Trial begins of former Chicago Obama fundraiser

By Andrew Stern

CHICAGO (Reuters) - A friend and fundraiser to U.S. Democratic presidential hopeful Barack Obama went on trial on Monday in a case that has directed scrutiny at the often corrupt political culture of the candidate's adopted home state.

Antoin "Tony" Rezko, a property developer and restaurant entrepreneur, is accused by federal prosecutors of extorting bribes and campaign donations as well as money laundering.

Prosecutors say at least one campaign contribution of $10,000 went to an unidentified politician widely reported to be Obama when he was running for his U.S. Senate seat in 2004. Obama's campaign has donated to charity more than $150,000 in contributions traced to Rezko and his associates.

The trial opened on Monday with jury selection and is likely to last from three to four months.

The Rezko case has been an embarrassment for Obama, but so far it hasn't been a big issue on the campaign trail. Obama has won the last 11 nominating contests and analysts say he could essentially wrap up the nomination with victories in Ohio and Texas on Tuesday.

In addition to his influence in Illinois, the Syrian-born Rezko has business ties in the Middle East and to Iraqi-born British billionaire Nadhmi Auchi, who was convicted in France in the Elf oil company scandal in 2003 and given a suspended sentence.

It was a $3.5 million transfer from Auchi's company to Rezko prior to the trial that persuaded Judge Amy St. Eve of the U.S. District Court to revoke Rezko bond in January, putting him in jail.

'SLUMLORD'

Obama's friendship with Rezko -- who Obama's rival for the party nomination, New York Sen. Hillary Clinton, once referred to as a "slumlord" for whom Obama did legal work -- dates to the early 1990s. Rezko offered the young Harvard law school graduate a job, which Obama refused, but a link was formed and they occasionally socialized.

Besides Rezko's fundraising prowess for Obama and other politicians, notably Illinois Democratic Gov. Rod Blagojevich, a 2005 real estate deal has drawn particular scrutiny.

On the same day in 2005 that Obama purchased a Georgian mansion for $1.65 million, $300,000 less than the original asking price, Rezko's wife, Rita, purchased the adjoining lot from the same seller at the full $625,000 asking price. The sellers have said Obama was the highest bidder.

Later, Obama expanded his side yard by purchasing a sliver of Rezko's lot for $104,000. Until the deal came to light, Obama's gardener was paid to mow the grass on the entire lot.

Obama has said he was "boneheaded" to involve Rezko in the deal, given that Rezko was widely reported to be under federal investigation at the time.

Obama has maintained he did no political favors for Rezko, though he said he did perform a few hours of paid legal work for non-profit companies that were partners with Rezko in construction deals.

Rezko is accused of scheming to extort nearly $6 million in kickbacks from investment houses and others wanting to do business with two state boards.