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Blagojevich fundraiser indicted for tax fraud

Posted December 13, 2007 10:00 pm

Mike Ramsey

Gov. Rod Blagojevich's federally investigated administration suffered another blow Thursday as his former top fundraiser was charged with tax fraud.

The 12-count federal indictment against Christopher G. Kelly, 49, alleges that the wealthy Burr Ridge roofing contractor concealed more than $1 million in personal income and more than $300,000 in business income from the Internal Revenue Service between 2000 and 2005. He allegedly used cash from two corporations he controlled to pay personal expenses and gambling debts he racked up in Las Vegas and with Illinois bookmakers.

Kelly was chief fundraiser for Blagojevich's 2002 election bid and has been characterized as a friend and private adviser to the governor. In a highly controversial move by Blagojevich, Kelly served as the governor's liaison to the Illinois Gaming Board when the regulatory panel sought to untangle the state's 10th license from a legal dispute. The friend and "kitchen Cabinet" adviser has been less visible in recent years.

He is the second Blagojevich insider to be indicted in the span of 14 months. In October 2006, as Blagojevich campaigned for a second term, his confidant Antoin "Tony" Rezko was charged with trying to shake down firms seeking to do business with the Teachers' Retirement System and the Illinois Health Facilities Planning Board.

In court papers, Kelly reportedly was the unnamed "Individual B" who discussed a kickback scheme with Rezko as a way to raise campaign funds (for Blagojevich, media outlets reported). Kelly has not been charged with wrongdoing in that case.

Speculation is that the feds are trying to put pressure on Kelly through the tax charges to gain leverage in the Rezko case, which is slated for trial in February.

U.S. Attorney Patrick Fitzgerald downplayed questions about the government's motives and said the tax charges are serious enough to warrant prosecution.

"People always have a parlor game about what people are thinking, but we speak in terms of what we have charged and what we intend to prove," he said at a news conference at the Dirksen U.S. Courthouse in Chicago.

Also Thursday, a federal grand jury returned a fresh indictment against Rezko in a separate loan-fraud case and named a new defendant, Abdelhamid "Al" Chaib, who allegedly helped Rezko seek loans under false pretenses to buy pizza restaurants.

In yet another corruption case, investment banker P. Nicholas Hurtgen was re-indicted for allegedly helping a Health Facilities Planning Board member request payoffs from applicants seeking permits. At the center of the schemes, prosecutors have said, was Stuart Levine, a Republican whom Democrat Blagojevich reappointed to the influential hospital-construction panel.

An initial court appearance for Kelly was not scheduled. His defense attorney, Michael Monico, said Kelly would fight the charges and prove he does not owe the federal government additional taxes.

"These charges have nothing to do with politics," Monico told reporters. "They have nothing to do with fundraising. They have only to do with Mr. Kelly's personal life and his business and taxes."

Blagojevich, who has not been accused of any crimes, voiced support for Kelly in a written statement.

"Chris Kelly is my friend," he said. "I am saddened to hear these allegations about Chris's personal life. I know the pain it must be causing him and his family."

Kelly faces up to 38 years in prison if he is convicted of the combined offenses. He is charged with five counts each of filing false personal and corporate tax returns, one count of obstructing the IRS and one count of illegally "structuring" monetary transactions.

Kelly placed millions of dollars in bets in Illinois and Las Vegas, prosecutors said. The indictment said he shifted money from his BCI Commercial Roofing to pay off some of his gambling debts by disguising the transactions as business-related expenses.

In early 2005, he attempted to use a $79,140 wire transfer from a bank account in Saudi Arabia to a Florida bank account to conceal the source of the partial payment of a large gambling debt, prosecutors said. They said Kelly later used a wire transfer from a Chicago pizza company to make a payment on the debt.

Kelly also allegedly concealed his personal receipt of cash by depositing and cashing company checks that were payable to himself, his children and his wife in amounts less than $10,000, the sum that triggers Currency Transaction Reports. In one September 2004 incident, an unnamed "Individual C" converted checks Kelly had provided him into cash and handed Kelly $28,650 in a parking lot, the indictment says.

Blagojevich in 2002 ran on a platform to clean up corruption in state government, which had been rocked by the scandals under former Gov. George Ryan. But Blagojevich has been beset by federal investigations of his administration, including a probe into alleged hiring fraud. He disowned Rezko last year when the businessman was indicted.

Government ethics watchdog Cindi Canary conceded that Thursday's charges against Kelly are not directly related to Blagojevich's administration. But she noted that federal prosecutors typically have squeezed lower-level figures to move upward.

"If I were in the administration, I'd be very concerned," said Canary, executive director of the Illinois Campaign for Political Reform.

Mike Ramsey can be reached at (312) 857-2323 or ghns-ramsey@sbcglobal.net.

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