Trial begins of former Chicago Obama fund-raiser

CHICAGO (Reuters) - A friend and fund-raiser to U.S. Democratic presidential hopeful Barack Obama went on trial 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 Monday with jury selection and is likely to last from three to four months with Rezko accused of scheming to extort nearly $6 million in kickbacks from investment houses and others wanting to do business with two state boards.

The Rezko case has been an embarrassment for Obama, but so far 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 over rival Hillary Clinton in Ohio and Texas on Tuesday.

On Monday, he repeated his acknowledgment that he had been "boneheaded" to carry out a real estate deal with someone who was under federal investigation.

"On the other hand, there have been no allegations that I did anything wrong, there have been no allegations that I in any way betrayed the public trust, there have been no allegations that I did him favors," Obama told reporters in San Antonio, Texas.

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 New York Sen. Clinton, has 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.

"Being a politician in Illinois, you're aware there are pretty dark excesses. I'm not saying (Obama) succumbed to it. But that's the system he came through. I think he navigated it better than most," said Jay Stewart of the Better Government Association, which gave Obama a 2006 civic achievement award.

He said Rezko's case is a "high-end shakedown scheme" that is part of the "cesspool" of Illinois and Chicago politics.

Besides Rezko's fund-raising 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, who began his political career by winning a seat in the Illinois state senate in 1996, has said he only performed a few hours of paid legal work for nonprofit companies that were partners with Rezko in construction deals.

(Editing by Stuart Grudgings)