UPDATED 05/17/11 6:22 p.m.

CHICAGO (CBS) — Rod Blagojevich’s college roommate and first chief of staff as governor testified Tuesday that he helped the governor try to shake down a racetrack owner for campaign cash in exchange for signing legislation to help the horse racing industry.

Alonzo “Lon” Monk, 52, met Blagojevich in law school in the 1980s and they became close friends. Monk later ran Blagojevich’s first campaign for governor in 2002 and then became his first chief of staff after taking office in 2003.

After leaving the governor’s office, Monk became a lobbyist and one of his clients was racetrack owner John Johnston, who in late 2008 was pushing for legislation that would reinstate subsidies that casino owners had been paying to the horse racing industry for years.

According to Monk, in 2006, Blaogojevich had signed off on legislation requiring casinos to provide financial subsidies to the state’s horse racing industry, which suffered as a result of the state’s riverboat casinos.

But that legislation expired in 2008 and lawmakers were working on similar legislation to renew the subsidy for another three years.

Monk said that, before lawmakers approved the new legislation in 2008, Blagojevich had tasked him with trying to get $100,000 in campaign cash from Johnston.

Prosecutors played a November 2008 phone call in which Blagojevich discussed a number of fundraising schemes with his brother, Robert, who was running the governor’s campaign fund at the time. Robert told his brother that Monk had said he’d reached out to Johnston about making a $100,000 campaign contribution.

“He says Johnny Johnston’s good for it,” Robert told his brother. “He’s gonna give you, you know, he didn’t get it, but he says, you know, ‘I’m good for it. I got to just decide what, what a-, accounts to get it out of.’ And, and Lon’s gonna talk to you about some sensitivities, legislatively, tonight when he sees ya, with regard to timing of all of this.”

But the only timing that the governor seemed concerned with was getting campaign cash before the new year.

“Right, before the end of the year, though, right?” Rod asked his brother.

Prosecutors have repeatedly stressed that Blagojevich was trying to get campaign contributions before Jan. 1, 2009, because of an ethics bill barring him from getting campaign cash from anyone holding a state contract after the end of 2008.

A week after that call, lawmakers approved the racetrack bill and, four days later, sent it to the governor’s desk.

Monk testified that, after lawmakers approved the legislation, he and Blagojevich tried to figure out how to convince John Johnston to make a contribution before Blagojevich would sign the measure.

In a secretly recorded conversation at the governor’s campaign office, Blagojevich and Monk rehearsed a conversation that Monk could have with Johnston to ask for $100,000 without blatantly linking the money to the racetrack legislation.

“I wanna go to him without crossing the line and say, give us the f***in’ money,” Monk said. “Give us the money and one has nothing to do with the other … but give us the f***in’ money.”

Later, they were heard discussing concerns that Johnston would change his mind about making a campaign contribution if Blagojevich signed the legislation first.

Monk said he could tell Johnston that Blagojevich “feels like you’re gonna get skittish if he signs the bill.”

Assistant U.S. Atty. Chris Niewoehner asked if Monk believed the legislation and the campaign money were linked and if that was the message they were trying to send to Johnston.

“I wouldn’t have had to say that otherwise,” Monk testified. “The purpose was to delay signing the bill so that we could get the contribution before the end of the year.”

After that conversation with Blagojevich, Monk drove to one of Johnston’s racetracks to pass on the message to Johnston, starting off by saying they were having “two separate conversations,” one about the legislation and another about campaign cash.

“I was trying to be, you know, subtle in my conversation with John Johnston. I didn’t want to be blatant,” Monk testified.

Niewoehner asked if Monk believed telling Johnston that they were having two separate conversations would make him believe the subjects were not linked.

Monk said no, he was sending a message “That they were tied together.”

The next day, Monk flew to the Dominican Republic for a golfing trip and, the day after he got back, Blagojevich was arrested.

Defense attorneys will begin cross-examining Monk on Wednesday.

Monk Says Schemes Started Before Blago Took Office

Earlier, Monk testified that Blagojevich and some of his top advisers began talking about how to make money for themselves off of state business even before Blagojevich was first elected to office.

Monk said that one of Blagojevich’s chief fundraisers, Chris Kelly, first mentioned the possibility of making money off of state business in the months leading up to the 2002 election.

The next summer, Monk and Blagojevich had a meeting with Kelly and fellow fundraiser Antoin “Tony” Rezko, at Rezko’s real estate office.

According to Monk, Rezko had come up with a list of 8 to 10 ideas to make money off of the state and to divide that money equally between.

“He discussed different ideas that we could pursue for the four of us to make money,” Monk said. They would then share that money after Blagojevich left office.

Monk said he could only remember one specific plan that Rezko mentioned: an idea to acquire an insurance company that would do business with the state.

But they never went through with that plan or any of the others and, in 2005, they stopped talking about those ideas altogether after they learned that Rezko was under investigation by the feds.

Monk also testified that Rezko and Kelly were involved with making recommendations about who should be appointed to jobs at the governor’s office and to top posts at various state agencies, boards, commissions after Blagojevich took office in early 2003.

Blagojevich regularly hired people recommended by Kelly and Rezko, who were still raising money for the governor’s campaign fund, Monk said. He said the two of them also discussed getting campaign cash from the people who were seeking jobs with the Blagojevich administration.

“Primary to a fundraiser in 2003, there was a meeting where Tony indicated to us that he was going to go out and seek $25,000 contributions from people seeking to be appointed to boards and commissions because that’s what he thought they were worth,” Monk said.

Monk Describes Alleged School Shakedown

Monk also testified about Blagojevich’s alleged scheme to get a campaign fundraiser from then-Congressman Rahm Emanuel’s brother, a Hollywood agent, in exchange for releasing a state grant for a school in Emanuel’s district.

According to Monk, Emanuel met with Blagojevich in late 2003 or early 2004 to request state funding for the Academy for Urban School Leadership, a charter school in his district. Monk said Blagojevich “wanted to get it done,” but didn’t release the grant right away.

Instead, several months went by without the school getting the money and Emanuel made several calls to find out why it was taking so long, Monk testified.

So Monk called Blagojevich to ask what he wanted to do and the governor indicated that he wanted to hold off on the grant until he found out about a fundraiser he wanted Emanuel’s brother, Ari Emanuel, to hold.

Monk was already aware that Blaojevich was trying to get Ari Emanuel to host a campaign fundraiser for the governor and he said Blagojevich made it clear “the school would not get the money” if Ari Emanuel didn’t hold the fundraiser.

“He wanted to see how well the fundraiser did, whether it was going to meet any expectations or not, before giving any money to the school,” Monk said.

Eventually, Blagojevich’s deputy governor Bradley Tusk took over the school matter and Monk had no further involvement.

But earlier at the trial, former Blagojevich chief of staff John Harris testified that the money for the school was eventually released, but only in chunks, rather than in one lump sum as usual for such grants.

He said the governor only released money for the school after they had begun construction of a new athletic field and complained that they couldn’t pay their contractors without funding from the grant.

Monk Admits Lying To Feds

Tuesday afternoon, Monk admitted that he lied to the FBI when they first interviewed him in the summer of 2005.

He said he did not tell federal investigators about the meetings he, Blagojevich, Rezko and Kelly had to discuss how they could make money from state actions, nor did he tell them about getting $25,000 campaign contributions from people seeking appointments with the Blagojevich administration.

Monk also didn’t tell the FBI in 2005 that Rezko had been giving him cash gifts. According to Monk, he had asked Rezko for advice on buying a new car in May 2004 and Rezko offered to help him buy the car.

Eventually, Rezko gave him several $10,000 cash gifts, in all totaling $70,000 to $90,000.

He didn’t put the money in the bank, because he was worried how it would look to be making such large cash deposits.

Monk also conceded he didn’t tell Blagojevich about the cash from Rezko.

“He wouldn’t have approved of the method of obtaining the money. It could have led to an investigation of me and, potentially, him,” Monk said.

Monk eventually began cooperating with federal investigators after Blagojevich’s arrest. He has pleaded guilty to conspiracy to solicit a bribe in exchange for a plea deal with federal prosecutors.

Road Building Executive “Terrified” By FBI After Blago’s Arrest

Before Monk was expected to be called to the stand, prosecutors finished questioning road building executive Gerald Krozel, who has testified that Blagojevich was trying to squeeze him for campaign cash in exchange for a major tollway construction project.

Krozel said he had no intention of raising any money for Blagojevich, but never revealed that to the governor or his adviser, Monk, who talked to him twice about raising money for Blagojevich in late 2008.

But Krozel said he did tell Monk that his fellow road building executives were reluctant to raise money for Blagojevich because they had received subpoenas regarding their campaign contributions to Illinois politicians.

Krozel also testified that he was questioned by FBI agents on Dec. 9, 2008, the day Blagojevich was arrested, about 15 minutes after the governor’s arrest.

He said two FBI agents came to his home at 6:30 a.m. that morning, informed him of the governor’s arrest and questioned them about their discussions about the tollway program and campaign contributions.

Krozel said he was “terrified” because FBI agents were at his home so soon after arresting Blagojevich and “I thought they were coming there to take me away.” He also said he was worried about his wife, who was bedridden with neurological programs and could not walk or talk, so relied on him “for everything.”

He acknowledged that he lied to the FBI agents at the time, telling them he didn’t feel pressured to give any money to Blagojevich. He also said he couldn’t remember if he specifically told them that he believed that a $6 billion tollway plan Blagojevich had discussed with him would be dependent on how much money Krozel raised for the governor.

Krozel has said he lied to the FBI because he was afraid of being charged himself. He is testifying under a grant of immunity from federal prosecutors.

“They terrified me,” Krozel said during cross-examination by defense attorney Aaron Goldstein.

“You were frightened by the FBI?” Goldstein emphasized. “You felt terrified by the Federal Bureau of Investigations, is that right?” Krozel said yes.

Monk later backed up Krozel’s testimony about the tollway plan, saying that, before Krozel met with Blagojevich about the plan, Blagojevich had told Monk and other advisers that he was approving a $1.8 billion tollway plan, but holding off on a much larger tollway project until after Jan. 1, 2009.

“He said that these programs were really gonna benefit engineering companies, construction companies … and that we really needed to put a lot of pressure on those companies … to raise as much money as we could from them,” Monk said.

“He wanted me to be very aggressive,” in pushing Krozel to raise money for the campaign, Monk said.

Monk also said the governor told him that, “If they don’t step up by the end of the year, f*** ‘em. I’m not going to do the $5 billion program.’”

“Unless they gave him campaign contributions, he wasn’t going to go forward with the $5 billion tollway program,” Monk added.

Judge Won’t Let Defense Ask Krozel About Previous Contributions

Defense attorneys also wanted to question Krozel about his personal wealth and previous contributions that he and other members of the road building industry had given to elected officials, but Zagel ruled they must first show proof that the information is relevant to the case.

“It’s a significant fact that the person the governor is talking to is a wealthy man, works for a multi-million dollar company,” defense attorney Sheldon Sorosky said. “Part of their way of doing business is contributing to favorable public officials to get favorable legislation.”

Outside the presence of the jury, Krozel acknowledged that he and members of the road building industry had raised money for other politicians before and had given money to various elected officials, including Blagojevich.

“These are the same people who fundraise for other people, for other politicians. There’s state action always very close to their fundraising or contributions,” Goldstein said, arguing that the jury should hear about the road building industry’s previous fundraising efforts.

“Yet these are the same people who … play the game and they’re involved in politics and they fundraise and they contribute and there’s state action very close to it,” Goldstein added, saying that they didn’t claim feeling any pressure until Blagojevich was put on trial.

“They have a bias and motive to say these things,” Goldstein said. “900 times before, it doesn’t seem to be a problem.”

But prosecutors contend that it does not matter how wealthy Blagojevich’s alleged victims might be, or how much money they might have given to politicians in the past.

Zagel agreed, ruling that defense attorneys did not show that Krozel’s previous fundraising activities meant that he could not possibly feel pressured by Blagojevich to raise money in exchange for approval of the tollway construction plan.

“Your offer of proof is not sufficient to raise that issue, so no,” Zagel said.

–Todd Feurer, CBS 2 web producer.

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