Ex-AT&T Illinois president pleads not guilty in alleged scheme to sway House Speaker Michael Madigan

The former president of AT&T Illinois pleaded not guilty Friday to federal charges alleging he orchestrated and approved a scheme to funnel payments to an associate of then-Illinois House Speaker Michael Madigan in exchange for the speaker’s help passing legislation important to the company.

Paul La Schiazza, 65, was charged in an indictment returned by a federal grand jury last week with with conspiracy, federal program bribery, and using a facility in interstate commerce to promote unlawful activity. The most serious counts carry up to 20 years in prison if convicted.

La Schiazza, who has homes in Rhode Island and Florida, pleaded not guilty through his attorney during a telephone hearing before U.S. Magistrate Judge Jeffrey Cummings. He will remain free on a recognizance bond while his case is pending.

Asked by the judge if he’s currently employed, La Schiazza replied, “No your honor, I am not.”

Hours later, lawyers for AT&T Illinois appeared at the Dirksen U.S. Courthouse to confirm before a judge the company has entered into a deferred prosecution agreement with the U.S. attorney’s office, admitting its role in the scheme and agreeing to pay a $23 million and cooperate in the investigation. In exchange, prosecutors will drop criminal charges filed against the company in two years.

During the brief hearing before U.S. District Judge Jorge Alonso, Assistant U.S. Attorney Amarjeet Bhachu said the agreement was reached voluntarily and in good faith and that AT&T Illinois’ cooperation “will assist in the prosecution of other individuals,” including Madigan and La Schiazza.

Meanwhile, AT&T released a statement last week saying the company holds itself and its contractors “to the highest ethical standards” and is “committed to ensuring that this never happens again.”

The investigation of AT&T Illinois, which was reported by the Tribune earlier this year, expanded upon the far-reaching allegations brought against the ex-speaker in a similar bribes-for-favors scandal involving Commonwealth Edison.

Last week, federal prosecutors unsealed a superseding indictment against Madigan and his longtime confidant, Michael McClain, adding allegations they participated in the AT&T scheme. The new conspiracy allegations allege for the first time that a direct vote the speaker made on legislation was tainted by a scheme to influence him.

Arraignments for Madigan and McClain have not yet been scheduled. Their attorneys have declined to comment.

In February, AT&T disclosed in a regulatory filing that federal prosecutors had notified them they were considering filing criminal charges against its Illinois subsidiary, formally known as Illinois Bell Telephone Co. LLC, involving “a single, nine-month consulting contract in 2017″ worth $22,500.

State records show the company that year had hired a stable of Madigan-connected lobbyists working for the Illinois subsidiary as AT&T was fighting for a controversial bill to end landline service for its 1.2 million customers.

The Tribune reported that investigators were specifically looking at thousands of dollars in payments allegedly passed to former state Rep. Edward Acevedo, a onetime member of Madigan’s leadership team who’d recently left the General Assembly.

The payments to Acevedo were made via a lobbying contract between AT&T and Thomas Cullen, a former Madigan staffer and longtime political strategist aligned with the speaker, two sources told the newspaper. Acevedo was a registered lobbyist at the time, state records show, but not for AT&T.

Neither Acevedo nor Cullen has been charged with any wrongdoing in the alleged scheme.

Thomas Anthony Durkin, Cullen’s attorney, had no comment on the matter Friday. Acevedo’s lawyer, Gabrielle Sansonetti, also had no comment.

According to a statement of facts agreed to by AT&T, in 2015, Madigan’s office had blocked the controversial landline legislation.

After that defeat, an executive circulated a “lessons learned” memo that contained one section headed, “Speaker Madigan.” The memo stated that AT&T had not been as “helpful” as ComEd when “requests” were made from the speaker’s camp, according to the statement.

The scheme to reward Acevedo, referred to in the court papers as “FR-1,” began in February 2017, after the company learned through McClain that the speaker was looking to kick Acevedo some money, according to the statement.

In an email exchange that March, AT&T Illinois’ director of legislative affairs asked two of the company’s executives if they were “100% certain” they would get credit “from the powers that be” if the payments were made to Madigan’s associate.

“I would hope that as long as we explain the approach to McClain and (the associate) gets the money then the ultimate objective is reached,” one of the executives wrote back, according to the statement.

The legislative affairs director responded, “I don’t think (La Schiazza) wants this based on hope. We need to confirm prior to executing this strategy,” the statement said.

In April 2017, La Schiazza approved a deal to secretly funnel $2,500 a month to Acevedo through a lobbying company already doing business with AT&T Illinois, according to the statement. The lobbying company was not named in the court filings.

At McClain’s direction, AT&T employees then met with Acevedo to discuss a “pretextual” reason for the payments: to “prepare a report on the political dynamics of the General Assembly’s and Chicago City Council’s Latino Caucuses,” according to the statement of facts.

Acevedo never did any real work for AT&T Illinois, however. In fact, according to AT&T’s admissions in court, he balked at first at the payments, saying they were too low. But Acevedo agreed to the deal after McClain stepped in and said the amount was “sufficient.”

From June 2017 to January 2018, Acevedo was paid a total of $22,500 in monthly installments. According to AT&T’s admission, the former representative “did not complete the purported assignment” on Latino politics, and “no efforts were undertaken” by AT&T to ensure work was being done in exchange for the money.

Meanwhile, after a protracted fight, the landline bill passed during the final hours of the spring 2017 legislative session — with Madigan’s direct assistance, according to legislative records and the statement of facts agreed to by AT&T.

On June 29, 2017, Madigan permitted the bill to be brought to a vote and cast his ballot in favor of the legislation, records show. Two days later, after Republican Gov. Bruce Rauner vetoed the legislation, Madigan and the Democrat-led General Assembly overrode him, with Madigan again voting for the override.

The new allegations involving AT&T further punctuate a stunning downfall for Madigan, the longest serving leader of any legislative chamber in the nation who held an ironclad grip on the state legislature as well as the Democratic Party and its political spoils. He was dethroned as speaker in early 2021 as the investigation swirled around him, and soon after resigned the House seat he’d held since 1971.

Madigan, 80, and McClain, 75, were charged in March in the original 22-count indictment alleging they conspired to participate in an array of bribery and extortion schemes from 2011 to 2019 that allegedly leveraged Madigan’s elected office and political power for personal gain

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The indictment also accused Madigan of illegally soliciting business for his private property tax law firm during discussions to turn a state-owned parcel of land in Chinatown into a commercial development.

Both Madigan and McClain have pleaded not guilty. Their attorneys have accused prosecutors of trying to criminalize legal political actions such as job recommendations in a quest to bring down the once-powerful speaker.

McClain, a former state legislator and lobbyist, is also facing separate charges stemming from the alleged ComEd scheme. Also indicted in that case, which is set for trial in March, are former ComEd CEO Anne Pramaggiore, ex-ComEd lobbyist John Hooker and consultant Jay Doherty, the former head of the City Club of Chicago.

Acevedo, meanwhile, pleaded guilty to tax charges stemming from the ComEd investigation and was sentenced in March to six months in federal prison.

jmeisner@chicagotribune.com

rlong@chicagotribune.com