Federal Prosecutors Re-Indict Former Bear Stearns Banker

CHICAGO — Federal prosecutors in Chicago announced yesterday the re-indictment of former Bear Stearns & Co. public finance banker P. Nicholas Hurtgen on charges that he participated in an extortion scheme involving a Chicago-area hospital as it sought regulatory approval from the state for new facilities. The indictment reinstates the same charges first levied against Hurtgen in May 2005 — alleging that he participated in a fraud scheme orchestrated by Illinois businessman Stuart Levine to pressure Naperville-based Edward Hospital to use a construction company owned by Jacob Kiferbaum to build its new facilities in exchange for state regulatory support. Kiferbaum was to pay kickbacks to Levine.Patrick Fitzgerald, U.S. attorney for the Northern District of Illinois, announced the indictment along with several others, including a former top fundraiser to Illinois Gov. Rod Blagojevich at a news conference yesterday.Levine had previously served as vice chairman of the Illinois Health Facilities Planning Board, which must approve hospital construction projects. Kiferbaum pleaded guilty early in the case and has cooperated with federal prosecutors. The case against Levine was dropped last year after he entered a guilty plea to charges that he peddled his influence as a member of both the planning board and the state teachers’ pension fund to enrich himself. Levine is also now cooperating with prosecutors.In March of this year — as Hurtgen was facing a trial on the charges — U.S. District Court Senior Judge John Grady dismissed the charges, finding the prosecution had failed to specifically allege in its indictments that Hurtgen was aware that Levine was to receive kickbacks.Federal prosecutors in the new indictment make clear their contention that Hurtgen had full knowledge of the alleged kickbacks, providing new details “about Hurtgen’s role in, as well as his knowledge of, the charged criminal activity.” Hurtgen allegedly participated in the scheme in late 2003 and early 2004 to “obtain financial gain for Bear Stearns and himself” with the understanding that Bear Stearns would win the underwriting business on the hospital’s new $90 million hospital and a $23 million office building.Hurtgen, 44, allegedly promised Edward Hospital that the planning board would approve the projects if it hired Kiferbaum and that it would deny them if they refused. Because state law prohibited Levine from communicating with the hospital, Hurtgen allegedly communicated the threats to Edward officials and helped stage an “accidental” meeting at a restaurant between Levine and hospital officials who were there with Kiferbaum.The indictment also notes that Bear Stearns had done extensive business with the state, including managing substantial funds for the teachers’ retirement system and in underwriting the state’s $10 billion pension bond sale in June 2003. Bear Stearns was the co-book-running senior manager. Court information was not immediately available. If convicted, Hurtgen faces 20 years in prison for each count.Erika Csicsila, an attorney with Schiff Hardin LLP who is representing Hurtgen, responded to the new indictment saying “We do not believe the new indictment cures the defects of the old one.”The Hurtgen indictment is part of a sweeping federal probe into state corruption known as Operation Board Games. Fitzgerald also announced yesterday the indictment of Blagojevich’s friend and former top fundraiser Christopher Kelly on federal tax fraud charges. Kelly, a roofing company owner, and Illinois businessman Antoin Rezko, wielded significant power during the early years of Blagojevich’s administration, as the governor made board appointments and filled key positions. As investment bankers sought to participate on the state’s $10 billion bond sale, several said it was Rezko and Kelly who suggested what consultants they should hire to lobby on their behalf. Rezko was indicted last year on charges of fraud and influence peddling and faces a trial next year.Hurtgen resigned from Bear Stearns under pressure in the summer of 2004, after it was disclosed that Edward Hospital officials had filed a sealed federal whistleblower’s case alleging the shakedown scheme. Hurtgen served as a top aid to former Wisconsin Gov. Tommy Thompson before joining Bear Stearns in 1995.