Illinois governor sees a 2nd aide indicted by U.S.

CHICAGO —  Christopher Kelly, a close advisor to Illinois Gov. Rod R. Blagojevich and chief fundraiser on his two campaigns for governor, was indicted Thursday on federal tax fraud charges, accused of understating more than $1.3 million in personal and business income on tax returns for five years, federal authorities said.

The indictment charged that Kelly concealed his use of corporate funds to pay for personal expenses such as gambling debts to sports bookmakers.

The wealthy roofing contractor has been one of the governor’s most trusted confidants and acted as Blagojevich’s campaign chairman from 2004 until summer 2005.

“Chris Kelly is my friend. I am saddened to hear these allegations about Chris’ personal life,” Blagojevich said in a statement issued by his office. “I know the pain it must be causing him and his family. My thoughts and my prayers are with them during this difficult time. In fairness to Chris, I believe it is important to let the legal process play out and not rush to judgment.”

Also charged Thursday were Abdelhamid Chaib, who was added to a pending indictment of Antoin “Tony” Rezko, once a top fundraiser and advisor to the governor, and P. Nicholas Hurtgen, a former senior managing director at Bear Stearns & Co. in Chicago.

The indictment against Chaib, Rezko and Ali Ata, a former executive director of the Illinois Finance Authority, alleged they fraudulently schemed to obtain a $2.6-million loan to finance the sale of 17 pizza restaurants in the Chicago and Detroit areas.

Hurtgen was reindicted on charges he took part in a fraud scheme to force kickbacks from hospital expansion projects. He was originally charged with political insider Stuart P. Levine, real estate consultant John Glennon and construction firm owner Jacob Kiferbaum. But a judge in March dropped Hurtgen from that case, finding that the original indictment did not specifically outline that Hurtgen knew that kickbacks were involved.

Kelly is a former advisor to the administration on gambling issues. He was once asked to intervene as the administration’s representative in negotiations between the Illinois Gaming Board and the Emerald riverboat casino. Blagojevich, a Democrat, said he selected Kelly in part for the assignment because Kelly is an avid gambler and high-roller and he often travels to Las Vegas on weekends.

Kelly’s attorney, Michael Monico, said Wednesday that he was waiting to learn the full details of the allegations but said Kelly has done nothing wrong. Kelly has paid all of his required taxes to date, Monico said.

Kelly becomes the second member of Blagojevich’s inner circle to be hit with federal charges. Rezko, once a top fundraiser and advisor to the governor, was indicted last year and accused of using his relationship with Blagojevich to extort businesses that came before the Illinois Health Facilities Planning Board and the state’s Teachers’ Retirement System board.

At the center of that case was GOP insider Levine, a onetime member of those boards who has admitted to scheming with Rezko and others to squeeze millions of dollars from companies seeking state business.

Sources said that the charges Thursday were not directly related to the Rezko case, but that Kelly has long been a target in that probe.

In Levine’s plea agreement, federal prosecutors alleged that Rezko and another fundraiser, identified only as “Individual B,” schemed almost from the beginning of the governor’s administration to use their newfound influence for corrupt purposes.