From the Associated Press

Accountants testify in Ryan trial

January 17, 2006

BY DON BABWIN ASSOCIATED PReSS

Two accountants testified Tuesday at the corruption trial of former Gov. George Ryan that they were never informed that thousands of dollars were taken out of Ryan's campaign fund and distributed to family members and spent on plane trips.

Robert Montague, for example, said he did not know that Ryan's son-in-law, Michael Fairman, was paid $23,000 in 1996 when he was having money problems. And Arnold Lederman said that he did not know when preparing Ryan's amended tax returns for 1995 and 1996 and his 1997 and 1998 tax returns that about $50,000 from the campaign fund was paid to Fairman.

In what is scheduled to be the last week of testimony by government witnesses in the four-month-old trial of Ryan and lobbyist friend Larry Warner, prosecutors hammered home their contention that Ryan illegally failed to report to the Internal Revenue Service money taken from his campaign fund for personal expenses.

Lederman said he also did not know that Ryan directed to his daughters thousands of dollars he made in consulting fees for former Sen. Phil Gramm's presidential campaign. Nor did he know about a plane Ryan chartered to Indianapolis for a basketball tournament.

Ryan and Warner are charged in a 22-count federal indictment with racketeering, mail fraud and other offenses. Both have said they did nothing illegal.

Tuesday's testimony only reiterated what previous witnesses have said and what prosecutors have already alleged. The testimony, however, did drive home prosecutors' contention that Ryan ignored the law about reporting such expenses-- and it elicited a statement from Lederman that prosecutors likely will repeat before jurors begin deliberations.

Close to the end of questioning by prosecutors, Lederman recalled a conversation he'd had with Roger Bickel, Ryan's attorney, whom he'd dealt with after he was hired in 1997 to work on Ryan's taxes. "He said George feels that campaign funds are his money and he can do whatever he wants with them," Lederman testified.

Ryan, 71, contends he did nothing improper. In fact, in 2002 Ryan amended his federal tax return to increase his income by more than $63,000-- much of it from his campaign fund. Ryan said he hadn't, for example, realized that he owed taxes on thousands of dollars paid to Fairman or owed taxes on money in consulting fees that went to Ryan's children.

"While I have served in public office for over 30 years, my professional training is as a pharmacist, not a lawyer or an accountant," Ryan explained in the tax documents, which were introduced as evidence in his trial in December.

And in court Tuesday, Lederman acknowledged under questioning by Ryan attorney Brad Lerman that it was Ryan who volunteered to amend his tax returns for 1995 and 1996 to determine if he underpaid for those years.

Far from hiding what he was doing, Lerman's questions suggested, Ryan was calling attention to how he was spending campaign funds.

In other testimony, a longtime friend of Warner's testified that he bought stock in a high-tech company a day or two after Warner told him about the state of Illinois' involvement with the company.

Larry Stern testified that Warner told him in April 1997 during one of the regular chats the two had in Warner's office that Viisage Technologies had landed or was about to land a multimillion-dollar contract with the state to provide a digital imaging system to store drivers license photos.

Stern, who said Warner was enthusiastic about Viisage, testified he used his wife's account to buy the stock because he did not have the money, not because he was trying to hide the transaction. He sold the stock the next month and made about $3,300 on the deal, Stern testified.

Stern acknowledged he was granted immunity from criminal prosecution in exchange for his cooperation with authorities. But he made it clear that he agreed to testify against his old friend in the hope that prosecutors would spare his wife criminal prosecution, explaining that in 2001 when he was confronted by federal investigators about Viisage, his wife was dying of cancer. She has since died.

"I didn't want her to be involved," said Stern, who appeared to struggle with his composure when his testimony turned to his wife. "She didn't know anything about it."