Mr Blagojevich says he believes he has done nothing wrong
Barack Obama has called on Illinois Governor Rod Blagojevich to resign following his arrest on charges that he tried to "sell" Mr Obama's Senate seat.
Mr Blagojevich, as governor, has the sole authority to pick Mr Obama's successor as senator for Illinois.
Congressman Jesse Jackson Jr has been revealed as the man who Mr Blagojevich claimed sent an emissary to him, offering campaign cash for the seat.
Mr Jackson denied any wrongdoing in a statement to reporters.
In transcripts of intercepted conversations released by the FBI on Tuesday, Mr Blagojevich is quoted saying that a man referred to by officials as Senate Candidate Five would "raise me 500 grand. An emissary came. Then the other guy would raise a million, if I made him a senator".
Congressman Jesse Jackson Jr denies his involvement
Mr Jackson's lawyer confirmed to reporters on Wednesday that Mr Jackson was Senate Candidate Five.
But Mr Jackson, son of the prominent civil rights leader and former presidential candidate Jesse Jackson Sr, insisted he was "not a target of this investigation".
Mr Jackson Jr said he had never made any approaches to Mr Blagojevich to discuss buying the vacant Senate seat.
"I want to make this fact plain: I reject and denounce 'pay to play' politics and have no involvement whatsoever in any wrongdoing," he said. "I did not initiate or authorise anyone at any time to promise anything to Governor Blagojevich on my behalf."
He added that he believed the governor "should resign and forfeit his authority to make the Senate appointment".
Mr Obama, who is not close to Mr Blagojevich, was not involved in the alleged wrongdoing, prosecutors said.
Mr Obama's official spokesman said the President-elect wanted Mr Blagojevich to resign.
"Under the current circumstances, it is difficult for the governor to effectively do his job and serve the people of Illinois," he told reporters in a written statement
And he said that Mr Obama was keen for the Illinois legislature to consider holding a special election to fill the seat.
CHARGES AGAINST BLAGOJEVICH
Federal agents say Mr Blagojevich
Tried to obtain campaign contributions in exchange for official actions;
Tried to use state funds for the private purpose of inducing the Tribune Company to fire Chicago Tribune editorial board members critical of him;
Tried to obtain personal financial benefits for himself in return for his appointment of a US senator
Lawmakers in Illinois have said they could hold a special legislative session as early as Monday to work out the details of the special election.
Mr Blagojevich, who was arrested on Tuesday, was released on bail after appearing before a federal judge and arrived at his office for work on Wednesday.
His lawyer told reporters that Mr Blagojevich believed he had done nothing wrong and had no plans to resign.
Federal investigators, who have been working on a case against Mr Blagojevich for several years, have charged him with a number of offences including soliciting a bribe.
The charges relate to a variety of corruption schemes in which the governor was allegedly involved, including so-called "pay to play" deals - the doling out of jobs, contracts and appointments in return for campaign contributions.
The US Attorney's Office has released a 76-page FBI affidavit detailing the charges against Mr Blagojevich, which includes transcripts of his telephone conversations intercepted by court-authorised wiretaps over the last month.
In the conversations, the Democratic governor allegedly discussed offering Mr Obama's Senate seat in return for a well-paid position at a non-profit organisation or a group affiliated with trades unions, according to the affidavit.
In the transcripts, on 3 November Mr Blagojevich said the seat was a "[expletive] valuable thing, you just don't give it away for nothing".
The conduct would make Lincoln roll over in his grave
The day after the presidential election, according to the affidavit, Mr Blagojevich was recorded as saying: "I've got this thing and it's [expletive] golden, and uh, uh, I'm just not giving it up for [expletive] nothing."
Mr Blagojevich also allegedly talked about getting his wife Patti placed on a corporate board.
In addition, he has been charged with illegally threatening to block state aid to the company that owns the Chicago Tribune newspaper.
Mr Blagojevich allegedly demanded that the company fire members of its editorial board in return for financial assistance in the sale of Wrigley Field, a Chicago sports stadium.
The governor was elected on a pledge to clean up after his predecessor George Ryan, who is serving a six-and-a-half-year sentence for fraud.
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