The NYT explains Obama's inadvertent roll in bringing down Blagojevich.
Here's the short version. The IL legislature passed an ethics bill to curb campaign donations from contractors, etc. who have business with the state. Blago (love the new shorthand for his name -- not Jacko but still...) vetoed the bill. President of the IL Senate and Obama mentor Emil Jones also opposed the bill, but then candidate Obama phoned him and urged him to support the bill which Jones did leading to the override of the veto. With the new bill taking effect January 1, Blago went on a spree to squeeze everyone in sight for campaign cash before the Dec 31 deadline. The Feds got tipped off which led to the wiretaps. On the wiretaps they caught Blago conspiring to sell the Senate seat.