Of all the deals that former Chicago Ald. Edward “Fast Eddie” Vrdolyak has cut in a lifetime as a lawyer and politician, the windfall he received from the state’s historic tobacco litigation may have been his slickest.

Over the past two decades, Vrdolyak’s been paid at least $12 million in fees stemming from the $9.3 billion settlement struck in the late 1990s even though prosecutors say he did no legal work on the case and hid his involvement from the Illinois attorney general.

The cash kept rolling in year after year even as Vrdolyak went to prison for an unrelated real estate fraud scheme and faded from the Chicago political scene, prosecutors say.

Now, prosecutors are asking a federal judge to sentence the 83-year-old Vrdolyak to up to 3 1/2 years behind bars, saying his decision to play games with the IRS and hide portions of the tobacco income was just the latest in a long string of ethical and legal lapses by someone who should have known better.

“Vrdolyak came from a privileged background. He was well educated, served as an elected official, and had a thriving legal practice,” Assistant U.S. Attorney Amarjeet Bhachu wrote in a sentencing memo filed late Friday. “Despite all these advantages in life, he has chosen time and again to be a schemer, and to break the law.”

Vrdolyak’s lawyers, meanwhile, asked U.S. District Judge Robert Dow for a term of home confinement, saying Vrdolyak’s money from the tobacco deal was a legitimately earned “consulting” fee and that any proceeds he received were paid out of the pockets of other law firms involved in the litigation, not Illinois taxpayers.

They also said that to throw the octogenarian — whose recent health troubles include a heart attack and brain tumor — into prison in the middle of an ongoing pandemic could amount to a death sentence.

“Since the pandemic struck, he lives in near isolation with his wife, heeding his doctor’s advice to avoid crowds at all costs,” Vrdolyak attorney Catharine O’Daniel wrote. “If sentenced to imprisonment, he will no longer be able to distance himself from others or protect himself from the deadly COVID-19 virus.”

Bhachu said prosecutors would support delaying Vrdoyak’s prison term until a coronavirus vaccine had been distributed to the federal inmate population.

U.S. District Judge Robert Dow is scheduled to sentence Vrdolyak on Dec. 4.

Long known as “Fast Eddie” for his knack for backroom negotiations, Vrdolyak pleaded guilty in March 2019 to a tax charge alleging he obstructed IRS investigation into the tobacco deal by hiding payments to and from his friend and associate, attorney Daniel Soso.

The plea marked Vrdolyak’s second felony conviction in a little more than a decade. In 2008, Vrdolyak pleaded guilty to fraud for his role in a kickback scheme in which a Gold Coast real estate deal was rigged so he could secretly split a $1.5 million finder’s fee with corrupt insider Stuart Levine, a close friend who had secretly worn a wire on Vrdolyak. He was ultimately sentenced in that case to 10 months in prison.

Bhachu referenced the previous conviction in his sentencing filing Friday, noting Vrdolyak had been captured on an FBI wiretap telling Levine, ““If two (expletive) schemers like you and I can’t figure this out, then we got a problem.”

After he was sentenced in that case, Vrdolyak wrote off the $6,000 fine from the judge as a “legal and professional services expense” on his taxes, Bhachu said.

According to court records, Vrdolyak’s role in the tobacco settlement came after then-Illinois Attorney General Jim Ryan negotiated a contingency arrangement promising 10% of the payout to four law firms that handled the litigation. That figure was dramatically reduced after years of court arbitration, but in the end, several law firms were to share in a total of $188.5 million.

One of those firms was Seattle-based Hagens Berman, which was headed by attorney Steve Berman. Identified only as Individual B in the indictment, Berman entered into a secret agreement in 1996 to pay Vrdolyak and Soso fees from the settlement and hide the payments from the attorney general and tobacco companies, the charges alleged.

Berman was not charged with wrongdoing. Vrdolyak’s lawyers have argued in court filings that not only was Vrdolyak’s cut of the settlement aboveboard but it also was blessed by key players, including Ryan.

But prosecutors said Vrdolyak’s name was purposefully left off the settlement paperwork because he was a controversial figure.

“Indeed, it is easy to include that news that a political insider like Edward Vrdolyak and his associate were going to pocket $65.4 million would have raised all sorts of red flags,” Bhachu wrote in a previous court filing.

Meanwhile, evidence uncovered in the probe showed that efforts to keep the deal under wraps became frayed over time. In 2014, Soso emailed both Berman and Vrdolyak to vent his frustration that Vrdolyak had been withholding money he was owed. He also threatened to sue Vrdolyak, warning that the legal action would make “front page news and most definitely open a can of worms that I would rather stay closed,” according to a copy of the email quoted in Bhachu’s sentencing filing.

Ryan was issued a “non-target letter” by prosecutors and was interviewed several times about his recollection of the tobacco settlement, though his memory by that time was diminished by health issues.

He told prosecutors that if Vrdolyak was involved in the tobacco litigation, it was behind his back,” Bhachu said. After “questions arose” about Vrdolyak’s possible involvement, Ryan said he instructed his then-chief of staff to investigate, but no record of any deal was uncovered, Bhachu said.

“Ryan further stated that if he had found out Vrdolyak had received money from the litigation, Ryan would have tried to get the money returned,” Bhachu said.

Soso, 68, pleaded guilty in 2019 to one count of income tax evasion for failing to report more than $3 million in income in the deal. He was sentenced in March to 2 years in prison.

jmeisner@chicagotribune.com

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