suspect “consulting” and other fees from a company co-owned by Obama’s original paymaster, now-jailed (and awaiting sentencing) real estate developer/political kingmaker Tony Rezko. The revelations reinforce the popular image of the couple as willing to do anything for money.

Courtroom testimony about the Blagojevich finances a couple of weeks ago by an IRS agent, Shari Schindler, revealed that the Illinois first couple had an urge to spurge. The couple was swimming in some $200,000 in credit card and other consumer debt at the time of Blago’s arrest on December 9, 2008. Yet they did not lack for income. The couple’s combined household income during 2002-08 was nearly $2 million, or around $300,000 a year. So how did they get so deep in the red? Think wardrobes. Agent Schindler, testifying for the prosecution, noted the Blagojeviches spent around $400,000 on clothes during that period. This included $57,000 at Saks Fifth Avenue, $28,000 at Neiman-Marcus and a whopping $205,000 on custom suits for the governor at Tom James Clothing/Oxxford.

On top of this, Gov. and Mrs. Blagojevich made $392,000 in scheduled mortgage payments to Citibank on three residential properties from 2002 through 2008. Nominally, they resided cost-free at the governor’s mansion at 410 East Jackson Street in the state capital of Springfield. But unless the Illinois legislature had pressing business, neither spent too much time there. The main action was in Chicago, where they owned a home in the pricey North Side neighborhood of Ravenswood Manor. The couple also had payments on a pair of condos they rented out, one in Chicago and the other in Washington, D.C.

Let’s backtrack a bit to aftermath of the 2008 elections. Governor Blagojevich was desperate. Family expenses were mounting and he didn’t think he could provide well for his wife and two daughters. “Amy is going to college in six years, and we can’t afford it,” he yelled at a teleconference on November 10. Yet apparently he wasn’t that hard-pressed. Court records show that four days later the governor paid $429 for a pair of neckties at Saks Fifth Avenue, and then, two days later, dropped another $429 at Saks for two more ties. Luckily for him, Senator Barack Obama was about to be the nation’s next president. That meant an interim appointment to the vacant seat – and the governor would get to appoint, pending U.S. Senate approval. As National Legal and Policy Center has noted before, Blagojevich went candidate-shopping for a person who could win an election and contribute a large sum to his war chest. Though aware of FBI wiretapping, the governor solicited advice as to who could fit the bill. A political career and family finances lay in the balance.

Also revealed in court testimony by Agent Schindler and two other persons, both formerly on the payroll of real estate developer and key Obama benefactor Antoin “Tony” Rezko, was the fact that Patti Blagojevich during 2002-04 had engaged in a series of dubious transactions to bolster household income. The governor’s wife apparently had received about $150,000 or more in compensation from Rezko’s company, Rezmar, for what amounted to no-show work.

One witness, testifying under a grant of immunity, was Robert Williams, former Rezmar chief financial officer. He stated that Patti Blagojevich’s company, River Realty, received eight separate monthly payments of $12,000 during October 2, 2003-May 3, 2004 for unspecified “consulting” services. When prosecutor Carrie Hamilton asked Williams if he was aware of Mrs. Blagojevich’s consulting work, he replied, “I was not.”

Williams, with prodding from Hamilton, also explained how Rezko effectively helped launder a $40,000 sham brokerage fee that went to River Realty and ultimately toward subcontractors who did work on the First Couple’s Ravenswood Manor home. Williams recalled seeing a list of bills, dated January 22, 2004, the couple owed to firms who had performed carpentry, flooring, railing and other types of renovation. The list came from Chicago Construction Services, an affiliate of Rezmar. Williams said that River Realty was paid $40,000 as part of a closing on a nearly $4 million property on Irving Park Road on Chicago’s Northwest Side. Near closing time, he recalled, Rezko asked him to review a brokerage agreement that would provide an additional commission of 2 percent, or $79,300, to River Realty. Williams identified a check from Rezmar to River Realty for $79,300 written on December 2, 2002, a sum paid outside or in addition to money that Mrs. Blagojevich received from the seller.

In addition, Williams testified that in December 2003 Rezko expressed to him an eagerness to pay Patti Blagojevich $15,000, but without explaining why, except to say it had to “be related to one of the projects.” He recalled telling Rezko that he would try to get that sum to her. Williams proceeded to examine the list of company projects and noticed there recently was a closing for a project called St. John’s Crossing for which the co-op broker’s fee was about $15,000. He testified that Patti Blagojevich did not work on this project nor was affiliated with it. Notwithstanding, he said, Rezko directed him to cut a check for $15,000 payable to River Realty.

Another witness, former banker and Rezmar consultant Michael Winter, amplified Williams’ testimony about Patti Blagojevich’s monthly income. Winter stated that in the spring of 2003 he and Rezko discussed the possibility of Winter becoming company president. Winter testified that he saw the governor’s wife at Rezko offices and that she was paid $12,000 a month. The prosecution asked Winter how he found out about these payments. Winter responded that Rezko told him he was going to hire Mrs. Blagojevich as a consultant and get her involved in his (Winter’s) projects so as to “justify” paying her. Winter expressed his belief that this was a bad idea. After the checks started coming to Mrs. Blagojevich, Winter approached Rezko and told him that due to Rezmar’s mounting financial troubles, the payments were unjustifiable. Rezko responded that he would move her payments to another one of his companies.

Finally, Shari Schindler was recalled to the witness stand. The prosecution introduced a chart detailing funds that River Realty received from Rezko. Schindler showed that on December 17, 2002, Chicago Title wired $47,556.80 to River Realty in relation to a closing for which Rezko was the buyer. River Realty also received money from the seller on this deal. Additionally, Mrs. Blagojevich, through her company, on August 2003 received an unspecified sum from 850 N. Ogden LLC, a Rezko-affiliated company. Schindler also confirmed Rezmar’s eight $12,000 payments to River Realty, plus the $40,000 check to River Realty on the Irving Park property. After this, the prosecution asked Schindler if the 2004 income tax returns for the Blagojeviches and River Realty indicated any affiliation with Rezko. She replied in each case there wasn’t, adding that on corporate tax returns a specific sum doesn’t have to indicate origins.

All of this matters for two reasons. First, it shows Governor Blagojevich and his wife at the very least were ethically-challenged and likely in violation of the law as well. The evidence weighs against Blagojevich’s claims of innocence. Second, it reveals once more the central role of Tony Rezko. Rezko, as National Legal and Policy Center explained in detail last week, was the prime financial mover behind Barack Obama’s Senate bid in 2004, especially during primary season. Without Rezko’s help, Obama might not be where he is today. Throughout Obama’s tenure in the Illinois Senate, he supported Rezko-sponsored subsidized housing ventures in Chicago, many of which were sited in his district. The quid pro quo here – campaign cash for project funding – raises questions about the latter’s business relationships with the governor and his wife.

Former Governor Blagojevich certainly isn’t enamored of Obama lately. Back in late 2008 he thought the President-Elect, about to vacate his Senate seat, would raise money on his behalf. On Thursday, July 2, the day of Williams’ testimony, jurors heard a tape of the governor during a conference call giving a salty-tongued reaction to his advisers’ news that he shouldn’t expect financial help from Obama. Bellowed Blago: “You guys are telling me…Give this motherfucker his senator. Fuck him! For nothing? Fuck him!” The former governor’s advisers could be heard telling their boss that if he appointed himself senator, he would be a “national joke.” In response, a dejected Blagojevich stated, “We’re stuck…This world is passing me by, and I’m stuck in this job as governor. I’m stuck.” In a much different sense today, he still is.


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Illinois Governor, Aide Arrested in Probe of Senate Appointment.