May 17, 2008 Evelyn Pringle
The solution to the problems arising from the unsuccessful attempts to shut down Operation Board Games would be for Barack Obama to become president and issue a bipartisan pardon to all members of the “Combine” who funded his seat in the US Senate. The scam worked when Scooter Libby took the fall for the Bush administration.
However, that might not be so easy. US attorney Patrick Fitzgerald has made quite a name for himself eliminating the corruption in Illinois right down the line from the governor’s office to the Cook County Board to Mayor Richard Daley’s political mafia in Chicago.
And Illinois voters are behind their new Elliot Ness. A May 30, 2007 poll by the Glengariff Group found voters support the job he is doing by "a very wide and very strong margin.”
The poll asked voters if they approve or disapprove and 62.4% approve while only 11.4% disapprove. The poll showed his highest approval came from non-Chicago, Cook County voters at 73.6% approve and 9.1% disapprove with highest overall approval coming from Democrats.
On April 15, 2008, the Combine was dealt a major blow when an appellate court upheld Fitzgerald’s conviction of four men charged with running the corrupt hiring system in Daley's City Hall. The written ruling states in part: "It is hard to take too seriously the contention that the defendants did not know that by creating a false hiring scheme that provided thousands of lucrative city jobs to political cronies, falsifying documents and lying repeatedly about what they were doing, they were perpetrating a fraud.”
"By setting up a false bureaucracy, the defendants arguably cheated the city out of hundreds of millions of dollars," the judges wrote.
“The ruling sent waves of angst through City Hall, Gov. Blagojevich's office and other government offices where some had hoped the court would find the age-old practice of giving plum government jobs to cronies was legal,” the April 16, 2008, Sun-Times reported.
Patrick Collins, lead prosecutor in the case, told the Times he welcomed the ruling. "In my opinion, the decision that came down today blessed the aggressive posture that the U.S. Attorney's office has taken in corruption cases," he said.
"A contrary decision would have had a chilling effect on the future cases considered by the U.S. Attorney's office," he told the Times.
“The decision triggered immediate anxiety within Blagojevich's inner circle because of the likelihood it could embolden the feds to now aggressively pursue hiring fraud charges against former high-level aides to the governor,” the Times wrote.
But that’s not to say Blagojevich has anything to worry about. A Federal court assigned Julia Nowicki to monitor the illegal hiring practices in Cook County and on April 15, 2008, Chicago's ABC channel 7 news reported that Nowicki said the hiring system “is so inept that people get typing jobs- without taking a typing test, no applicant is subjected to background checks, and insiders find out about jobs before the general public does.”
The former President of the Cook Country Board, John Stroger’s son, Todd, is now the President, whose candidacy was supported wholeheartedly by Obama, right along with Mayor Daley and Blagojevich, in the midst of the corruption scandals.
The elimination of the Combine's pay-to-play schemes is also an illusion. On April 2, 2008, Crain’s Chicago Business news wrote: “Just months after receiving a pair of six-figure, no-bid contracts, Cook County's new Washington, D.C., lobbyist is hosting a fundraiser for the official who awarded him that work: County Board President Todd Stroger.”
“Lobbyist Richard Boykin is holding the fundraiser for Mr. Stroger,” the report stated, “at the Loop offices of Mr. Boykin's law firm, Barnes & Thornburg LLP.” An arrogant Stroger spokesperson told Crain’s Boykin "can throw a fundraiser for whoever he wants."
Cook County Commissioner, Tony Peraica, called the new contract and subsequent fundraiser "a perfect example of the kind of play-to-pay politics that is pervasive" in local government. "There's an absolute quid pro quo connection," he told Crain‘s.
Combine members throw in the towel
The Tony Rezko trial opened the door to more Board Game cases not yet tried and more Combine members threw in the towel. Ali Ata, the former director of the Illinois Finance Authority, entered into a plea agreement on April 22, 2008.
The Authority was established by Blagojevich in 2004, “to support the Governor of Illinois' economic development agenda," and "IFA approves about $3 billion in project financing each year," according to its web site.
Ata pled guilty to charges that included tax fraud, and lying to the FBI in saying he received nothing in return for $50,000 in contributions to Blagojevich when according to the plea agreement, he did "receive something for those contributions, specifically employment with a state agency ... with an annual salary of approximately $127,000."
The agreement notes that Ata met with Blagojevich, not Rezko, in 2000 or 2001, and Blagojevich asked for his support because he was contemplating a run for higher office. Ata testified that he held his first Blagojevich fundraiser in the 1990s when he was asked to raise money for Blagojevich‘s run for Congress within the Arab community.
Ata made a $5,000 donation to Obama on June 30, 2003. Talat Othman was also appointed to this Board, and he donated $1,000 to Obama on June 30, 2003. David Gustman was made chairman, and his wife, Lisa, also gave Obama $1,000 on June 30.
Ata is a former president of the Chicago Chapter of the American Arab Anti-Discrimination Committee. He represents “a deeper corruption” in the Arab American community, “an aspect of the story that has not received much attention,” according to a May 2, 2008 report by Ray Hanania in the Southwest News-Herald.
Hanania points out that many in the Arab community are calling Ata a “rat.” But he’s not alone, Hanania says:
“The real rats are those who used their positions as “leaders” to rape and pillage their own community. The real rats are the so-called “leaders” who worked to benefit themselves pretending they were doing it for the benefit of the community.”
In his report, Hanania explains how Ata and others would often gather at a “hookah” café on Harlem Avenue, where they helped organize political dinners attended by Arab Americans from the Southwest suburbs at which politicians where “honored.”
“These Arab community “leaders,” he says, “would tell the community that if they bought tickets to their “candidate’s nights,” their organization fundraisers or donated through them to local politicians, these politicians would respond by giving the Arab American community empowerment.”
“They said the politicians would give the Arab Americans a voice in their governments,” he reports. “In truth,” Hanania says, “these political leaders lied.”
“They did get jobs, contracts and clout,” he notes, “but the people who benefited were not members of the community but rather the relatives, children, friends and business associates of these leaders.”
Ata has apparently done quite well as a member of the Combine. In 2004, his net worth was $12 million, according to the Tribune.
During the Rezko trial, Ata testified that he had about $2 million invested in Rezko projects, which include Riverside Park, and wanted to get it back someday. Rezko’s attorney got him to admit that he really did not have to worry about the money he gave Blagojevich.
In one state deal, Ata and three business partners, Faysal Mohamed, Fuad Mohamed and Refat Zayed, “took in more than $3.2 million from taxpayers by leasing a West Side office building to the state over 10 years,” according to the June 6, 2005 Sun-Times.
On May 4, 2008, the Times reported that the Blagojevich administration is still “paying Ata and his partners more than $800,000 a year to lease space for the Department of Human Services in the building.”
Three months after Ata was appointed to head the Finance Authority, the Times says, “the Blagojevich administration agreed to a 10-year extension of his company's lease, to 2014.”
Ata left his position in March 2005, when a state audit major problems at the agency. A month later, Ata was offered a three-year contract worth $165,600 to be a consultant to the IFA on a coal-related energy initiative. However, he turned it down, according to the Times, after the newspaper began inquiring about his employment and a previous building lease deal with the city of Chicago.
Rezko schemes to hide assets from creditors
The second Rezko indictment involves Ata and the Finance Authority, and alleges fraud in financial transactions with the General Electric Capital Corp in connection with the sale of a string of Papa John pizza restaurants in Illinois, Wisconsin and Michigan.
The indictment and plea agreement provide a preview for the scheme hatched to conceal Rezko's assets from creditors through Obama's secret Land Trust.
When announcing the arrests, Fitzgerald stated: "The new indictment is part of Operation Board Games, an ongoing federal public corruption investigation of insider-dealing, influence-peddling and kickbacks involving private interests and public duties related to various state boards and non-profit organizations."
Co-schemer Abdelhamid Chaib, is the former the director of Rezko Concessions. Blagojevich appointed Chaib's wife to a position with the Department of Employment Security Review Board.
An exhibit presented to the jury shows Chaib contributed $10,000 to Blagojevich. Records show Obama received $5,000 from Chaib on June 30, 2003, the same day that Ata donated $5,000.
This indictment alleges that Rezko fraudulently caused General Electric Capital Corporation (GE), to extend more than $10 million in loans to finance what Rezko portrayed as sales of two different groups of Papa John’s pizza restaurants in the Chicago and Milwaukee areas.
The indictment says Rezko and his co-schemers fraudulently obtained a $4.5 million loan from GE in March 2001 to finance the purchase of the Milwaukee pizza stores by a straw purchaser, and his company, at an inflated price, and by the submission of fraudulent documents, including false financial statements about the condition of the stores.
The government alleges that they made similar fraudulent representations to obtain another $6 million loan in October 2001, in connection with Rezko’s sale of the Chicago area pizza restaurants from Rezko Enterprises to his own company, Chicago PJ.
After closing on the loan for the Chicago stores, the loan became delinquent, and Rezko caused additional false financial information to be submitted to GE in asking for forebearance on the default, according to the indictment.
In addition to defrauding GE, prosecutors allege that Rezko defrauded investors by concealing that he was transferring the company’s assets to himself and a straw purchaser.
The indictment says that as part of the scheme to defraud GE, in February 2004, Ata signed a letter on Finance Authority letterhead that falsely made it appear that Investor 1, now known to be Dr Paul Ray, had applied for financing with the IFA in connection with Ray's acquisition of the pizza restaurants.
Dr Ray was an investor in Riverside Park and contributed $3,000 to Obama on June 30, 2003, the exact same day the contributions were made by Chaib and Ata. Ray also gave Obama $2,000 on October 2003, on top of a donation of $1,000 on December 31, 2002.
The letter stated that Ray's financing would be recommended for approval by the IFA Board on March 15, 2004, and that the IFA would guarantee 50% of the total $16 million.
During the Rezko trial, Ata testified that in February 2004, he told Rezko that IFA board members were worried over the approval of financing for the Papa John’s deal because there could be negative publicity due to Rezko’s association with the pizza businesses
But Ata said Rezko scoffed at the concerns. "He said as far as the publicity, he will get the governor's office to approve the transaction, and as far as the board,” Ata told the jury, Rezko said, “We put them there.”
Rezko eventually called Ata and dictated the language of a letter that said IFA was guaranteeing half of the purchase price. But before the deal could go through, Ata brought the chairman, David Gustman, and the board’s financial advisers to Rezko's office to tell him they did not believe the financing was good for IFA. Ata said Rezko seemed to agree, but he never gave back the letter Ata wrote on Ray’s behalf.
Papa John's searches for Rezko assets
Rezko's firms had started falling behind on payments to Papa John's in 2001, and Papa John's finally cancelled its franchise agreement with Rezko in the spring of 2004.
Rezko then transferred the pizza chains to companies owned by “personal friend(s) and long-time business associate(s)," to operate under trade names such as “Papa Tony’s" and “Pizzeria Zia,” according to a lawsuit filed in 2005 by Papa John's.
Papa John's alleges Rezko still controlled the pizza chains and the associates were merely running "front" companies under different names. The companies named in the lawsuit include AR Pizza, Chaib Investments, Newco Pizza and LayaZia. AR Pizza, Newco Pizza and LayaZia have their principal places of business at the same location as Rezko Enterprises, according to the lawsuit.
Nadhmi Auchi firm, General Mediterranean Holding, owns 50% of AR Pizza and Rezko owns 50%.
Reporters, Mike McIntire and Christopher Drew, tracked Rezko’s “financial maneuverings” during the year that Rezko and Obama were entering into the real estate deal through an examination of lawsuits in state and federal courts, documents in the Board Games cases, and land records, for a report in the March 8, 2008 New York Times.
They discovered that Rezko was fighting off lenders and investors trying to collect on defaulted loans and failed business ventures the whole time. “But he side-stepped that financial dragnet by arranging for the land to be bought in his wife’s name, making it the only property she owned by herself,” they report.
As a result, when the Obamas bought part of the lot in January 2006, “the money they paid was beyond the reach of Mr. Rezko’s creditors, including one conducting a court-ordered hunt for his assets to recover a $3.5 million debt,” the Times notes.
When buying the mansion, Obama said the lot next door had to be sold separately because, “It was already a stretch to buy the house,” in the Tribune on November 1, 2006.
This is where Rita supposedly entered the picture. She would buy the lot. However, affidavits filed in the Rezko case in November 2006, show Rita could not afford it either.
Her only income was a $37,000 a year from a part-time government job handed to her by Cook Country Board President, John Stroger, when she came up with $125,000 in cash and obtained a half a million dollar mortgage at the Mutual Bank of Harvey.
The way Obama set up the deal, the mansion and the strip of land were placed in a Land Trust with the Northern Trust Corporation. The price of the mansion was $1.65 million, and the Obamas coughed up $330,000 to obtain a $1.32 million mortgage at Northern Trust Bank.
Obama claims he got the money because he pulled off a marketing coup for book sales in July 2004, when he delivered a keynote address at the Democratic National Convention and got elected to the Senate. “Because of the attention I received during Senate campaign and the convention, my book sold well,” Obama told Chicago Sun-Times reporters during an interview on March 14, 2008
“I came into a sizeable amount of money that allowed us to move,” he said.
Cook County land records show the deed for the lot granted to Rita was recorded on June 20, 2005, with a declared value of $625,000. Records indicate Rita conveyed the land to Northern Trust Company Land Trust #10209, on January 11, 2006.
According to a web site for Marquette Bank's Trust Services, in Illinois a Land Trust provides shared ownership protection when real estate is owned by more than two people, and divorce, legal disability or the death of one can hinder the sale of the property.
With the establishment of a Land Trust, a judgment against one beneficiaries cannot create a lien on real estate held in trust and ordinary legal proceedings against one will not cloud the title. While the interest of a beneficiary can be subject to claims of creditors, the creditors must take additional steps to assert their claims against a property held in trust, according to Marquette site.
Obama claims he had no idea Rezko was flat-broke. During his March 14, 2008 interview, he told the Sun-Times, “I was shocked - as I think a lot of people in Chicago were shocked - to find out the difficult financial straits he was in because I don't think anybody suspected that at the time.”
But the investigation by the New York Times found that between November 2002 and January 2005, at least 12 lawsuits were filed against Rezko and his businesses, including one by the GE Commercial Finance Corporation.
In fact, GE obtained a $3.5 million judgment in November 2004, but put off collection in the first half of 2005 while negotiating for payments with Rezko, the Times reports.
When documents unsealed in the Rezko case revealed the $3.5 million loan made to Rezko a month before the real estate deal, Auchi’s lawyer said the loan was to “assist the financial position” of a pizzeria company called AR Pizza, according to a February 26, 2008, report by James Bone and Dominic Kennedy in the Times of London.
"The money transfer raises the question of whether funds from Nadhmi Auchi helped Mr Obama buy his mock Georgian mansion in Chicago," Bone and Kennedy wrote.
But Auchi’s attorney told the New York Times that Rezko was supposed to use the money for his pizza business, and said, “as far as my client is aware, Mr. Rezko used the loan for its intended purpose and not for any other purpose.”
However, the Times review showed Rezko did make a payment to GE a few months after he received the loan, but only for $1 million. In October 2005, GE finally obtained a court order and began seizing even the smallest assets. As the Times explains:
“The company’s lawyers filed a claim against the Rezkos’ home and began issuing subpoenas to banks where Mr. Rezko had accounts, finding very little cash.
“Court records show that G.E. was due to be in court on Jan. 5, 2006, for example, obtaining an order to seize $1,297.39 from one of Mr. Rezko’s checking accounts.”
“Less than a week later,” the Times notes, “Mrs. Rezko sold a 10-foot-wide strip of the empty lot to Mr. Obama, for $104,500, so he could widen his side yard.”
Soon Rezko’s role in the real estate deal became public, in written questions to Obama, the Sun-Times asked: “Why did you put the property in a trust?”
“I was advised that a trust holding would afford me some privacy, which was important to me as I would be commuting from Washington to Chicago, and my family would spend some part of most weeks without me,” he replied in writing.
Now Obama claims he never even knew the lot was in Rita's name. During his March 14, 2008 interview, the Tribune asked him: “When Tony sold the garden lot in his wife's name, didn't that strike you as odd?”
“You know,” he said, “I have no idea why he did it. I don't think he was intending to hide something, because if he was then, you know, using your wife's name, Rita Rezko, probably wouldn't have been the best way to do it.”
“Did he ever explain to you what he was doing?” the Tribune asked.
“No," Obama replied, "I didn't discover it until the issue of him purchasing this lot broke through, uh, through you.”
The report in the London Times asked Rita whether she used money from her husband to buy the lot and she stated: "I can't answer these questions, I'm sorry."
It also asked how long she and her husband had known Auchi, and she said: "I will not be able to answer this question."
Combine warns co-schemers not to cooperate with Feds
On his last day on the stand, Ata told the jury he finally agreed to cooperate with the Feds in April 2008, after an unnamed person delivered a threat and prosecutors once had him wear a wire to make a recording of the person who threatened him.
The prosecution’s filings say Ata lied to the FBI in 2005 when he "intentionally concealed that he paid Rezko approximately $125,000 in cash ... during 2003 and 2004 so that he could obtain a state appointment and then ensure its continuation."
Ata testified he gave Rezko the money because he wanted to keep his job at the Finance Authority. He said he delivered $25,000 to Rezko in early 2004, because Rezko said it was needed to pay contractors to stop them from filing a lien on Blagojevich’s home.
He also testified that he and Rezko once delivered $50,000 in cash to the home of Christopher Kelly and left it in the car while they went inside. Ata said Rezko told him, “there's somebody from Downstate that's coming to pick up the money." A source told the Sun-Times the money went toward paying Kelly's gambling debts.
Ata also explained that in exchange for a 25% ownership of a real estate partnership, Rezko made a problem with a state lease disappear. After Rezko became a silent partner, he said, the problem went away.
When Rezko’s attorney pressed for details about how that worked, Ata said he learned Rezko had gone to Michael Rumman to get the matter resolved, who Blagojevich appointed to lead the Department of Central Management Services.
Assistant US Attorney Hamilton asked Ata whether he ever sought to be repaid and he said he was an investor in Rezko projects and "I figured at some point in time we'd settle."
Ata told the jury he used to drop by Rezko’s office after he was appointed and would see other top officials waiting to meet with Rezko. In order to keep their jobs, he said, people appointed had to follow orders and become a team player.
For instance, Ata said, he often saw Kelly King Dibble at Rezko’s office, a former Rezmar employee, who became director of the Illinois Housing Authority. But when Dibble balked at hiring a Rezko relative, Ata said, Rezko passed a message to Dibble "congratulating her on her new assignment," and the new assignment was unemployment.
"It emphasized that you need to be a team player and follow the rules if you're going to be a part of the administration," Ata told the jury on May 1, 2008.
Kelly Dibble donated $250 to Obama on June 30, 2003, $250 on January 23, 2004, and $250 on April 25, 2007, according to a summary of contributions by Rezko Watch.
Dibble is now an attorney with the Northern Trust Company, Obama’s Land Trust holder. On September 30, 2007, Dribble donated $1,000 to Obama presidential campaign.
Ata told prosecutors he lied to the FBI in December 2005, because he was encouraged to be a "team player" by people acting on Rezko’s behalf and when he received a grand jury subpoena in late 2005, people contacted him in an effort to stop him from cooperating.
Prosecutors identified one of those people as Orlando Jones, the godson and former chief of staff to the deceased former Cook County Board President, John Stroger. Jones was a former vice president of Rezmar and an investor in Riverside Park.
Prosecutors say Jones wanted Ata to lean on another Rezko business associate to get him to stop cooperating as well. Ata told prosecutors that Jones reassured him that Rezko was working to kill the Board Games investigation by getting the Bush administration to fire Fitzgerald. "Don't worry, the plan is still in place," Jones told Ata.
Jones committed suicide in September 2007, after news of a pending indictment in a pay-to-play scheme reaching all the way to Las Vegas, was splashed all over the media. “The discovery of Jones' body came just two days after FBI agents approached Jones,” FBI spokesman Frank Bochte told the Sun-Times. Jones "cordially declined" to speak with Chicago agents, he said.
A recent state audit of the Illinois State Board of Investment had also shown that Jones collected more than $471,000 in fees from William Blair, to promote the investment firm before the Board, according to a report by Rick Pearson in the May 25, 2007 Tribune.
This Board is the oversight panel for pension systems for lawmakers, judges and state workers. The Board invested $280 million with William Blair in 2004 and when Blair got more money, so did Jones. His referral fees would net him about $224,000 in 2007, “his biggest payday yet,” Rick Pearson estimated in the Tribune.
According to the Sun-Times, Jones had been interviewed by federal authorities a while before his death about the pension fund deals approved by the Board of Investments.
Blagojevich also appointed Allison Davis, Rezko’s former slumlord partner and Obama’s former boss at the Davis, Minor & Banhill law firm, to serve on the Board of Investment.
Davis is president of the Davis Group. On January 29, 2003, the group donated $2,000 to Obama and on June 30, 2003, it made a contribution of $6,000. Obama also received donations from the group of $2,000 on July 7, 2004, $2,000 on January 29, 2007, and $2,300 on June 30, 2007, according to a tally by Rezko Watch.
Prosecutors allege that another member of this Board, Joe Carriatore made a deal with Rezko where his brother Phil Cacciatore, would get a seat on the Board for a $50,000 contribution to the “Friends of Blagojevich,” fund. Joseph Carriatore was an original investor with Rezko in Riverside Park. He donated $1,000 to Obama on June 30, 2003.
Velma Butler was recommended for this Board, but did not get the job. She gave Obama $1,000 on June 30, 2003, and donated $25,000 to Blagojevich three weeks later on July 25, 2003. Butler was also an investor in Riverside Park.
Following Jones’ suicide, County Commissioner Peraica told CBS channel 2 news: “Some of these matters Jones was involved in that are currently being investigated by the FBI and the U.S. Attorney’s Office are reaching to the highest level of county government.”
The pay-to-play scheme in Las Vegas involved a company called Crystal Communications, lead by Martello Pollock. On June 30, 2003, Pollock donated $1,000 to Obama.
In addition to pressure from Jones, Ata says that after he met with Federal agents the first time, he got a voice-mail from Rumman saying Rumman was traveling with "our friend," meaning Rezko, asking Ata to delay the meeting with investigators.
Rumman left his $120,900 a year position in April 2005, after "Auditor General William Holland accused CMS of wasting taxpayer money, skirting state purchasing laws and failing to document hundreds of millions of dollars in alleged savings the agency attributed to its hiring of high-priced consultants," according to the March 11, 2007 Sun-Times.
The next month, Rumman was called to testify before a Government Administration Committee and told the panel: “I was recommended to the governor by Mr. Tony Rezko,” the Sun-Times reported.
Rumman also said he was partners with Rezko in Riverside Park. “Rezko seems to have a hand in everything Rod Blagojevich does with a lot of hires, apparently the contracts, and he is part of the kitchen Cabinet -- and there is absolutely no oversight,” said Rep Jack Franks, chairman of the panel that heard Rumman's testimony.
Franks did not know the half of it. Following Rumman through the maze of Operation Board Games provides a map to the Combine’s corruption in Iraq with contracts signed by Aiham Alsammarae, the convicted minister of electricity who escaped from a jail in Bagdad and is now living in Chicago. This is the subplot currently under investigation in Congress.