Corrupt IL hospital board has given campaign contribution to Obama, he returned it only now, when scandal erupted

Reform Law Might Have Aided Blagojevich Scheme
A 2003 Illinois Good-Governance Measure Supported by Obama Apparently Backfired in Hospital-Construction ScandalArticle
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more in Politics »By JOHN R. EMSHWILLER and CHRISTOPHER COOPER
President-elect Barack Obama helped enact an Illinois good-government reform measure while serving as a state senator in 2003 that appeared to inadvertently have aided Gov. Rod Blagojevich in an alleged corruption scheme involving hospital construction.

Mr. Obama backed legislation that revamped the Illinois Health Facilities Planning Board. The panel was responsible for approving major hospital expansion projects and was seen at the time as unwieldy and tainted by cronyism. The bill shrank the size of the board and set new limits on a governor's ability to stack the panel with members of his own political party.


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Illinois Gov. Rod Blagojevich
But Mr. Blagojevich, a Democrat, put together a friendly, five-member majority on the shrunken board that included members of both parties -- board members whom Mr. Blogajevich and his allies used to extract money from companies seeking approval to build medical facilities, according to the federal criminal complaint filed this month against the governor. The alleged health-board abuses were part of what prosecutors say was a broader scheme by Mr. Blagojevich to obtain money for political favors, including the attempt to sell the U.S. Senate seat vacated last month by Mr. Obama. Mr. Blagojevich has denied the charges.

There is no indication that President-elect Obama was involved in any hospital board wrongdoing. But his role in the legislation shows how he became a useful, though apparently unwitting, ally to Mr. Blagojevich's alleged schemes, sometimes conducted under the "reform" slogan that both men regularly invoked.

After the passage of the law, Mr. Obama received $15,500 in campaign donations from three hospital-board members who since have been identified by prosecutors as participants in the alleged abuses. As the Illinois political scandal that has now engulfed Mr. Blagojevich burgeoned, Mr. Obama gave that money to charity.

Obama spokesman Ben LaBolt declined to comment on the 2003 law or the Blagojevich scandal. In a written statement, he said that "President-elect Obama's longstanding record of reform in the Illinois legislature is clear." He said that record included a sweeping 1998 ethics reform package and Mr. Obama's support this year for a state law to reduce special-interest influence in the legislature.

Mr. Obama and aides also have denied wrongdoing in Mr. Blagojevich's alleged abuse of his appointment power to fill the vacant U.S. Senate seat. The Obama transition team released a report Tuesday saying Obama aides had some interaction with Mr. Blagojevich and his associates on the matter, but didn't discuss any deals.

Mr. Blagojevich won the governorship in 2002 as a reformer. Changing the makeup of the hospital board was part of a general revamp of state panels.


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Businessman and fund-raiser Antoin "Tony" Rezko
The hospital board bill was introduced in the legislature in the spring of 2003 and won quick approval from a Senate committee that Mr. Obama chaired; it passed both houses unanimously. A subsequent email from an adviser to the governor named Mr. Obama as one of several legislators instrumental in getting the legislation passed.

Within months of the board's reduction to nine members from 15, Mr. Blagojevich had assembled a majority five-member bloc that was used to begin extracting campaign contributions from medical executives, prosecutors say. A Federal Bureau of Investigation affidavit filed in the Blagojevich case says that the point man in this scheme was Antoin "Tony" Rezko, a friend and major fund-raiser for both Mr. Obama and Mr. Blagojevich.

While Mr. Rezko wasn't a member of the hospital board, he provided instructions on behalf of Mr. Blagojevich to members on how to vote, according to the FBI affidavit. One member of that group, Stuart Levine, testified at the Rezko trial that Mr. Blagojevich had told him to discuss hospital board matters only with Mr. Rezko or another ally, adding that "you stick with us and you will do very well for yourself."

Mr. Levine pleaded guilty in 2006 to two criminal counts related to the misuse of his position on the hospital board and on another state panel and agreed to cooperate in the ongoing investigation. Jeffrey Steinback, an attorney for Mr. Levine, declined to discuss the Blagojevich case. None of the four other members of the purported bloc have been criminally charged. Two have been granted immunity from prosecution in exchange for their testimony.

One example of alleged hospital-board abuses cited by prosecutors involved the effort by Mercy Health System to win approval for a new hospital in Crystal Lake, Ill. The board initially voted down the proposal. Later, it reversed its stance. Prosecutors say the reversal came after Mr. Rezko exercised "his influence at the Planning Board" in return for the hospital builder's promise to "make a substantial campaign contribution" to Gov. Blagojevich.

Mercy executives have denied any wrongdoing.

Mr. Rezko was convicted of influence-peddling earlier this year in Chicago federal court in connection with the hospital board and other matters. Prosecutors say Mr. Rezko has begun providing information to them about Mr. Blagojevich. A Rezko attorney declined to comment.

Write to John R. Emshwiller at john.emshwiller@wsj.com and Christopher Cooper at christopher.cooper@wsj.com