CLAYTON • St. Louis County Executive Steve Stenger, a target of a yearlong undercover federal investigation into political favors traded for campaign contributions, was indicted by a grand jury Thursday on charges of theft of honest services.

The indictment was unsealed Monday as Stenger resigned in a letter to County Counselor Peter Krane, writing that “it is in the best interest of our County and my family.”

The council met Monday night and chose its chairman, Sam Page, to fill the executive seat until the November 2020 election. Under the county charter, the County Council had to pick a Democrat, the same party as Stenger.

Stenger, 47, of Clayton, appeared in U.S. District Court at 1 p.m. with his lawyer, Scott Rosenblum, who told reporters outside that his client was not taking questions.

The judge entered a not-guilty plea for Stenger. He was released without bail, typical for a defendant in a case that does not involve violence. No date was set for his next appearance. If convicted, he could spend at least a handful of years in prison because of the amount of money that was alleged to be involved in the scheme. Stenger, a lawyer and accountant, has agreed to surrender his law license.

Assistant U.S. Attorney Hal Goldsmith told reporters the indictment was the result of an investigation that began in early 2018, that involved his staff, the FBI, the U.S. Postal Inspection Service and the IRS criminal investigations unit, and included cooperation from witnesses. He said the investigation was continuing.

The investigation, Goldsmith said, was timed so that it would have no impact on Stenger’s bid for reelection in 2018, pursuant to Department of Justice policy. Investigators monitored or recorded a significant number of meetings and phone calls and obtained call records. He said the evidence gathered was “fairly voluminous” and included thousands of emails and texts.

Explaining the “honest services” charge, Goldsmith said Stenger deprived the residents of St. Louis County of his honest services by accepting bribes and operating a “pay to play” scheme.

Outside of the courthouse after the hearing Rosenblum said, “Obviously, it’s been a very difficult day for Steve.”

Rosenblum said after the hearing that the indictment was “not a surprise” and that he had been in discussions with federal prosecutors. He declined to answer questions about how, and whether, Stenger would fight the case.

Asked whether Stenger’s resignation and the forfeiture of his law license had been coordinated with prosecutors, Rosenblum said, “I’m not answering any more questions.”

Prosecutors said in a statement that from October 2014 to Dec. 31, 2018, “Stenger and various individuals and companies schemed to defraud and deprive the citizens of St. Louis County of their right to his honest and faithful services, and the honest and faithful services of the St. Louis Economic Development Partnership’s Chief Executive Officer, through bribery and the concealment of material information.”

Stenger, prosecutors said, sought and accepted “campaign contributions from individuals and their companies in exchange for favorable official action, and for individuals and their companies to enrich themselves and their companies by secretly obtaining favorable action for themselves and for their companies, through corrupt means.”

The indictment claims Stenger sought to help a campaign donor, John Rallo, and his companies to get insurance contracts from the county in 2015 and 2016, and a 2016 consulting contract through the St. Louis County Port Authority.

Stenger also helped a Rallo company, Wellston Holdings LLC, obtain options to purchase two properties in Wellston, which were held by the Land Clearance for Redevelopment Authority.

Stenger also helped a company that is not named in the indictment get a 2019-2021 state lobbying contract from the St. Louis Economic Development Partnership. Partnership records indicate the company is lobbying firm John Bardgett & Associates, which already held the contract with the Partnership and had a long relationship with its predecessor, the St. Louis County Economic Council.

Stenger lied in public statements and took other actions to cover up the crimes, the indictment says.

At an Oct. 23, 2014, dinner while Stenger was campaigning, Rallo complained that “he was tired of giving money to politicians and not getting anything in return,” the indictment says. The indictment says Rallo had no such problems with Stenger.

Rallo repeatedly made political donations to Stenger before his election with the understanding that he would get contracts from the county or associated entities, and continued to do so afterward as part of Stenger’s “trustee program” — those who donated $2,500 every three months, the indictment says.

Wellston contracts

In 2016, Sweeney directed partnership staff to help Rallo and two investors buy two properties in Wellston that the county spent millions of dollars clearing and preparing, the indictment says. She set the “must exceed” prices at $250,000 and $255,499 knowing Rallo’s group might be the only bidder, it says, and helped them revise their bids so they would win when another bidder entered.

Post-Dispatch investigations in 2017 and 2018 put a spotlight on the deals with Rallo. The indictment noted that when a reporter sought information in August 2017 about the Wellston deal, Sheila Sweeney, CEO of the Partnership appointed by Stenger, instructed Rallo not to talk to the reporter.

“No don’t meet him,” Sweeney texted back. “Trying to make the Steve & you connection.”

Sweeney instructed Rallo to remove his name from public filings connecting him to Cardinal Consulting as a way to cover Stenger and, she added, “me too!!!”

In May 2018, Stenger told Rallo not to talk to Post-Dispatch reporters, according to the indictment. The indictment did not make it clear whether the conversation was in texts or if it was a recorded phone conversation.

“You can’t talk to the f---ing press,” Stenger told him. “I bent over f---ing backwards for you, and I asked you one simple f---ing thing, don’t talk to the f---ing press. And I’m telling you, you’re gonna f---ing kill yourself, alright, you’re gonna kill yourself with this shit.”

Stenger told Rallo the paper’s interest would die down after he won his August primary.

“Our goal is not to give him anything. This is just a rehash of what he already has. Rehash of that same old story. It’s gonna pass in August, because the reason for what they’re doing is gonna die ... I’m winning in the polls ... it’ll go away.”

An extra $30,000

The indictment also revealed why Rallo’s Cardinal Consulting had been paid $130,000 on a contract for which he had bid $100,000, an inconsistency explored by the Post-Dispatch.

According to the charges, Stenger directed Sweeney to have Rallo forward the $30,000 balance to an individual, identified by the initials “JC,” who had helped with Stenger’s political campaign. Rallo did not know JC, and JC did not do any work for the payment, according to the indictment. According to sources, “JC” is John Cross, a local political operative. He could not be reached Monday.

Lawyers for Sweeney and Rallo said Monday they would not comment.

The indictment also demonstrated Stenger’s disdain for subordinates who refused to carry out orders to direct county business to his donors. He described Mike Chapman, one of his earliest policy advisers, as a “major pain in the ass.” And when Director of Administration Pamela Reitz would not go along with awarding an insurance contract to Rallo, Stenger wrote to adviser Jeff Wagener that “I am absolutely done with her. As soon as a replacement can be found I want her gone.”

The indictment also alleges that in late 2018 Stenger directed his chief of staff Bill Miller and senior policy adviser Jeff Wagener to strongarm Sweeney into agreeing to award a Partnership lobbying contract to the unnamed company — John Bardgett & Associates — that had donated to Stenger. The company and its principal had donated about $59,000 to Stenger, according to the indictment.

Excerpts of conversations at different locations recorded by federal investigators strongly point to the possibility that someone in Stenger’s inner circle had been wearing a wire. Miller on Tuesday told the Post-Dispatch, “I don’t have anything to say.” And Wagener, asked if he knew how his conversations were recorded, said he had no comment.

On Nov. 19, 2018, Stenger was recorded as saying, “Why don’t the three of you [Miller, Wagener and Curran] go over there and talk to her [Sweeney]. Have, not a pressure, twist your arm shit, but talk to her and say, look at, Sheila, there are some real reasons why we can’t see this go the wrong way. Because this will f--- everything in the world up.”

And he said that if Sweeney wanted to go with a competing company, “the Board’s going to reverse her. We’ve got too many people on the Board.”

Stenger had claimed in interviews that he did not try to influence Partnership decisions.

At Sweeney’s direction, the Partnership in December awarded a three-year contract to John Bardgett & Associates worth $149,000 in 2019, $151,000 in 2020 and $153,000 in 2021.

In a statement, John Bardgett said his firm had worked for 31 years with St. Louis County and its economic development organizations.

“This has occurred through the administrations of 5 county executives of different party affiliations — we do not, have not and never will place any conditions on any contribution to any organization,” he said in an email.

St. Louis Mayor Lyda Krewson said Monday that Stenger made the right decision to resign.

“These are very serious charges,” she wrote on Twitter. “This clearly would’ve had a negative effect on the county executive’s ability to govern. That affects the whole region. The County Executive made the right decision in resigning. I will work with the new County Exec.”

Clouds build

Despite a bitter cold war with a bipartisan majority on the County Council, Stenger appeared to be at the top of St. Louis’ political world as recently as weeks ago, enjoying wide support from unions and business leaders. After raising an unprecedented $4.4 million for his reelection, he narrowly vanquished a deep-pocketed primary foe in Mark Mantovani and easily dispatched Republican Paul Berry III in the general election.

He was sworn into his second term on Jan. 1, promising “transformational” change in affordable housing, access to medical care and unemployment. Days later came news that the nonprofit advocacy group Better Together was planning to launch a campaign to put a merger of St. Louis city and county on a statewide ballot in November 2020. The plan called for Stenger to emerge as the metro city’s first mayor.

Even so, clouds were building over his political future. Post-Dispatch investigations pointed to several instances, including the deals involving Rallo, where county contracts went to Stenger’s political donors. Stenger’s council rivals launched an ethics probe and called for state and federal investigations into the county’s long-term lease for office space at the former Northwest Plaza, which is owned by developers who gave Stenger’s campaign $365,000.

Stenger repeatedly denied any quid pro quo and complained about the newspaper’s coverage of his administration and its “misleading and tiresome” focus on the county’s relationships with his campaign benefactors.

In July, two council members said their sources told them federal agents had tailed Sweeney. The Partnership board forced her out following Post-Dispatch investigations into low staff morale and high turnover at the Partnership, the agency’s procurement practices and the awarding of contracts to Stenger’s campaign donors. Several former employees told the Post-Dispatch that Stenger essentially ran the office through Sweeney.

The subpoena

A federal subpoena issued to St. Louis County on March 21 sought records of every contract and grant issued by the county since Stenger took office on Jan. 1, 2015. It also sought personnel files for five people he hired as well as records of all his communications.

Page, then St. Louis County Council chairman, revealed the subpoena’s existence to a Post-Dispatch reporter in an interview on March 24, a Sunday morning. That same day, Better Together executive director Nancy Rice told Post-Dispatch metro columnist Tony Messenger that the statewide ballot initiative was being redrawn to remove Stenger as metro mayor.

The Partnership confirmed later that week that it was cooperating with three federal subpoenas served to itself and two county agencies it staffs — the St. Louis County Port Authority and the St. Louis County Land Clearance for Redevelopment Agency.

Stenger attempted to spin the bombshell as a routine event in the course of an executive’s political career, noting that the U.S. government had previously commanded St. Louis Mayor Francis Slay and former St. Louis County Executive Charlie Dooley’s administrations to turn over records, and that he wasn’t the target of the subpoena. But Slay and Dooley immediately rebutted his comments, saying the government had never subpoenaed records of their communications.

Days later, Goldsmith clarified in a letter that the county should start by turning over records from a list of grants and contracts — most of them involving Stenger’s campaign donors.

As the county began producing records to comply with the subpoena, the ranks within Stenger’s inner circle began to thin. Chief of staff Miller quit on April 12, followed by senior policy adviser Lance LeComb on April 16. Other senior staff members in his office, Tom Curran and Linda Henry, also decided to retire.

University of Missouri-St. Louis political scientist Dave Robertson said some politicians feel bulletproof after getting into office.

“It’s easy for people who have their validation from voters to feel that they are entitled to use a lot of power and some of those individuals use that power for things that are illegal — that’s what’s at stake here,” he said. “Ask a few former Illinois governors about that.”

He said the Stenger case comes at a time in politics when candidates want “massive election war chests.”

“Lots of politicians feel that its essential for them to scare off challengers by accumulating a lot of money,” he said. “There’s no reason to think that most politicians commonly violate the law as is charged in this case.”

“Hubris,” he added, “makes you dumb.”

Ed Rhode, Stenger’s former campaign organizer and spokesman for the merger campaign Unite STL, said Monday in a statement: “While the reunification effort is unaffected by today’s development, we do believe that it underscores the need for change and the potential benefit of reforming and streamlining St. Louis Government.”

It was a stunning end to a political career that saw Stenger rise from two terms on the council to oust a seemingly entrenched County Executive Charlie Dooley in the Democratic primary in 2014, then narrowly defeat Republican Rick Stream in the general election that year.

The day of Stenger’s announcement that he intended to challenge Dooley, he told a reporter in an interview that his top priority was “restoring integrity to St. Louis County government.”

David Hunn and Jesse Bogan of the Post-Dispatch contributed to this report.

St. Louis County Executive Steve Stenger pleaded guilty to pay-for-play charges: Some background reading

Here's a collection of Post-Dispatch stories looking at some of the controversies surrounding the St. Louis County Executive.

Jeremy Kohler is an investigative reporter for the St. Louis Post-Dispatch.

Jacob Barker is a business reporter for the Post-Dispatch. 314-340-8291