ILNews

AG argues contempt warranted in East Chicago suit

Back to TopCommentsE-mailPrintBookmark and Share

Indiana Attorney General Greg Zoeller said two politically connected Lake County attorneys should be held in contempt for failing to disclose what happened to $16 million in revenue funneled to their private corporation from an East Chicago casino.

“It’s rare that this office has ever sought that,” Zoeller said in a recent interview joined by his predecessor, Steve Carter. “We’ve already been to the Supreme Court and back, and we’re still seeking discovery.”

IL_Casino01-15col.jpg Indiana Attorney General Greg Zoeller, left, and former Attorney General Steve Carter talk about years-long efforts to discover what happened to $16 million in revenue from an East Chicago casino steered to a politically connected company. (IL Photo/ Perry Reichanadter)

A hearing Feb. 15 before Marion Superior Judge David Shaheed could determine whether more will be known about what happened with the money, or whether the litigation Carter initiated in 2006 will begin another tour of the appellate courts.

Defendants East Chicago Second Century and its principals, Michael A. Pannos, a former Indiana Democratic Party chairman, and Thomas S. Cappas, a Lake County Democratic Party activist, were longtime allies of former Mayor Robert Pastrick, whose administration crumbled in a separate corruption scandal from which the current case arises.

Carter said as a native of Lake County he is accustomed to being jibed for the region’s reputation as a haven for crooked politicians and machine-style cronyism – “unfortunately it was well-deserved,” he said. His administration took aim at what he called the culture of corruption.

The anti-corruption efforts culminated in the fall of Pastrick’s 33-year administration against which Carter and Zoeller successfully pressed civil prosecution under state and federal Racketeer Influenced and Corrupt Organizations laws that led to a judgment of $108 million against Pastrick and members of his administration for the city of East Chicago.

During Pastrick’s tenure in the early 1990s, an East Chicago group was awarded a gaming permit for a riverboat casino. The permit included a provision unique among the state’s gaming licenses: 0.75 percent of casino revenue would go to a private corporation called East Chicago Second Century Inc.

Each Indiana casino permit includes percentages typically steered to localities or nonprofit foundations that use the money for economic development purposes. In the case of Second Century, Zoeller said there’s been no sight of that in East Chicago.

casinoThe unique nature of the East Chicago arrangement led Carter to bring a lawsuit against Second Century. Dismissed by the trial court and Court of Appeals, the Indiana Supreme Court in 2009 reversed, holding that it was within the attorney general’s powers to bring the case and pursue claims for constructive trust and unjust enrichment of Second Century and its principals.

On remand, Shaheed denied Second Century’s motion to dismiss, and Second Century has asked for interlocutory appeal on the motion. Zoeller answered with a motion to compel discovery and for sanctions at the judge’s discretion that could include a contempt finding. The state alleges that the Second Century players “continuously delayed discovery in this process without just cause. … They continue to throw up roadblocks and intentionally flout the discovery rules.”

Zoeller believes the conduct rises to a level that contempt is warranted. “Seeking sanctions is not part of our strategy,” he said. “It was uniquely appropriate under this circumstance.”

Carter said the resistance to discovery is telling. He said the parties should answer with an accounting of where the money went, “If this has been such a great deal for the public.”

Attorney Brady Rife, an associate with McNeely Stephenson Thopy & Harrold in Shelbyville, represents the Second Century defendants. He said he could not comment on pending litigation.

Second Century argues in its request for interlocutory appeal that Zoeller is overreaching, a claim he said was settled in favor of the AG’s powers by the Supreme Court.

“The Attorney General is pursuing claims which, under the current case law, have never been pursued previously against a private entity,” Second Century’s motion reads. “Indiana law provides no precedent allowing the Attorney General to pursue claims for unjust enrichment and disgorgement against a private company such as Second Century. Likewise, Indiana law provides no precedent allowing the Attorney General to seek discovery of highly private and confidential business and personal records from a private company such as Second Century under these circumstances.”

Carter said he’s cognizant of protests that the Republican AGs are pursuing a political beef in a traditional Democratic stronghold.

“That’s what everyone in Lake County argues when we try to bring in transparency,” he quipped.

But there appears to be a measure of cooperation with the administration of Mayor Anthony Copeland. “I have a new respect and relationship with the current mayor,” Zoeller said.

Copeland said he’s let the AG’s office lead, and the episode has illustrated the importance of accountability of public funds. “If it’s not overseen by someone, you wake up one day … chasing the trail of what happened to millions,” he said.

“No matter what the residual amount that’s remaining, in the end it could be returned to the rightful owners,” Copeland added.

Carter and Zoeller said that even though the city of East Chicago has settled with Second Century, the public statewide has a right to know what happened with funds collected for distribution as proscribed under gaming statutes.

“Part of the role of our office is to seek some public trust,” Zoeller said. “I think $16 million is still worth pursuing.”•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Two cops shot execution style in NYC. Was it first amendment protest, or was it incitement to lawlessness? Some are keeping track of the body bags: http://www.breitbart.com/big-government/2014/12/13/al-sharpton-leads-thousands-in-saturday-march-on-washington-dc/

  2. From the MCBA: “This situation is not just about the death of Michael Brown, but the thousands of other African-Americans who are disproportionately targeted and killed by police officers.” The association said it was “saddened and disappointed” by the decision not to indict Ferguson police officer. HOPING that the MCBA will denouce the execution style killig of two NYC police officers this day, seemingly the act of one who likewise believes that the police are targeting blacks for murder and getting away with it. http://www.mediaite.com/online/two-nypd-cops-fatally-shot-in-ambush-in-brooklyn/ Pray this violence soon ends, and pray it stays far away from Indiana.

  3. "Am I bugging you? I don't mean to bug ya." If what I wrote below is too much social philosophy for Indiana attorneys, just take ten this vacay to watch The Lego Movie with kiddies and sing along where appropriate: https://www.youtube.com/watch?v=etzMjoH0rJw

  4. I've got some free speech to share here about who is at work via the cat's paw of the ACLU stamping out Christian observances.... 2 Thessalonians chap 2: "And we also thank God continually because, when you received the word of God, which you heard from us, you accepted it not as a human word, but as it actually is, the word of God, which is indeed at work in you who believe. For you, brothers and sisters, became imitators of God’s churches in Judea, which are in Christ Jesus: You suffered from your own people the same things those churches suffered from the Jews who killed the Lord Jesus and the prophets and also drove us out. They displease God and are hostile to everyone in their effort to keep us from speaking to the Gentiles so that they may be saved. In this way they always heap up their sins to the limit. The wrath of God has come upon them at last."

  5. Did someone not tell people who have access to the Chevy Volts that it has a gas engine and will run just like a normal car? The batteries give the Volt approximately a 40 mile range, but after that the gas engine will propel the vehicle either directly through the transmission like any other car, or gas engine recharges the batteries depending on the conditions.

ADVERTISEMENT