Arguing that Gov. George Ryan’s campaign fund is being depleted to pay legal fees for fighting the criminal charges against it, federal prosecutors Thursday asked a judge to freeze $1 million of the account.
In seeking the order, prosecutors said an examination of bank records shows that the balance in three primary accounts held by the Citizens for Ryan campaign committee may have already dipped below $1 million. The government has said it plans to seize that amount if it wins a conviction against the fund.
Since April, when Citizens for Ryan and two top Ryan aides were indicted, the fund has spent more than $330,000 on legal fees, prosecutors said.
The government accused the campaign fund and the two aides of illegally diverting resources and employees from the secretary of state’s office to Ryan’s 1998 gubernatorial campaign.
U.S. District Judge Rebecca Pallmeyer said she likely would protect the $1 million by requiring that Citizens for Ryan post a bond guaranteeing that amount until the conclusion of the trial.
Complicating matters is that Altheimer & Gray, the law firm defending Citizens for Ryan, was disqualified Monday from defending the fund because of conflicts of interest. While the firm can appeal the decision, Pallmeyer ordered Altheimer & Gray attorneys to bring another legal team into the case by June 27.
Mark A. Flessner, an attorney with Altheimer & Gray, has not said if the firm will appeal.
Shortly after the indictment, prosecutors received assurances from campaign fund lawyers that legal fees wouldn’t drain the $1 million the government plans to seize in the event of a conviction. The lawyers also said they wouldn’t make any large withdrawals without the government’s permission.
In court Thursday, Flessner argued there was nothing wrong about the withdrawals and that prosecutors have long been aware that legal fees were being drawn from the fund.
“We’ve been dealing with the government on this issue for 10 months,” Flessner said. “Ultimately, in January, Altheimer & Gray set aside $200,000 so it would be in a sort of safe haven if you will.”
But $200,000 is only a fifth of what prosecutors believe Citizens for Ryan owes the state, Assistant U.S. Atty. Patrick Collins said.
After examining the records of one of the three primary bank accounts of the campaign committee, prosecutors were alarmed at the rate funds were being depleted, Collins said.
According to campaign reports, Ryan’s committee had $2.36 million in the bank as of Dec. 31, 2001. But prosecutors said there was just $1.475 million in the fund as of April 1. In addition, they noted, $63,000 was paid Altheimer & Gray on April 10, $115,000 was paid on April 26 and $160,000 went to the firm on June 7.
Dennis Culloton, the governor’s spokesman, said details on the spending will be forthcoming in a few weeks when the committee must file a report covering the fund’s costs and revenues for the first six months of the year.
“I don’t have at my disposal all of the account receivables,” he said.
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But Culloton noted that “we have incurred a number of professional services bills as well as day-to-day expenses.”
Flessner did not comment on the possibility the fund could run short of cash for legal fees.
As for prosecutors, the fund’s ability to pay its legal fees is not a concern, Collins said.
“The U.S. attorney’s office is concerned first and foremost with having full restitution paid to the victim, in this case the state of Illinois,” he said. “That should take precedent over other financial matters.”
Culloton said a decision on whether the governor would create a legal defense fund might be made after the judge’s ruling.