ILNews

State wants detailed audit of corruption money

Michael W. Hoskins
January 1, 2009
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In the first minutes of a federal court hearing Tuesday, U.S. District Senior Judge James Moody told attorneys he wasn't going to order a state-supervised audit of East Chicago's finances, as the Indiana Attorney General's Office was asking. But his stance may have changed.

Following five hours of testimony and arguments in the civil racketeering case, Judge Moody realized the scope of the action being proposed in the suit against former Mayor Robert Pastrick and top aides - mainly six Pastrick political allies now known as the Sidewalk Six - who've been found civilly liable for running a corrupt enterprise.

Arguing on behalf of the Indiana Attorney General's Office, Chicago attorney Patrick M. Collins - who is acting as a special deputy attorney general - tried to convince Judge Moody that Pastrick and James Fife III could be held liable for more than $100 million in the case targeting the years of corruption that lingers in some form today.

Aside from the sidewalks-for-votes money used in the 1999 primary election, the suit also focuses on the Second Century and the Foundations of East Chicago, for-profit and non-profit recipients, respectively, of casino money. Both are embroiled in ongoing state court litigation as the attorney general and current East Chicago mayor fight to get those organizations to publicly disclose what the casino cash was used for during the Pastrick administration.

In a memorandum for injunctive relief filed June 2, the Attorney General's Office proposed that the State Board of Accounts review and report to the court what the full economic damages have been from the Pastrick corruption. The audit would assess the current financial conditions of East Chicago, the amounts and purposes of casino funds disbursed, and any other structural or systematic problems in the city, the brief stated.

As the hearing opened Tuesday, Judge Moody said he'd reviewed the brief and wasn't going to order an audit because he didn't find enough legal justification, that he wasn't convinced the Attorney General's Office could do it on its own accord, and that he didn't see it justified at such a late stage in this case.

But Collins argued that the start of the remedy phase was the only time that part of the remedy could be used, not during the trial preparation, and that any testimony at trial also could be used in the damages and remedy phase.

The state called five witnesses, including the former city controller Ed Maldonado, who's serving 130 months in prison after his conviction in the criminal Sidewalk Six case. He testified that Pastrick and Fife headed a political machine that misguided millions of dollars; while he signed the checks and knew of the activity, they were ultimately the ones leading the corruption. A state Board of Accounts auditor testified that she'd reviewed the city finances before; however, because casino monies were diverted to for-profit and non-profit trusts or organizations, she couldn't fully see the scope of the Pastrick activity. A former Internal Revenue Service agent and two other city officials also testified about how East Chicago is still recovering from the Pastrick legacy.

"The Pastrick political machine essentially took over the city and ruled it for personal and political gain of Mayor Pastrick," attorney Joel Levin said for the state during closings. "The city was the epitome of a political machine, and politics influenced this city in every way, shape, and form. But Your Honor can do something to unwind that legacy."

Notre Dame University Law School professor G. Robert Blakey, a racketeering law expert who helped draft the Racketeer Influenced and Corrupt Organization Act about four decades ago, told the judge that this is a case of first impression nationally. The judge is basically able to do anything he wants as allowed under the expansive RICO statute, Blakey said. He asked the judge to order a forensic audit - one that goes beyond the numbers and includes interviews and extensive research - to determine how the casino money was used under Pastrick's agreement. That could reveal the extent of damages that should be repaid to taxpayers, he said.

Blakey urged the judge to consider all remedial options possible under the RICO statute, including the use of liens, a trustee, constructive trust, or asset forfeiture. Typical antitrust cases have used inspection audits, and that could be ordered here also, he said.

"There's something about a federal court," Blakey said. "People pay a lot of attention to a federal court order. What we're asking is that you do justice ... for the people of East Chicago."

While Pastrick didn't appear Tuesday, his attorney Michael W. Bosch represented him in court and Fife represented himself. Neither presented specific arguments, but they did question specific aspects of the state's case during witness testimony.

Bosch said during closing the state has given the former mayor "a free pass," and that Pastrick should be held responsible for nominal damages.

"You get a buck," he said. "Triple that, you get three bucks."

Attorneys have until June 22 to file their findings of fact and conclusions, and Judge Moody will then consider what happens next.

More coverage about this case can be found in the June 10-23, 2009, issue of Indiana Lawyer.

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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