Robert Cooley, who testified for the FBI in corruption cases, told ABC 7 in Chicago that Blagojevich paid the mob to let him operate as a bookie.
"When I was working with government wearing wire, I reported, I observed Rod, the present governor, who was running a gambling operation out in the western suburbs," Cooley said. "He was paying street tax to the mob out there."
Cooley also worked as a police officer, and his undercover work and testimony led to the convictions of 24 politicians, cops, judges and lawyers on corruption charges.
Cooley said he wasn't surprised to see Blagojevich in legal trouble.
"I predicted five years ago when he ran the first time that he was a hands on person who would be selling every position in the state of Illinois and that it exactly what happened," he said.
Spokesmen for the governor didn't comment on ABC 7's story.