Former Illinois governor Rod Blagojevich smiles as he arrives at federal court for his arraignment on federal racketeering and fraud charges in Chicago on Tuesday. (Charles Rex Arbogast/Associated Press)

Ousted Illinois governor Rod Blagojevich pleaded not guilty on Tuesday to federal corruption charges, making official his denial of political malfeasance that authorities say included a scheme to sell U.S. President Barack Obama's former U.S. Senate seat.

Blagojevich looked relaxed as he stood alongside his brother, who also pleaded not guilty in the scheme.

The former governor did not make a statement before the plea but told reporters and spectators when he entered the courthouse that he was "innocent of every single accusation."

"Now we can begin the process of getting the truth out and I can clear my name and vindicate myself," he said.

Blagojevich, 52, is charged with trying to auction the Senate seat, planning to squeeze money from companies seeking state business and plotting to use the financial muscle of the governor's office to pressure the Chicago Tribune to fire editorial writers who had called for his impeachment.

Defence lawyer Sheldon Sorosky, a longtime Blagojevich friend, entered the plea on his client's behalf before U.S. District Judge James Zagel. Zagel then asked Blagojevich if he was pleading not guilty to all counts.

"That's correct," the impeached former chief executive responded.

Funding for defence uncertain

Other lawyers have been reluctant to file an appearance with the court on behalf of the governor because it could lock them into a case that could consume thousands of hours over the next two years without any guarantee they would be paid.

No big names among Chicago's criminal defence lawyers are offering free services to Blagojevich.

Blagojevich does have money in his Friends of Rod Blagojevich campaign fund. But prosecutors have put defence lawyers on notice they will ask Zagel to order the campaign money forfeited if Blagojevich is convicted. Lawyers could be ordered to return their fees if they were paid from the campaign fund.

There has even been speculation that Blagojevich might have to turn to the federal defender's program if Zagel doesn't assure lawyers they can be paid through the campaign fund.

The other defendants in the case — former chief fundraiser Christopher Kelly, former aide John Harris and Springfield millionaire William Cellini — are to be arraigned Thursday. Former aide Alonzo Monk is to be arraigned next week.

Harris, a former Blagojevich chief of staff, is co-operating with the federal investigation. Monk, also a former chief of staff and campaign manager, is reported to be co-operating with the investigation as well.