(MCT) — A longtime friend of U.S. Rep. Jesse Jackson Jr.who was at the center of a Senate seat scandal that sent ex-Gov. Rod Blagojevich to prison was arrested Wednesday in his own federal fraud case, accused of bribing doctors to send patients to his surgical centers.
Raghuveer Nayak, a wealthy businessman and former campaign fundraiser for both politicians, was indicted on charges he secretly paid hundreds of thousands of dollars to physicians from 2000 to 2010 to have patients referred to Rogers Park One Day Surgery Center, Lakeshore Surgery Center and other Chicago-area facilities he owned.
The investigation of his businesses had hung over Nayak's head for years, and his lawyer, Thomas McQueen, said the charges were not unexpected. "He knew this had never gone away," McQueen said after the FBI arrested his client at Nayak's Oak Brook home.
A frowning Nayak appeared Wednesday at the Dirksen U.S. Courthouse in a rumpled shirt and entered a plea of not guilty to the 19 fraud counts against him. U.S. Magistrate Judge Maria Valdez ordered him released on a $10 million bond secured by six properties in Illinois and Indiana after Assistant U.S. Attorney Christopher Niewoehner told the court that Nayak has "rather significant assets" and ties to India.
Nayak left the courthouse without commenting.
In making their case against Blagojevich, federal authorities alleged that it was Nayak, a longtime friend of the Jackson family, who offered up to $6 million in campaign money in exchange for Jackson being named a senator. Blagojevich was found guilty on corruption charges last year that included counts involving the attempted sale of the U.S. Senate seat vacated by Barack Obama after his 2008 election to the presidency.
Nayak was never charged in the Blagojevich case, and he quickly spoke with authorities after Blagojevich's arrest in a bid for leniency. But he never was used as a witness, either, and investigators continued to look into his businesses.
Jackson testified at Blagojevich's trial that he had no knowledge of a scheme to buy the Senate seat.
The indictment of Nayak is seen as one of the final offshoots of the sweeping federal investigation known as Operation Board Games, which in addition to Blagojevich led to convictions of fundraiser Antoin "Tony" Rezko, formerAld. Edward Vrdolyak, Republican power broker William Cellini and others. One of the final sentences in cases connected to that probe could be handed down as soon as next week, when political insider turned federal witness Stuart Levine is expected to learn his punishment.
Sources have confirmed that the Board Games investigation is wrapping up. U.S. Atty. Patrick Fitzgerald is leaving office at the end of the month, and one of the lead prosecutors against Blagojevich, Reid Schar, already has left.
Although he raised money for politicians for more than a decade, Nayak mostly worked under the radar until his connections to Blagojevich and Jackson surfaced in 2008 as part of the burgeoning federal investigation into the governor's office.
Days after Blagojevich's December 2008 arrest, the Tribune first reported that Nayak and his associate, Rajinder Bedi, were organizing a fundraising effort for Blagojevich aimed at supporting Jackson's bid for Senate.
Nayak has told federal investigators that Jackson asked him to raise campaign money for Blagojevich in hopes that the then-governor would appoint Jackson to the Senate seat vacated by Obama, sources familiar with the investigation have told the Tribune.
There have been no signs of federal criminal authorities actively investigating the Blagojevich-Nayak-Jackson connections for quite some time. If anything, Nayak's indictment on the hospital charges was seen as the latest indication that the Blagojevich investigation was drawing to a close.
But the House Ethics Committee announced late last year it will continue investigating Jackson's efforts to be named to the Senate seat vacated by Obama. The committee also released a 2009 report by congressional investigators who said there was "probable cause" to believe Jackson directed Nayak's efforts or at least knew that Nayak would try to trade cash for the Senate pick.
Jackson has denied those suggestions and predicted he will be vindicated at the end of the ethics probe. A Jackson spokesman did not return calls for comment Wednesday.
Jackson also has said he did not violate House ethics rules about accepting personal benefits when he had Nayak buy a plane ticket for a woman who had a secret relationship with the congressman.
Jackson, who has since distanced himself from Nayak, told the Tribune editorial board that Nayak's purchase was "a friendly gesture" by "a close and dear friend of mine, one who knows members of my family, has worked with members of my family, has been a friend of our family's for a number of years."
Jackson, who has been in Congress for nearly 17 years, won a Democratic primary campaign earlier this year.
Nayak's story is one of a man who overcame racism and near-poverty to become a wealthy and controversial businessman and leader in Illinois' burgeoning Indian community over the past decade. Federal authorities have previously investigated fraud allegations involving Nayak clinics, but he never was charged and denied any wrongdoing.
The indictment unsealed Wednesday alleges as part of the scheme that "physicians deceived their patients by not disclosing that they were being paid for making referrals to Nayak's facilities," but Nayak was the only person charged. He allegedly created false contracts to disguise some of the illicit payments, describing them as money for advertising, according to the document.
Prosecutors are seeking $1.8 million in "alleged fraud proceeds" in the case.
In one kickback scheme, prosecutors alleged, Nayak paid one person, identified only as "Individual A," more than $2 million in checks drawn on his surgery centers' accounts. In return, "Individual A" gave Nayak cash equaling about 70 percent of the value of the checks, according to the indictment.
In the Blagojevich case, Nayak's friend Bedi testified that Nayak issued about $2 million in checks to a Bedi-owned company. Bedi testified he provided cash in return and said he knew Nayak was cheating on his taxes by making the payments.
Nayak's businesses have over the years needed the approval of state regulators and auditors, and Nayak became a big campaign bundler and contributor, donating more than $779,000 to elected officials including Blagojevich, Attorney General Lisa Madigan and Obama from the late 1990s until his name surfaced in the Blagojevich scandal.
The Tribune previously reported that after Nayak first opened several Chicago drugstores in the early 1980s, his businesses faced multiple audits by state and federal authorities. His name also came up repeatedly in one of the largest health care fraud investigations in Illinois history.
That multiyear federal probe resulted in the shuttering of two hospitalsDoctors Hospital and Edgewater Medical Centerand the convictions of seven doctors and administrators. Nayak, who then owned a lab testing company called NR Laboratories as well as an outpatient surgery center, was among numerous people who came under scrutiny, the Tribune had reported.
Some of Nayak's associates and friends were convicted in the scheme, which included charges that two patients died from unnecessary procedures performed by doctors looking to collect fraudulent public aid checks.
