Category Archives: Fiscal Issues

Before the Fall, Cellini Firm Feasted on Fees

It would appear that William Cellini’s reign as a state powerbroker is over, especially since he’s probably headed for jail.

That’s in sharp contrast to a few years before his conviction last November in federal court of extortion conspiracy and soliciting a bribe. At that time, the real estate investment firm he ran was flush with tens of millions of dollars in fees provided by the Teachers Retirement System (TRS) of Illinois.

Cellini’s Commonwealth Realty Advisors received $30 million between 2001-2010, the Better Government Association found.

It was Cellini’s influence on the state’s largest public pension fund that helped lead to his downfall. Cellini was convicted of scheming to pressure a co-owner of investment firm Capri Capital in 2004 to make campaign contributions to then-Gov. Rod Blagojevich in return for Capri’s managing some TRS investments worth $220 million.

Federal authorities have alleged in court documents that Blagojevich insiders Tony Rezko and Christopher Kelly were also part of the scheme to force Capri to make payments to the ex-governor’s campaign fund.

The plot backfired when Capri co-owner Tom Rosenberg, a Hollywood producer whose films include “Million Dollar Baby,” refused to give money to Blagojevich, according to court documents.

Rosenberg threatened to go to the authorities.

To try to prevent that from happening, Cellini, Rezko, Kelly and TRS board member Stuart Levine decided Capri should get the $220 million investment stake anyway. But they vowed to use their influence to block Capri from receiving future state business, federal authorities alleged in court documents.

In October 2008, a federal grand jury indicted Cellini on charges of conspiracy to commit mail fraud, extortion conspiracy, attempted extortion and soliciting a bribe.

Cellini was subsequently convicted in federal court, where Rosenberg was a key government witness.

Cellini’s family still has property and business interests in Springfield and downstate, so a comeback for the resilient political powerhouse is always a possibility.

But that’s a long shot: Cellini faces up to 30 years in prison and his firm, Commonwealth Realty, has closed. His sentencing is scheduled for June 15.

This blog entry was reported and written by BGA Investigator Andrew Schroedter, who can be reached at (312) 821-9035, or at aschroedter@bettergov.org.

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IMRF Vs. TRS: Getting More For Less

Over the past decade, another major public employee pension fund reaped a higher investment return, paid less in financial fees and used fewer advisers than the Teachers Retirement System (TRS) of Illinois.

The Illinois Municipal Retirement Fund (IMRF), which had $24 billion in assets at the end of 2010, had an average annual return of 5.4 percent (not including fees) for the 10-year period ending in 2010.

The fund couldn’t provide a net return for the 10-year period.

During that period, IMRF paid $594 million in fees to money managers, significantly less than TRS’ $1.3 billion payout. Eighty vendors were paid more than $1 million each by IMRF compared to more than 200 TRS vendors.

Another difference: IMRF, which manages pensions for local governments and school districts, is not state-funded as is TRS and four other major state-backed pensions.

IMRF was about 80 percent funded at the end of last year, according to a preliminary estimate.

In comparison, TRS is less than half funded.

Brett Chase is a Chicago-based freelance reporter and BGA investigator.

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Daley’s 2011 Budget Cuts Include Cop-Friendly Homebuying Program

A relatively small but innovative grant program designed to help Chicago police officers, firefighters and paramedics buy homes in lower-income neighborhoods was among Mayor Daley’s 2011 budget cuts.

Launched in 1995, the Public Safety Officer Homeownership Incentive Program made meeting residency rules—city employees must live within Chicago proper—more manageable.

Over the last two years, 51 Chicago Police Department employees and five Chicago Fire Department employees tapped into the program, receiving grants between $3,000 and $7,500. In total, the program offered $172,500 in assistance since January 2009.

The neighborhoods ranged from Austin to Rogers Park to Pullman. (Even a sliver of Lakeview qualified.)

But now, the program is gone.

“This is one of the many cuts that were made in putting together the 2011 budget,” Pete Scales, a spokesman for the city’s Department of Finance, said. “We cut [$97 million] in expenditures.”

Chicago’s home-buying cops and firefighters can still apply for a similar program, offered by the U.S. Department of Housing and Urban Development.

In blue: boundaries for the homeowning assistance program (City of Chicago)

This entry was written and reported by BGA senior investigator Patrick Rehkamp. He can be reached at (312) 386-9201, or at prehkamp@bettergov.org.

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Expert: Fed Rescue of Insolvent States Will Include Illinois

If the federal government bails out the nation’s debt-ridden states, Illinois will be among the first to grab a lifeline, according to one financial expert.

“If there’s even a hint of a bailout, you’re gonna have Illinois, New York, several other states right behind California,” said Christopher Whalen, bank analyst and managing director of Institutional Risk Analytics.

Whalen told the Business Insiders website that California, which is running a $25 billion deficit, is close to defaulting on its bills. Should that occur, the federal government would be compelled to come to California’s aid by crafting some type of financial restructuring plan or rescue effort.

Whalen notes that California has a number of governance problems that are adding to its crush of financial woes. They include: A huge deficit, an inability to quickly pass a state budget and massive public pension obligations.

If that litany of woes sounds familiar it’s because Illinois has similar difficulties: A budget deficit of $15 billion; a woefully under-funded state budget; and staggering public employee pension obligations of around $80 billion or more.

Some lawmakers are suggesting the federal government refrain from bailing out any state that goes broke.

However, the feds may not have a choice because any sovereign state default, especially a biggie like California or Illinois, would inevitably damage the U.S credit rating, cripple investor demand for its bonds and deeply hinder the economy.

State defaults are rare and Arkansas was the last to go bust during the Great Depression.

Nevertheless, Whalen is one of a small but growing chorus of financial experts who are openly concerned about the states’ debt loads and potential impact on the economy.

Respected financial analyst Meredith Whitney is also sounding the alarm about the dire fiscal condition of the nation’s 15 largest states. She says Illinois ranks as the second worse, right behind California.

By Robert Reed, director of investigations. Do you have concerns or information about the State’s deficit or finances? Contact the BGA at 312.427.8330.

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