TRS response to Rezko indictments

[OCT. 12, 2006]  SPRINGFIELD -- The Illinois Teachers' Retirement System and its board of trustees are disgusted, angered and deeply troubled by the federal charges filed Wednesday against Antoin "Tony" Rezko, who has served as a top fundraiser and adviser to Gov. Rod Blagojevich. Rezko and former retirement system trustee Stuart Levine are accused of soliciting and demanding millions of dollars in undisclosed payments and kickbacks from investment firms seeking to do business with the retirement system.

"These alleged acts of misconduct in no way reflect the strong commitment of the current board of trustees and the 175 members of the TRS staff to serve our members with honesty, integrity and professionalism," said Jon Bauman, executive director of the retirement system. "We are steadfast in our mission to protect the retirement security of TRS members who entrust us with their financial futures. Rezko and Levine are accused of using pay-for-play schemes to enrich themselves and others instead of serving in the best interests of the teachers and citizens of Illinois. Their actions are shameful."

The indictment states that Rezko and Levine used their influence to coerce the investment firms into signing sham consulting contracts, requiring the firms to pay "finder's fees" for work that was never provided. The true recipients of the fees were concealed by Levine and former outside counsel Steven Loren from the board of trustees and from retirement system staff. No assets of the retirement system were used to pay these fees, which prosecutors say were split among Rezko, Levine and others involved in the scheme. In most cases, the schemes were unsuccessful because staff intervened or because the investment proposals were not worthy of consideration by the board.

Levine, who has been cooperating with federal prosecutors, is scheduled to plead guilty Oct. 27 in connection with the scheme. The Teachers' Retirement System will continue to provide cooperation and information to federal authorities and looks forward to justice being served in this case.

In January, the retirement system filed a civil suit in Cook County Circuit Court against Levine; its former outside counsel, Steve Loren, and his former law firm; and Joseph Cari, former partner of the private equity fund HealthPoint Capital. The suit, which accuses Levine, Loren and Cari of criminal breach of their fiduciary duties to the retirement system, seeks $3.9 million in legal fees paid to Loren's former law firm, Gardner Carton & Douglas, as well as other monetary and compensatory damages to be determined by the court. The civil suit has been stayed until the criminal cases are resolved.

The Teachers' Retirement System provides retirement, disability and death benefits to teachers and administrators at Illinois public elementary and secondary schools outside the city of Chicago. The retirement system is diligent in obtaining the best investment fee structure available. The system earned top performance returns among its peers this year and ranked in the top quartile of the Wilshire Trust Universe Comparison Service. The fund serves 325,000 members and annuitants and had assets of $36.5 billion as of June 30.

[Teachers' Retirement System news release]