Associated Press WriterCHICAGO (AP) -- Gov. George Ryan's former deputy chief of staff pleaded guilty Thursday to mail fraud for his role in what federal prosecutors called a criminal racket that secretly used public money and state employees for political purposes.

Richard Juliano was deputy chief of staff for Ryan -- in both the secretary of state's and governor's offices -- and deputy chairman of Ryan's 1998 campaign for governor. He is cooperating with prosecutors seeking racketeering convictions against the campaign committee and campaign manager.

The charge against Juliano was included in a 10-count federal indictment returned April 2. The other defendants were the Citizens for Ryan campaign committee and Scott Fawell, who was Ryan's campaign manager and his chief of staff in the secretary of state's office.

Fawell and the campaign committee have pleaded innocent to all charges against them.

Juliano becomes the highest-ranking state official convicted in the federal investigation, which began in 1998 with allegations of bribes paid in exchange for Illinois drivers licenses. Federal prosecutors have traced $170,000 of the payoff money to the Citizens for Ryan campaign fund.

Juliano is the 43rd person, from state driving instructors to the former inspector general in the secretary of state's office, Dean Bauer, to be convicted in the Operation Safe Road investigation.

Ryan has not been accused of any wrongdoing. As the scandal mounted and his popularity in opinion polls plunged, however, he decided last summer not to seek a second term.

Juliano, 34, now lives in Virginia and last month resigned his job in the Bush administration in anticipation of the pending indictment. He was the No. 2 man in Ryan's 1998 campaign for governor, when federal prosecutors allege he worked with Fawell and unidentified "agents" of Citizens for Ryan to coordinate the illegal use of secretary of state employees, working on taxpayers' time, for campaigning and fund-raising.

Juliano appears throughout the 80-page indictment, but he was only charged with a single count of mail fraud. His defense attorney, James S. Montana, said Juliano was a very young political operative simply following orders from his boss and mentor, Fawell.

Montana said his client was ready to plead guilty on Monday, but that hearing was delayed because of a hitch in negotiations with the U.S. attorney's office regarding the sentencing guidelines that will be used to determine Juliano's fate.

Neither Montana nor the U.S. attorney's office would elaborate on the reason behind the delay, but both characterized it as minor issues that would not get in the way of Juliano's cooperation with the ongoing investigation.

After the indictment, the governor said Fawell and Juliano were "friends" who were innocent until proven guilty in court. He said Illinoisans will have to wonder whether the charges against his campaign fund, as outlined in the federal indictment, are true until the case runs its legal course in court. He has refused to answer further questions.