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On more than one occasion during his stunning press conference Tuesday, U.S. Attorney Patrick Fitzgerald bluntly said he has found no evidence of wrongdoing by President-elect Barack Obama in the tangled, tawdry scheme that Illinois Gov. Rod Blagojevich allegedly cooked up to sell Obama's now vacant Senate seat to the highest bidder. But for politicians it's never good news when a top-notch prosecutor has to go out of his way to distance you from a front-page scandal. And indeed, there are enough connections between the worlds of Blagojevich and Obama that the whole thing has the potential to grow beyond a colorful Chicago tale of corruption to entangle members of the Presidential transition team, to test Obama's carefully cultivated reformist image and to distract the President-elect just as he is preparing to take office.

The Obama Senate seat scheme is only one of the allegations lodged against the two-term governor, whose administration has been under investigation for alleged "pay to play" patronage practices for years. The complaint claims Blagoevich tried to extort the owners of the Tribune company to fire editors at the Chicago Tribune, and to withhold $8 million of state funds to a children's hospital in hopes of extracting a $50,000 campaign contribution from one of its executives. Blagojevich, who came into office in 2002 with promises to clean up the state's culture of graft, made no comment Tuesday during a bail hearing where he was released on his own recognizance. But late in the day his lawyer Sheldon Sorosky told reporters that the governor "is very surprised and certainly feels that he did not do anything wrong...a lot of this is just politics." (See pictures of who will be in Obama's White House.)

In laying out the federal criminal complaint, U.S. Attorney Fitzgerald said Blagojevich went far beyond the realm of hard-knuckle politics into a "political corruption crime spree." The central allegation is that the governor schemed to extort money and jobs for himself and his wife from the Obama transition team in exchange for naming Obama's preferred candidate (unnamed in the charges) to the open Senate seat. The complaint details Blagojevich's attempts to contact intermediaries to the transition and in one case shows him soliciting favors from a union official he identifies as an "emissary." All this alleged activity was taking place, amazingly, at a time when Blagojevich had every reason to believe he was being closely monitored by the U.S. Attorney's office.

For the time being, Obama and his aides have declined to comment on the complaint. Asked about the matter at a photo op Tuesday afternoon, Obama himself said he was "saddened and sobered" by the news but that he had not been in contact with Blagojevich and was "not aware of what was happening." But in the coming days and weeks the campaign will have to address whether Blagojevich or any of his representatives actually talked to an Obama adviser or other emissary on the matter. The transition team will also, undoubtedly, try to distance Obama from a man whom he helped first elect back in 2002 and supported for reelection in 2006, as well as from a brand of corrupt Chicago politics that John McCain tried unsuccessfully to link him to during the presidential campaign.

Blagojevich appears to have started thinking about approaching the President-elect's transition team almost immediately after the election, according to the FBI complaint unsealed Tuesday in Chicago, which is based on wiretapped conversations. In a discussion with his deputy governor Nov. 5, Blagojevich talks about getting an ambassadorship or a cabinet position (such as Secretary of Health and Human Services) in exchange for the Senate seat. The same day he said, "I've got this thing and it's f------ golden and, uh, uh, I'm just not giving it up for f------ nothing. I'm not gonna do it."

Things don't appear to have gone well over the following days, however. On Nov. 10, Blagojevich allegedly held a conference call with his wife, close aides and a handful of Washington-based advisers in which he complains that the advisers are telling him he has to "suck it up" and give this "motherf----- [Obama] his senator. F--- him. For nothing? F--- him." At this point in the complaint, it's not clear whether Blagojevich, his advisers or any other representatives have actually approached the Obama transition. Over the next two days, however, Blagojevich steps up his efforts. On Nov. 11, Blagojevich told his chief of staff and fellow defendant in the complaint, John Harris, that he knew that Obama wanted someone identified in the complaint only as "Senate Candidate 1" for the Senate seat. But, Blagojevich said, "they're not willing to give me anything except appreciation. F--- them." (See the Top 10 unfortunate political one-liners.)

That did not deter the governor, apparently. The same day, Blagojevich suggests starting a non-profit lobbying organization, known as a 501(c)(4), where he could eventually go to work, and proposes getting Obama's friend "Warren Buffett or some of those guys to help us on something like that." In a separate conversation the same day, he suggests that Obama and his associates "can get Warren Buffett and others to put $10, $12 or $15 million into the organization," and then suggests he could retire from the governorship to go over to the organization. (See the Top 10 scandals of 2008.)

Blagojevich then tries to use a union official as an intermediary to the Obama transition and "Senate Candidate 1." On Nov. 12, Blagojevich discusses the open Senate seat with an official of the Service Employees International Union (SEIU). During the conversation, Blagojevich says he understands the SEIU official is an "emissary to discuss Senate Candidate 1's interest" in the seat, according to the complaint. Blagojevich said he would be interested in the 501(c)(4) arrangement, and the SEIU official agreed to "put that flag up and see where it goes." Late Tuesday an SEIU spokesperson said in a statement that "we have no reason to believe that SEIU or any SEIU official was involved in any wrongdoing," though the organization wouldn't discuss any specifics of the allegations.

The following day Blagojevich attempts yet another contact with the Obama transition in hopes of floating the 501(c)(4) idea. He says he wants to tell an unidentified adviser to the President-elect that he wants money to be raised for the (c)(4). The same day, he says in a phone conversation that mentioning the (c)(4) to the President-elect's adviser would be an unspoken way of raising the question of Senate Candidate 1, and others. In the same conversation, Blagojevich suggests using an unidentified individual as an intermediary to the President-elect's adviser.

As Illinois reels from the lurid revelations about its governor, the state's politicians are scrambling to figure out what to do about Obama's replacement in the Senate. Despite all the damning charges, Blagojevich still currently has the power to appoint that person. Unless he steps down, is impeached or convicted, the state constitution gives him, and him alone, that authority. Though it's possible that the Senate could simply refuse to seat anyone Blagojevich chose, no one wants to let it get that far. By late Tuesday, it seemed likely that the state legislature would convene a special session to pass an emergency law setting up a special election for the open seat.