Rezko Trial: Lawyer's testimony highlights corruption that pervaded state deals

At the end of the day Tuesday in the Tony Rezko trial, a picture had emerged of both the tangled web of connections among Rezko and his associates and the murky ethical standards guiding investments by the Teachers Retirement System.

Prosecutors led Steve Loren, a former lawyer for the state teachers' pension fund who has pleaded guilty in the case, through various investment deals and cell-phone conversations between him and Stuart Levine, who has also pleaded guilty on charges related to the investigation, sometimes line-by-line.

The testimony came in the trial in U.S. District Court in which Rezko is charged with fraud, attempted extortion and money-laundering. He has pleaded not guilty.

Loren's testimony, centering on events from the spring of 2004, highlighted his involvement with Levine in diverting finder's fees, or placement fees, for TRS investments to people selected by top Blagojevich fundraisers Rezko and Chris Kelly.

When TRS was contemplating an investment with JER Partners in spring 2004, Loren was asked to review the legal documents, he said.

He testified that he noticed JER was allowing significantly better terms to investments of more than $100 million. Wondering why TRS, planning to invest only $75 million, would enter into a deal as a "second-class citizen," he was confused about TRS' insistence on the deal.

He discussed it with Levine, who was already aware of the proposed deal. Loren testified Tuesday that, when he asked Levine about it, Levine told him that he didn't want Loren to jeopardize the deal by examining it too closely.

Loren said Levine told him that Carl McCall, former New York state comptroller, was to receive a finder's fee as a result of the investment.

"Carl McCall had an interest in this and I shouldn't do anything to screw it up," Loren testified that Levine told him.

At Levine's request, Loren drafted the contract out of which a placement fee would be payable for the JER deal, using the terms "X" and "Y," which he inferred were to be replaced with JER and McCall at a later point in the process.

In a February 2004 meeting at Levine's office in the Hancock Building, Loren met with Levine and Jon Baumann, the fund's executive director, to discuss investments with various real estate fund managers that the pension fund was weighing.

Loren said he was surprised to find out that GOP powerbroker William Cellini, whose family owned one of the real-estate companies that TRS was considering investing in, would be attending the meeting.

"It didn't seem to me to be an appropriate meeting for Bill to participate in," Loren testified, calling it a violation of state ethics laws.

Cellini arrived late and proceeded to embrace Levine and kiss him on each cheek, Loren recalled. He then gave an "animated - not upset, but animated" account of his complaints to Rezko and Kelly about what he saw as their overzealous maneuvering with regard to TRS investments.

According to Loren, Cellini said: "They were moving too fast. They were gonna get in trouble . They needed to leave the investment decision making to us."