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Hospital clout scheme alleged
A wealthy political insider who played an influential role on a state hospital oversight board was accused in a federal indictment Monday of using his clout to profit on suburban hospital expansion and to extort millions of dollars from a medical school and a related charity.
Stuart Levine, 59, a longtime Republican contributor and the former vice chairman of the Illinois Health Facilities Planning Board, was arrested at his Highland Park home on charges of receiving at least $9.5 million through various kickback schemes.
Also charged was Jacob Kiferbaum, 52, the head of a Deerfield-based construction firm, and P. Nicholas Hurtgen, 42, a former aide to onetime Wisconsin Gov. Tommy Thompson and a former senior managing director for Bear Stearns & Co.'s office in Chicago.
Prosecutors alleged that Levine used his role on the state panel to block hospital projects unless Kiferbaum built them. Hurtgen, hoping to get hospitals to finance expansions with Bear Stearns, helped pressure hospital officials to hire Kiferbaum, prosecutors alleged.
Levine and Kiferbaum also were accused of allegedly padding costs of construction projects at Rosalind Franklin University of Medicine & Science in North Chicago to pay kickbacks ordered by Levine. Both men served on the medical school's board of trustees.
Levine also was charged with defrauding a scholarship foundation for the medical school of $6 million.
"It's truly stunning what people will do when they're motivated by greed and backed by clout," U.S. Atty. Patrick Fitzgerald said.
"When you serve on the board of a foundation or organization, it's your job to look out for the interests of the foundation, not to line your pockets. When you serve on the board of the state dealing with health facilities ... it's your job to look out for the citizens of Illinois and their right to medical care, not to shake down bribes and extort people to steer contracts to your friends."
He said Kiferbaum has agreed to plead guilty and is cooperating with authorities. The investigation is continuing.
2 suspects plead not guilty
At their arraignment Monday in U.S. District Court, Levine and Hurtgen pleaded not guilty and were released on their own recognizance. Levine must wear electronic monitors and was confined to his house. Hurtgen's wife agreed to be his custodian.
Though Levine was among the largest single contributors to Republican Jim Ryan's 2002 campaign for governor, Ryan's successful opponent, Democrat Rod Blagojevich, reappointed Levine to the Illinois Health Facilities Planning Board in 2003. Levine also contributed more than $4,200 to Blagojevich after the 2002 election.
Blagojevich abruptly canceled a news conference shortly after the indictments were unsealed. An aide said he was engaged in state budget talks with staff and did not want to interrupt progress being made.
Blagojevich spokeswoman Abby Ottenhoff said the governor reappointed Levine to the state hospital construction board for the sake of "continuity" and because the law required a certain number of Republican members on the panel.
Levine had been a member of the hospital construction board since 1996.
Plainfield project at stake
With Levine in that role, prosecutors said, Kiferbaum and Hurtgen allegedly tried to pressure officials of Edward Hospital in Naperville to use Kiferbaum's construction firm for a planned hospital project in Plainfield. Without that, the indictment alleged, they claimed the project would be rejected.
Underscoring the threat, prosecutors said that when Pamela Meyer Davis, Edward's chief executive officer, met with Kiferbaum at a Deerfield restaurant last year, Levine and Hurtgen also appeared, but acted as if they were merely passing by. Levine told her that Kiferbaum could be trusted, the indictment alleged.
Unknown to the three men was the fact that Davis was cooperating with the FBI, and sources said she wore a hidden recording device during parts of the investigation.
When Mercy Health Systems wanted to build a hospital in Crystal Lake, Levine told Kiferbaum he wanted a $1.5 million kickback if the new hospital won planning board approval, the indictment alleged.
The board initially rejected Mercy's plan, but reversed itself after the hospital hired Kiferbaum as a contractor. The Mercy proposal almost failed a second time, but Levine paused the board vote and whispered in the ear of another member who then asked to change his position. That put it over the top.
In a separate scheme outlined by prosecutors, Levine and Kiferbaum are alleged to have used their positions on the medical school board to defraud it and a related charity of millions of dollars.
Kiferbaum's construction firm received $40 million in construction work from the school and padded the price, using sham marketing and consulting contracts to steer $2 million in kickbacks to Levine or close associates, prosecutors alleged.
Half of that money allegedly went to a Levine associate, not charged in the indictment but identified by prosecutors as a European businessman.
Levine also served on the board of the Northshore Supporting Organization, a charitable trust that supported scholarships at the medical school. Prosecutors said he caused the charity's board to lend $6 million to companies that he and another board member, identified as Individual 1, controlled.
Levine then orchestrated an elaborate scheme in which the charity board donated promissory notes for the loans to the medical school under the condition it then sell them to the European businessman for $1 million, the indictment charged.
Instead of sending the money to the university, the businessman sent it to Levine who then turned it over to the school but represented it as a donation, the indictment alleged.
Debt allegedly erased
The businessman then returned the promissory notes to Levine and Individual 1, essentially wiping away the debt, prosecutors alleged.
"In the end, $6 million went out the door for a $1 million payment, which had been stolen in effect from the Chicago Medical School in the first place," Fitzgerald said.
Marc Martin, an attorney for Levine, said there wasn't any need to arrest Levine as he had offered to surrender once charges came down.
Kiferbaum's attorney, Theodore Poulos, said his client would plead guilty.
"Jacob has accepted responsibility for his conduct. He has been cooperating with the government and will continue to do so," he said.
Hurtgen's attorney, Ronald Safer, said Hurtgen wanted to confront the charges. "Those charges will wither under the spotlight and Nick will be proven innocent," he said.
Tribune staff reporters James Kimberly, Ray Gibson and John Chase contributed to this report.