From The Chicago Sun-Times:

'The fix was in, for a price,' U.S. attorney says

May 22, 2002

BY STEVE WARMBIR, TIM NOVAK AND DAVE MCKINNEY STAFF REPORTERS

Lawrence E. Warner not only dined out often with his close friend Gov. Ryan at swank downtown restaurants.

The lobbyist and businessman also illegally gorged himself at the public trough--nearly $3 million over nine years--as an influence peddler in Ryan's secretary of state office, federal prosecutors alleged Tuesday in an indictment.

Warner used his influence to pry cash from firms that either wanted new contracts with the secretary of state's office or, in one instance, hoped to keep its business, prosecutors alleged.

All of this occurred with the consent of a high-ranking secretary of state official, who in return got a portion of Warner's bribes.

Authorities declined to saywhether the high-ranking secretary of state official was Ryan.

On Tuesday, the governor remained in his mansion and refused to talk with reporters.

Through a spokesman, he effectively denied any role in the scheme. But spokesman Dennis Culloton repeatedly refused to answer whether Ryan has been notified he is a target of the ongoing federal investigation.

"From the governor's perspective, there is no reason why he or any of his loved ones would ever have been charged with any wrongdoing because they haven't done anything wrong," Culloton said, adding the governor has never personally profited from his public service.

While U.S. Attorney Patrick Fitzgerald wouldn't answer questions about Ryan Tuesday, he described the corruption festering under the governor when he was secretary of state.

"For the better part of a decade in Illinois, when it came to contracts and leases in the secretary of state's office, the fix was in, for a price," Fitzgerald said. "Today, a grand jury alleged that the fix was a defendant named Larry Warner."

"I think today brings forth one of the most significant indictments in this case," FBI Special Agent in Charge Thomas Kneir said.

Also indicted in the scheme were Warner's friend, Donald Udstuen, the former top lobbyist for the Illinois State Medical Society and ex-Metra board member, and CTA board member Alan A. Drazek. Warner also is on a public board as Ryan's only appointment to the city-state agency that runs Navy Pier and McCormick Place.

Udstuen, 58, of Crystal Lake, is cooperating with the investigation and is expected to plead guilty to a single tax charge. Drazek, 61, of Morton Grove, is not cooperating, and his attorney, Dennis Berkson, declined to comment on the allegations.

The indictment of Warner marks the third Ryan friend indicted in the ongoing investigation of corruption under his secretary of state administration. In all, 51 people have been charged in the probe, Operation Safe Road.

Former top Ryan aide Scott Fawell was indicted in April for allegedly using state workers to do campaign work on the public dime. Ryan friend and former inspector general Dean Bauer was sentenced to a year in prison for obstructing justice.

The indictment announced Tuesday, though, breaks new ground in showing in detail how a member of Ryan's inner circle allegedly used the secretary of state's office to line his pockets.

Warner, 64, of Chicago, is accused of racketeering and other charges for raking in $2.8 million from four contracts that firms had with the secretary of state's office, as well as three building leases, in which he hid his financial interests, prosecutors alleged.

In some instances, Warner allegedly kicked back a third of his bribes to his pal, Udstuen, though the indictment does not say why. In all, Udstuen got more than $350,000, the feds allege.

Drazek's reputed role in the scheme was to launder the payments from Warner to Udstuen. Warner made out checks to Drazek's firm, American Management Resources, a direct mailing company, which then passed on the money to Udstuen while keeping some for himself, authorities allege.

This isn't the first time Drazek's firm has been accused of helping hide payments. It was referred to as Company A in the indictment against Fawell and accused of helping hide $30,000 in payments to Fawell, another Ryan aide, and Ryan's daughter, Linda Fairman, according to court records and sources.

As for Warner, the contracts with the secretary of state's office cited in the indictment involved two with American Decal and Manufacturing Company Inc. in Chicago for stickers.

Another was with IBM for computers and a fourth for the relatively new digital licensing system with Viisage Technology based in Massachusetts. Warner also was registered as a state lobbyist for IBM, records show.

Warner is accused of extorting American Decal by demanding at first $2,000 a month, then $3,000, then $5,000 if the company wanted to keep its contract for providing license plate validation stickers.

One key way Warner allegedly helped was by nixing a suggestion to remove a certain bid requirement.

That requirement helped American Decal get the contract.

A secretary of state official had decided to get rid of the requirement, relying on a committee's unanimous recommendation, but then was overruled by the high-ranking agency official with whom Warner was allegedly sharing bribes.

Warner is also accused of hiding that he was receiving commissions or had actual ownership interests in three properties rented by the secretary of state's office--one downtown, the others in Bellwood and Joliet.

One of the four contracts with the state agency is still in effect, as are two of three leases with the original owners.

Fitzgerald said the companies are cooperating and in some cases were victims.

When Udstuen learned the feds were investigating Warner, Udstuen and Drazek got together to amend their tax returns to try to cover their tracks, prosecutors alleged.

And only a few days after the governor's former top aide, Fawell, got indicted, the feds say Drazek and Udstuen met again to come up with a fake cover story.

Warner and Udstuen also had close ties to another individual in a pending federal case, Michael Segal, the indicted owner of Near North Insurance, sources said.

Segal would let the two friends use Near North's private jet, including at least one instance in which they were joined by the governor, sources said.

More 'smart' than 'smooth'

Since he was a young man, Alan A. Drazek has been "consumed by the political, governmental game," a friend said.

Like Donald Udstuen, Drazek worked for Gov. Richard B. Ogilvie and later became involved with transit. Gov. Ryan appointed him to the CTA board 17 months ago.

Under former President George Bush, Drazek headed a Chicago office that ensured office supplies, phone lines and computers were in tip-top shape for federal employees. In Springfield, he was an Ogilvie personnel chief; Drazek bristled at the suggestion he doled out patronage jobs as Udstuen once had.

Drazek, 61, of Morton Grove owned American Management Resources, which authorities said secretly funneled money from Texas Sen. Phil Gramm's presidential campaign to Ryan aides and a daughter of the governor. Drazek also is in business with Roger "The Hog" Stanley, whose companies got state business after Stanley allegedly provided Ryan's former chief of staff favors.

Drazek is described by one friend as a low-key, "kind of nerdy guy, not a stylish smooth guy, but . . . smart and capable."

Robert C. Herguth, Chris Fusco

'Part of the inner circle'

Few people are closer to Gov. Ryan than Larry Warner.

They are fast friends and frequent dinner companions, often at many of Chicago's hot spots, including Tavern on Rush, a tony North Side restaurant whose owners include Warner.

"Larry's someone who is part of the inner circle. He was omnipresent,'' said a Republican operative who wanted to remain anonymous.

Warner, 64, owns Lash Warner and Associates, an insurance adjusting company on the city's North Side. He is also involved in dozens of other businesses, according to an ethics statement he filed with the state last week.

Warner was Ryan's only appointment to the city-state agency that runs McCormick Place and Navy Pier. Warner was one of the few board members who wanted to give a $300,000 golden parachute to the agency's CEO, Scott Fawell, a former Ryan aide who was indicted on racketeering charges last month.

Warner drives a Mercedes-Benz bearing a license plate with only the letter "O," a plate he got from Ryan.

Tim Novak

'Dr. Don' an elite lobbyist

A cigar-chomping, tough-talking patronage chief for Gov. Richard B. Ogilvie, Donald Udstuen evolved into a cigar-chomping, smooth-talking lobbyist known as "Dr. Don."

The nickname came from his long affiliation with the Illinois State Medical Society, a powerful doctors group from which he resigned as the federal probe was bearing down. But it just as well could have referred to his surgeonlike mastery of the political system.

An elite Springfield lobbyist, Udstuen had been one of Ogilvie's "whiz kids . . . no more than a few years removed from the campus of Northern Illinois University" when he got the patronage post, according to Gov. Richard Ogilvie: In the Interest of the State by Taylor Pensoneau.

He was "overbearing" in the job, but those who know him said he later became more "affable" and "charming." All the while, he was a "political junkie" who enjoyed working behind the scenes, contributed a fortune to Gov. Ryan and others, and sat on the Metra board until his recent resignation.

Udstuen, 58, lives in Crystal Lake with his wife and sons.

Robert C. Herguth

Justices hear bid to make governor return salary

BY DAVE MCKINNEY SUN-TIMES SPRINGFIELD BUREAU

SPRINGFIELD--Should taxpayers be able to sue Gov. Ryan or any corrupt underling for misuse of state funds while Ryan was secretary of state, or could that have a long-range chilling effect on state government and lead to a litany of frivolous lawsuits?

Those were the battle lines drawn Tuesday before the Illinois Supreme Court by the Better Government Association and Ryan's personal attorney, former Gov. James R. Thompson, who argued a case before justices for the first time in 32 years.

The Chicago-based government watchdog wants taxpayers to be reimbursed for the salaries of Ryan and corrupt, lower-ranking officials, but that bid has been rejected twice by lower courts. Earlier court rulings have held that only the state's attorney general has the ability to sue a corrupt public official for misspent state funds.

"These were ill-gotten gains and they belong to the treasury. They don't belong sticking to the hands of the defendants," BGA attorney Robert Atkins told the court.

At one point in his arguments, Atkins cited a law journal article allegedly advocating such taxpayer-initiated lawsuits, and a co-author of that was Thompson's wife, Jayne Carr Thompson. The reference prompted a broad grin from the ex-governor.

Thompson, whose legal prowess once saved former Supreme Court Chief Justice James Heiple from impeachment, argued taxpayer lawsuits could lead to a "parade of horrors" that would result in an avalanche of groundless lawsuits.

"No decision of any state employee, any public elected official . . . would be safe," Thompson told the Democratic-controlled court.

Thompson also pointed out that taxpayers can vote out of office any corrupt official or an attorney general who opts not to sue that official, which he said is a tool as potent as any civil remedy.

Attorney General Jim Ryan has repeatedly rejected suing the governor and this week released a letter from U.S. Attorney Patrick Fitzgerald, who contended a parallel civil lawsuit could interfere with the ongoing federal corruption probe of the George Ryan-led secretary of state's office.

The Supreme Court is expected to decide the case later this year. A ruling in favor of the BGA would allow its lawsuit to proceed in Cook County Circuit Court. An opposite ruling would effectively end the group's civil efforts against Gov. Ryan.