A sweeping federal indictment of former Gov. George H. Ryan charged Wednesday that he received illegal cash payments, gifts and vacations, and helped his family members reap almost $167,000 in similar benefits–all from a Ryan confidant who made huge illicit profits on state contracts and leases.
During two terms as secretary of state, Ryan allegedly steered contracts and leases to companies that had been extorted for bribes, scuttling internal investigations into his campaign’s improper political fundraising practices and personally awarding more than 90 low-digit license plates to cronies and campaign contributors.
The indictment also accuses him of grossly understating his income on four years of federal income tax returns between 1995 and 1998.
Former U.S. Atty. Dan Webb, who is representing Ryan, said in a statement that he was confident the former governor would be exonerated, calling the charges “false, unfair and malicious.”
At a packed news conference Wednesday, U.S. Atty. Patrick J. Fitzgerald alleged that Ryan, while governor, had repeatedly lied to federal agents about his knowledge of and involvement in wrongdoing.
“What we’re alleging in the indictment is that basically the State of Illinois was for sale, for [Ryan’s] friends and family at times,” Fitzgerald told reporters. “At times George Ryan stepped into the process to make sure that those interests were taken care of, and that should not be happening.”
Though Ryan is by far the biggest catch of the 5 1/2-year federal Operation Safe Road investigation, Fitzgerald and Assistant U.S. Atty. Patrick Collins, who is heading up the probe, went out of their way to emphasize that prosecutors aren’t finished yet.
Ryan is the probe’s 66th defendant; 58 defendants and his campaign committee have been convicted.
Ryan’s indictment marks the fifth time in the last century that an Illinois governor has been accused of criminal wrongdoing. Two later were acquitted.
In Ryan’s defense
Webb said Ryan, 69, of Kankakee has accumulated no personal wealth, lives a modest lifestyle and “makes ends meet” through pension and Social Security payments after nearly 40 years of public service.
“The jury will easily conclude this is not the financial picture of a man who has engaged in the type of activities alleged in this indictment,” Webb said.
The 91-page indictment lays out a complex series of schemes alleging a pattern of corruption by Ryan during more than a decade in public office, mostly during his scandal-plagued tenure as secretary of state.
Ryan, charged with 18 counts of racketeering conspiracy, mail fraud, making false statements, and income tax violations, was added to an indictment first brought last year against Lawrence Warner, a trusted member of Ryan’s “kitchen cabinet” of prominent advisers who allegedly pocketed almost $3 million from the corrupt deals.
The government is seeking forfeiture of more than $3 million from Ryan and Warner.
Ryan was accused of secretly sharing in more than $32,000 in “consulting” payments from Sen. Phil Gramm’s 1996 presidential campaign, directing his shares to several daughters even though they did no work for the campaign.
Ryan is alleged to have authorized the firings or re-assignments of most of the secretary of state’s internal investigators to discourage investigations into improper political fundraising activities.
New disclosures
Among the new disclosures in Wednesday’s indictment was that in return for Ryan’s alleged assistance on state contracts and leases, Warner provided cash, loans, gifts and services totaling about $167,000 to Ryan family members.
According to the indictment, Warner provided two loans–one later forgiven–totaling $145,000 to Comguard, a private company partly owned by Ryan’s brother, Thomas, former mayor of Kankakee.
Comguard struggled financially until 1992 when it won lucrative state contracts to provide electronic monitoring of inmates.
Thomas Ryan’s wife said he was unavailable for comment Wednesday night.
Prosecutors also alleged that Warner gave a $5,000 no-interest loan to a Ryan relative, spent more than $3,000 on the 1997 wedding of one of Ryan’s daughters, invested more than $6,000 in a Ryan relative’s business and provided about $7,000 worth of professional services for free to another Ryan family member.
Ryan also received illegal cash payments, gifts, vacations and personal services, the charges alleged.
Between 1993 and 2002, Ryan allegedly took yearly vacations at a home owned by his friend Harry Klein in Jamaica and at least two vacations at Klein’s Palm Springs, Calif., residence. Authorities valued the vacation benefits at between $1,000 and $2,000 a year.
To conceal the free lodging, Ryan paid Klein by check, but Klein reimbursed Ryan in cash, according to the charges.
The indictment also alleged that Ryan arranged for the secretary of state’s office to lease a building Klein owned in South Holland. Klein received about $600,000 in lease payments.
The vacations and lease deal were first detailed by the Tribune in 2000.
Another Ryan confidant, Arthur “Ron” Swanson, a high-powered lobbyist, is alleged to have provided cash and gifts on multiple occasions to Ryan as well as a 1995 trip to Cancun, Mexico, to a Ryan relative.
In return Ryan was accused of privately tipping Swanson, identified in the indictment as “Associate 1,” that he had selected Grayville for a prison site. Swanson landed a $50,000 lobbying fee from the town, even though he allegedly knew Ryan already had decided to place the prison there.
Swanson was charged in August with that scheme and others and has pleaded not guilty.
“What we allege is that the state of Illinois was taken advantage of by Ryan and greedy friends,” Fitzgerald said. “And Ryan, it’s alleged, steered some of those greedy friends some of those payments.”
The indictment also charged Ryan with awarding more than 90 low-digit license plates requested by Warner for his business associates, clients and individuals he solicited to raise campaign funds for Ryan.
Ryan also allegedly rewarded friends, including land developer Anthony DeSantis, with the coveted low-digit plates. DeSantis, referred to in the indictment as “Individual 1,” allegedly made at least $2,500 in campaign contributions to Ryan, some allegedly disguised as personal checks to Ryan and his family, details first disclosed by the Tribune in 2001.
Ryan was accused of lying during three of four interviews with federal agents in 2000 and 2001.
Among the alleged falsehoods was Ryan’s denial that he had a personal financial relationship with Warner.
Ryan also was accused of lying when he claimed no one at the secretary of state’s office had ever linked sales of political fundraiser tickets to improper licensing.
Warner was charged with improperly wielding influence while Ryan headed the secretary of state’s office, steering lucrative contracts for license plate stickers and digital licenses to vendors he shook down for payoffs.
According to the indictment, in 1991 Warner advised Donald Udstuen, another Ryan confidant, that, with Ryan’s blessing, he would provide Udstuen with one-third of the kickbacks from vendors.
Udstuen’s share on just two contracts exceeded $300,000, authorities said.
Warner also told Udstuen that Warner would be “taking care” of Ryan–previously identified by authorities only as “Official A”–from his two-thirds share of the illicit profits, the charges alleged.
Udstuen pleaded guilty to a tax charge and is cooperating with federal authorities, but Warner has pleaded innocent and is awaiting trial.
In late 1992 a high-ranking secretary of state official informed Ryan that Warner was frequently meddling in his job and “manipulating” contracts, the indictment charged.
Authorities alleged that Ryan told the undisclosed official that Warner was the official’s “friend” and directed him to cooperate with Warner.
In April 1993, Ryan came to Warner’s assistance again after secretary of state officials changed the specifications on a contract to produce vehicle registration validation stickers by removing the requirement for a security mark.
The action threatened American Decal & Manufacturing’s chances of keeping the contract for the stickers, which must be affixed to all Illinois license plates.
But the charges alleged that Ryan directed the same high-ranking secretary of state official to change the contract specifications back. That allowed Warner to continue to pocket kickbacks from American Decal, about $332,000 by 2000, authorities charged.
As part of the fraud scheme, in the summer of 1991, Warner, Udstuen and Swanson allegedly tried to solicit as much as $1 million from Honeywell/Bull in order for the company to keep a computer mainframe contract with the state.
Honeywell/Bull refused and a company representative reported the solicitation personally to Ryan, the charges alleged.
At a meeting, Ryan told Honeywell that he had too much to lose to allow something like that to happen during his administration and assured them he would “get to the bottom of it,” authorities alleged.
Based at least in part on actions taken by Warner, Ryan later awarded the computer upgrade contract to International Business Machines. Over about six years, Warner received almost $1 million in payments from IBM, sharing about one-third of the money with Udstuen, according to the charges.
In 1996, with his inside access at the secretary of state’s office, Warner learned a high-ranking official there favored awarding a new digital licenses contract to Viisage Technologies, a Massachusetts firm.
Warner pitched his services to the firm, lining up a lobbying deal that he allegedly concealed.
According to the charges, Warner received about $800,000 in revenue from Viisage between 1999 and November 2002.
Before the lucrative contract was awarded, Warner tipped a secretary of state employee to buy stock in Viisage, figuring the stock would rise on word of its winning the state business, authorities said.
Warner was also alleged to have made more than $900,000 in profit by secretly owning an interest in buildings in Joliet and Bellwood leased to the secretary of state and hiding his commission for acting as a broker in a third lease.
Campaign fund charges
The indictment also charged that Ryan routinely used campaign funds for personal expenses but concealed the spending so that the money fraudulently wasn’t reported on campaign disclosure forms.
The tax fraud charges alleged that Ryan spent cash, sometimes on frequent gambling trips to casinos, that he received from third parties for his personal use.
On more than one occasion, Ryan received money from political supporters, deposited it into his personal account and used it for personal expenses without advising his campaign officials.
Ryan was accused of substantially under-reporting his gross income by failing to report much of his spending of campaign funds on personal expenses.
Ryan used campaign funds to pay his and certain relatives’ personal expenses and to provide personal gifts, the charges alleged.
“The public should know that this investigation will continue aggressively, passionately and fairly,” Collins, the lead prosecutor, said. “And we will take this evidence wherever it leads.”
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The charges
RACKETEERING CONSPIRACY
One count: From 1990 to at least 2002, George Ryan, his friend Lawrence Warner and others allegedly “engaged in a scheme to defraud” Illinois by using his government positions to obtain financial benefits for himself, his family and his campaign fund. Ryan also allegedly provided benefits to associates while concealing financial ties to them. The conspiracy allegedly involved mail fraud, money laundering, extortion, bribery and obstruction of justice.
MAIL FRAUD
Nine counts: Ryan, his family and friends allegedly received cash, gifts and loans from people seeking to do business with the state. In exchange, Ryan allegedly gave out confidential information and took other steps to steer lucrative state contracts to his friends.
FALSE STATEMENTS
Three counts: Ryan allegedly lied in three interviews with federal agents during the grand jury investigation.
INCOME TAX FRAUD
One count: Between 1991 and 2002, Ryan allegedly defrauded the IRS by diverting income he received from his campaign fund to family members and by spending unreported cash on personal expenses, including gambling trips.
FALSE TAX RETURNS
Four counts: From 1995 to 1998, Ryan allegedly filed federal tax returns with the IRS that “substantially” understated his actual income.
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Ryan associates at the center of the storm
Larry Warner
Chicago businessman
Indicted last year for allegedly using his influence over the secretary of state office to benefit himself and others.
Wednesday’s indictment: Alleges he received about $3 million in profits from SOS contracts and leases since 1991. He has pleaded not guilty; his trial is set for Feb. 23.
Donald Udstuen
Ryan confidant and former Metra board member Pleaded guilty last year to taking bribes from Warner and agreed to let federal investigators secretly record his telephone calls to Ryan.
Wednesday’s indictment: Alleges Ryan directed more than $300,000 in kickbacks to Udstuen, whose sentencing is pending.
Alan Drazek
Former CTA board member
Has testified Ryan aides told him to make nearly $10,000 in secret payments from Sen. Phil Gramm’s 1996 presidential campaign to four of the former governor’s daughters. The Gramm campaign didn’t know the payments were going to Ryan’s daughters. Early this year, Drazek pleaded guilty to helping conceal kickback schemes. His sentencing is pending.
Wednesday’s indictment: Alleges that Drazek participated with Ryan and Warner in a racketeering conspiracy and that Ryan lied about the payments on his tax returns.
Arthur “Ron” Swanson
Former state senator and friend of Ryan Accused of lying to a federal grand jury about $50,000 he received from a Grayville resident to lobby on the town’s behalf to get a state prison.
Wednesday’s indictment: Alleges Ryan informed “Associate 1” that he had selected Grayville to be the prison site shortly before a Grayville-affiliated group hired the associate to lobby for it. Swanson has pleaded not guilty to seven counts of perjury.
Harry Klein
Suburban businessman
Alleged to have provided Ryan and his nowimprisoned chief of staff, Scott Fawell, free trips to his Jamaican estate. Klein was awarded a lucrative lease from state officials.
Wednesday’s indictment: Alleges “Associate 2” provided annual vacation lodging to Ryan of between $1,000 and $2,000 from 1993 to 2002.
Anthony DeSantis
Owner of the Drury Lane Oakbrook theater Awarded the special plate number 217 in 1998. He gave Ryan and his wife cash gifts totaling $2,500 in 1997 and 1998.
Wednesday’s indictment: Ryan is accused of awarding “Individual 1” a number of low-digit plate numbers.
Sources: U.S. Attorney’s Office and Tribune staff reporting
Chicago Tribune
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The full 91-page indictment can be found at chicagotribune.com
To read previous Chicago Tribune stories about Operation Safe Road, go to bancodeprofissionais.com/saferoad.
