UPDATED 05/03/11 7:18 p.m.

CHICAGO (CBS) — As testimony began at Rod Blagojevich’s corruption retrial on Tuesday, prosecutors wasted little time getting to the most explosive allegation against the former governor: that he tried to cash in on his power to appoint a U.S. Senator. CBS 2’s Dana Kozlov has more on the trial.

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Former Blagojevich chief of staff John Harris took the stand Tuesday, testifying about conversations he had with Blagojevich as the former governor talked about what he could get in exchange for appointing someone to President Barack Obama’s former senate seat.

At the first trial, Harris was not called to the stand until halfway through the trial and it took prosecutors nearly three weeks to begin presenting detailed evidence about Blagojevich’s alleged Senate seat scheme. Prosecutors have streamlined their case after the first trial ended in a jury deadlock on most of the charges.

Blagojevich is being retried on 20 counts, including allegations he tried to sell or trade an appointment to the Senate seat. Blagojevich has pleaded innocent to all charges.

On Tuesday, Harris told jurors how, leading up to the 2008 election, even before Obama won the race for the White House, Blagojevich and his aides were discussing possible replacements for Obama in the Senate.

They were convinced that Obama wanted his close friend and adviser, Valerie Jarrett, to be named his successor in the Senate, according to Harris.

And, in a series of recorded phone calls, jurors heard Blagojevich talk about a wish list of Cabinet posts, ambassadorships or other high-paying jobs that he thought he could get in exchange for making Jarrett the next senator.

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Harris said the discussions began in October 2008, as he and Blagojevich were talking about the likelihood that Obama would win the race for president and Blagojevich would need to appoint his successor.

According to Harris, Blagojevich asked him, “what do you think I could get for this?”

Later, jurors heard the governor rattle off a series of high-paying, high-profile jobs that he thought Obama might be willing to help him get.

“How about (Secretary of) Health and Human Services? Can I get that?” Blagojevich asked Harris in one conversation two days before the 2008 election. “What can I, honestly, think I could, I might have a shot at getting?”

In a series of phone calls over the next two days, Blagojevich ran down a list of several other positions Obama might be willing to give him in his administration, from Commerce Secretary to ambassadorships to India, England, Germany, France, Canada, South Africa or the United Nations.

“I’m the governor of a $58 billion corporation,” Blagojevich told Harris at one point. “Why can’t I be ambassador to India?”

Blagojevich also raised the possibility of enlisting Obama’s help in getting him a job running a number of charity organizations or advocacy groups, including the Red Cross, the Salvation Army, the Pew Foundation, the Kaiser Foundation, the United Way and Families USA.

Harris also testified that both he and Blagojevich’s general counsel, Bill Quinlan, told Blagojevich at one point in October 2008 that he should not discuss making an appointment to the Senate seat at the same time as he talked about getting campaign contributions or other benefits for himself.

According to Harris, Blagojevich had suggested to him and Quinlan that the governor could approach a wealthy campaign donor, like J.B. Pritzker or Blair Hull, and convince them to provide millions of dollars for a non-profit group that Blagojevich could run or provide a campaign contribution for the governor.

“Mr. Quinlan and I told him that he couldn’t make such a deal and shouldn’t consider it,” Harris said. “Mr. Quinlan told him that that would not be permitted.”

Harris said they also told Blagojevich, “You can’t talk about this, you can’t even joke about this. … (We) told him that he could not talk about the two in the same sentence, not even if he was joking about it.”

Meantime, prosecutors also sought to shoot holes in Blagojevich’s claim that he was maneuvering to appoint Illinois Attorney General Lisa Madigan to the Senate seat in order to swing a political deal with her father, House Speaker Mike Madigan.

In some of the tapes played on Tuesday, Blagojevich and Harris are heard discussing how Speaker Madigan has been blocking his legislative agenda in Springfield and, in late 2008, rumors had begun spreading that Madigan would seek to impeach Blagojevich.

Harris and Blagojevich are heard talking about how they could tell the Obama camp that he is considering appointing Lisa Madigan in an attempt to get Speaker Madigan to help with the governor’s legislative agenda.

In order to convince Obama to make a deal for Jarrett, Blagojevich suggests he could leak a rumor to Chicago Sun-Times gossip columnist Michael Sneed that Lisa Madigan was a serious candidate for the spot.

But Harris testified that the talks about Lisa Madigan were not serious, but only an effort to make Lisa Madigan seem like a serious alternative to Jarrett if Obama really wanted his friend in the seat.

He also said that he wasn’t aware of any possible deal with the speaker to get Lisa Madigan appointed to the Senate.

In one of his conversations with Harris about the possible Madigan deal, Blagojevich is heard saying his ultimate goal is to get out of Illinois and into the Obama administration.

“I’d like to get out, the f*** outta here,” Blagojevich says. “The objective is to, to get a good gig over there.”

At the same time, Blagojevich was leaving open the possibility of naming himself to the Senate seat as his “ace in the hole.”

I cannot dismiss that real possibility. If they f***ing treat me with f***ing, you know, irrelevance and I don’t get something good,” Blagojevich is heard telling Harris later that same day. “I, you know, and I’m facing what I’m facing. We’ve always got that ace in the hole, don’t we?”

Prosecutors Say Blagojevich Motivated By Need For Campaign Cash

Harris also helped prosecutors outline the former governor’s financial motivations in 2008 and his desire to get campaign cash from state contractors before new legislation blocked him from doing so.

“It’s generally understood that a campaign fund is a sign of one’s political popularity and political strength,” Harris told jurors.

According to Harris, Blagojevich was worried about his mounting legal bills at the time and feared that they would completely drain his campaign fund. He said many of the governor’s supporters were shying away after two of his top fundraisers – Tony Rezko and Christopher Kelly – were indicted on corruption charges.

Harris said the governor also had been trying to stop a so-called “ethics bill” that would block him from collecting campaign contributions from most state contractors starting in January 2009. According to Harris, much of the money that Blagojevich had raised for his campaign fund in previous years had come from state contractors.

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Despite Blagojevich’s efforts to block the ethics bill, lawmakers passed the legislation in late 2008, effectively setting a deadline for Blagojevich to raise money from state contractors.

On Monday, prosecutors told jurors that Blagojevich’s Senate seat scheme was just one of five illegal shakedown schemes the former governor pursued while he was in office.

In addition to the Senate seat charges, Harris touched on two other schemes on Tuesday.

The first of those schemes, according to prosecutors, was when Blagojevich allegedly held up a $2 million grant for a Chicago public school in then-Congressman Rahm Emanuel’s district in 2006 while he tried to arrange for Emanuel to arrange a Hollywood fundraiser for Blagojevich.

Harris said that, in the fall of 2006, Blagojevich’s deputy governor, Bradley Tusk, approached him about a problem with the grant for the school, known as “The Chicago Academy.”

According to Harris, Tusk told him that Blagojevich had halted the grant and Tusk wanted help in getting Blagojevich to release the money.

Harris said he looked into the matter and found out that the school had already begun spending money on a construction project, expecting to use the grant to pay for the work, but was forced to stop paying contractors because it didn’t receive the grant, as expected.

“I told the governor that we should release the grant because the school had incurred expenses,” Harris said.

“He initially resisted, but when I explained that this would be a problem for us and him,” Harris said Blagojevich agreed to release just enough money so that the school could pay for the work that had already been done, but not the full $2 million grant.

Harris also testified that, in the fall of 2008, Blagojevich authorized a $1.8 billion tollway construction project and was considering a much larger $7 billion construction program, but wanted to get major contributions from the road building industry before he went forward with the larger plan.

“He indicated that he did not want to fully satisfy the appetite of the construction contractors, the engineers that would benefit from this program,” Harris said. “He was going to see how well he did fundraising from that industry before the end of the year when the ethics bill deadline would be imposed and if they satisfied him, he would offer the larger program.”

Prosecutors have alleged that Blagojevich tried to squeeze road building executive Gerald Krozel for hundreds of thousands of dollars in campaign contributions from other road building firms in exchange for moving forward with the larger construction plan.

Harris was still on the stand at the end of the day Tuesday and was expected to be on the witness stand for several days. At Blagojevich’s first trial, Harris was on the stand for all or part of six days.

FBI Agent Traces Blagojevich Probe

Earlier Tuesday, FBI Special Agent Daniel Cain took the witness stand and traced the background of the investigation that led to charges against Blagojevich.

Tuesday morning, FBI Special Agent Daniel Cain told jurors that federal investigators began tapping Blagojevich’s phones and bugging his campaign office in 2008 after a Blagojevich adviser, John Wyma, provided the FBI with information that Blagojevich “was involved in corrupt activities in campaign fundraising.”

Cain has been one of the lead agents in the federal investigation into corruption in Illinois state government since 2003.

Cain said the FBI placed hidden microphones at Blagojevich’s campaign office and placed taps on his home and office phones and various cell phones.

The FBI tapped two office phones at Blagojevich’s campaign office, Blagojevich’s home phone and cell phone, and the cell phones of Blagojevich advisers Lon Monk and John Harris, Cain said.

Defense attorney Lauren Kaeseberg drew repeated objections from prosecutors when she tried to ask Cain about how many hours of FBI wiretap recordings exist in the case and how he and other FBI agents decided to “redact” certain portions of those recorded conversations from the transcripts that are presented in court.

Prosecutors angrily objected to each question, as U.S. District Judge James Zagel had ruled earlier that the defense team could not suggest to the jury that prosecutors are hiding certain tapes that would prove Blagojevich is innocent.

“Asking those questions was inappropriate,” Zagel told defense attorneys while jurors were out of the courtroom. “I don’t want to be sustaining objections to stuff I clearly already ruled on.”

The judge has told defense attorneys that he gave them more leeway with questions at the first trial because he expected Blagojevich would take the stand, offering prosecutors a chance to directly challenge his defense strategy. But Blagojevich never testified at the first trial, so Zagel said he’s keeping the defense on a tighter leash this time.

“If I made a mistake and this case ends badly for your client, there’s a place you can go,” Zagel added, apparently referring to federal appeals courts.

Cain was helping outline the procedures of the government’s investigation, including how they started looking into Blagojevich.
According to Cain, the investigation that ultimately led to charges against Blagojevich originally began when the FBI received a complaint from a witness who claimed he was being extorted in connection with business at the Illinois Health Facilities Planning Board.

That investigation eventually led to a probe of corrupt activities at the Health Facilities Planning Board and the Teachers Retirement System. Political fixer Antoin “Tony” Rezko, a top fundraiser for Blagojevich, was later charged and convicted of kickback schemes involving those boards.

The investigation later turned to Blagojevich when Wyma provided information about Blagojevich’s own fundraising practices.

While Cain was on the stand, prosecutors also showed jurors a Chicago Tribune article in which Blagojevich condemned the actions of former Gov. George Ryan after Ryan’s conviction on corruption charges in 2006.

“Today’s verdict proves that no one is above the law,” Blagojevich said of Ryan’s conviction. “And just as important, it proves that government is supposed to exist for the good of the people, not the other way around, and certainly not for the personal enrichment of those who hold public office. That’s why it is altogether fitting and proper that on tax day, the Ryan jury made it clear that the people come first.”

Defense attorneys objected to presenting that article to the jury, saying it isn’t proof that Blagojevich is guilty.

“This is just a comment on the fact that someone was convicted,” defense attorney Sheldon Sorosky said. “That would be no different than if I were charged with selling drugs and a month or two before, I made a comment ‘I think drugs are bad.’”

But prosecutors said the quote shows that Blagojevich knew it was wrong to try and line his own pockets through his power as governor.

“The defendant point blank acknowledges he understands perfectly well that he cannot enrich himself through his public office,” Assistant U.S. Atty. Reid Schar said. “It obviously clearly rebuts any defense … that somehow…he had no clue that this was improper.”

Zagel agreed, saying the prosecution has a right to show that Blagojevich had intent to profit from his official actions and that he knew it was wrong.

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Todd Feurer, cbschicago.com