Pension kickbacks alleged
A wealthy Republican insider and two prominent Chicago attorneys were indicted Wednesday on charges of extorting hundreds of thousands of dollars in kickbacks from investment firms seeking business from a multibillion-dollar pension plan.
One of those charged had demanded a $850,000 kickback last year from a Virginia investment firm, declaring “This is how things are done in Illinois,” according to the charges.
The indictment alleged that Stuart Levine, the longtime Republican contributor and former trustee of the Illinois Teachers’ Retirement System, orchestrated the kickback scheme.
Joseph Cari, a prominent Democratic fundraiser, and attorney Steven Loren, both of whom were charged with assisting in the scheme, are cooperating in the ongoing probe and are expected to plead guilty, U.S. Atty. Patrick Fitzgerald said.
The indictment comes just three months after Levine was charged with misusing his role as vice chairman of a state hospital oversight board to block hospital projects unless his friends in construction and finance got cut in on the action. He has pleaded not guilty to those charges.
Wednesday’s indictment charged that Levine improperly steered $50 million in teacher retirement funds in August 2003 to one investment firm after its placement agent agreed to share two-thirds of his $375,000 finder’s fee with a Levine associate who hadn’t done any work.
On Levine’s instructions, Loren prepared a sham consulting agreement to try to justify the fee, the charges alleged.
Levine also allegedly tried to extort a kickback of $850,000 from the Virginia firm, identified as JER Inc. from public records. But when the firm balked at paying the money, Levine attempted to pull the contract off the agenda for the teachers retirement board meeting. A staffer refused, however, and the $85 million investment won the backing of the board.
Cari allegedly acted as a intermediary for Levine, demanding JER enter into a sham consulting contract to disguise the kickback.
“The Teachers’ Retirement System is supposed to invest funds for the benefits of teachers,” Fitzgerald told reporters at a news conference. Levine “used fraud and extortion to put those funds to use for the benefit of his friends,” Fitzgerald said.
In a statement, the Teachers’ Retirement System called the allegations “reprehensible.” and said that it had severed its ties with the accused.
The Teachers’ Retirement System provides pension and disability benefits for teachers and administrators in Illinois public schools except for Chicago. It has about 325,000 members and assets in excess of $30 billion.
Levine, 59, was charged with 13 counts of wire fraud, mail fraud, soliciting a bribe and attempted extortion.
Cari, a former finance chairman for the Democratic National Committee and an attorney, will plead guilty to attempted extortion, said his attorney Scott Lassar.
Last month Cari, 52, took a leave of absence from the law firm of Ungaretti & Harris.
Loren’s lawyer, Michael Siegel, also confirmed his client is cooperating and intends to plead guilty to a felony tax offense. “He’s worked hard with the U.S. attorney over the last several months in an attempt to correct the mistake he made,” Siegel said of Loren, 50, who has resigned from the law firm of Gardner Carton & Douglas.
Fitzgerald made it clear the investigation continues and issued an appeal for anyone with knowledge of corruption among state boards to contact federal authorities.
“We’re obviously very concerned about how the state boards are operating,” Fitzgerald said. “This is a broad investigation.”
In May Levine was charged with using his role on the Illinois Health Facilities Planning Board to block hospital projects unless Jacob Kiferbaum, the head of a construction firm, built them. P. Nicholas Hurtgen, a former senior managing director for Bear Stearns & Co.'s office in Chicago, was also charged in the scheme.
Last month, John Glennon, a onetime top adviser to former Gov. George Ryan and an influential Republican real estate consultant, was also charged with acting as a middleman for Levine in an alleged fraud on a suburban Chicago medical school. Glennon was also a trustee with the Teachers’ Retirement System.
According to Wednesday’s indictment, Levine and an undisclosed individual succeeded in obtaining $50 million in teacher retirement funds for a Chicago asset management company to manage in August 2003.
Public records show that the teachers retirement board approved the $50 million investment in August 2003 to Glencoe Capital Partners in a motion seconded by Levine.
In a statement, Glencoe Capital confirmed it has cooperated in the federal probe and said neither the firm nor its employees were targets.
The charges alleged that the firm’s agent who placed the business agreed to Levine’s demand that he kick back $250,000, two-thirds of his finder’s fee, to a businessman selected by Levine. Public records and sources identified the firm’s agent as Sheldon Pekin.
Attorney Andrew Staes, who represents Pekin, said his client had been hoodwinked by Levine and relied on the advice of a major Chicago law firm. Pekin “errantly believed ... that Stuart Levine was an honorable figure,” Staes said in a statement.
To try to justify the payments, Levine instructed Loren to prepare a sham consulting agreement, the charges alleged. Loren told his secretary not to save the bogus agreement on the computer, authorities said.
According to the charges, Levine originally told Pekin, identified in the indictment only as “Individual A,” that he would have to split his finder’s fee with a public official. But Levine later said the public official was not going to participate in the corrupt deal, authorities said.
The indictment also alleged that in 2004 Levine used Cari to communicate his extortionate demands to JER, identified in the indictment as “Investment Firm 4.”
Cari, a managing director of a private equity firm, agreed to the arrangement after Levine said he would help him try to obtain business from other Illinois public pension funds, Fitzgerald said.
Cari made a series of calls to JER’s president and other representatives, demanding the firm pay $850,000--equal to one percent of the $85 million it was seeking from the teachers retirement board to invest.
In a later call to two attorneys for JER, Cari warned the firm would lose the t deal if it didn’t pay the consulting fee. “This was how things are done in Illinois,” authorities quoted Cari as telling the attorneys.
When the firm refused to pay, Levine allegedly tried to pull the contract proposal off the agenda for the retirement board meeting. But a staffer refused to go along and JER won the $85 million investment contract.
Authorities also alleged that Levine had told a medical doctor with whom he had a financial and personal relationship--identified by sources as Dr. Robert Weinstein--that he would steer about $700,000 to Weinstein from either JER or Cari’s investment firm.
Tribune staff reporter Ray Long contributed to this report.
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Key charges in the indictment
- Stuart Levine arranged for kickbacks in the form of finder’s fees to go to an investment consultant for three investment firms he brought to the board. In return, the consultant split the kickback with associates of Levine’s.
- Levine directed the retirement system’s outside attorney to draw up a sham consulting agreement for agent Sheldon Pekin that would pass prosecutors’ scrutiny.
- Levine, with the help of Chicago lawyer Joseph Cari, demanded that a fourth investment firm pay a $850,000 consulting fee in return for an $85 million investment. Cari told firm representatives they needed to sign a consulting contract and that “this was how things are done in Illinois.” When the firm refused, Levine tried to pull the firm’s proposal from a board agenda, but a staffer refused and the board approved the investment.