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
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. I'm glad that attorney Carl Hayes, who represented the BMV in this case, is able to say that his client "is pleased to have resolved the issue". Everyone makes mistakes, even bureaucratic behemoths like Indiana's BMV. So to some extent we need to be forgiving of such mistakes. But when those mistakes are going to cost Indiana taxpayers millions of dollars to rectify (because neither plaintiff's counsel nor Mr. Hayes gave freely of their services, and the BMV, being a state-funded agency, relies on taxpayer dollars to pay these attorneys their fees), the agency doesn't have a right to feel "pleased to have resolved the issue". One is left wondering why the BMV feels so pleased with this resolution? The magnitude of the agency's overcharges might suggest to some that, perhaps, these errors were more than mere oversight. Could this be why the agency is so "pleased" with this resolution? Will Indiana motorists ever be assured that the culture of incompetence (if not worse) that the BMV seems to have fostered is no longer the status quo? Or will even more "overcharges" and lawsuits result? It's fairly obvious who is really "pleased to have resolved the issue", and it's not Indiana's taxpayers who are on the hook for the legal fees generated in these cases.

  2. We are a Finance Industry Company professionals with over 15 Years Experience and a focus on providing Bank Guarantee and Standby Letter of Credit from some of the World Top 25 Prime Banks primarily from Barclays, Deutsche Bank, HSBC,Credit Suisse e.t.c. FEATURES: Amounts from $1 million to 5 Billion+ Euro’s or US Dollars Great Attorney Trust Account Protection Delivered via MT760, MT799 and MT103 Swift with Full Bank Responsibility Brokers Always Protected Purchase Instrument of BG/SBLC : 32%+2% Min Face Value cut = EUR/USD 1M-5B Lease Instrument of BG/SBLC : 4%+2% Min Face Value cut = EUR/USD 1M-5B Interested Agents/Brokers, Investors and Individual proposing international project funding should contact us for directives.We will be glad to share our working procedures with you upon request. We Facilitate Bank instruments SBLC for Lease and Purchase. Whether you are a new startup, medium or large establishment that needs a financial solution to fund/get your project off the ground or business looking for extra capital to expand your operation,our company renders credible and trusted bank guarantee provider who are willing to fund and give financing solutions that suits your specific business needs. We help you secure and issue sblc and bank guarantee for your trade, projects and investment from top AA rated world Banks like HSBC, Barclays, Dutch Ing Bank, Llyods e.t.c because that’s the best and safest strategy for our clients.e.t.c DESCRIPTION OF INSTRUMENTS 1. Instrument: Funds backed Bank Guarantee(BG) ICC-600 2. Currency : USD/EURO 3. Age of Issue: Fresh Cut 4. Term: One year and One day 5. Contract Amount: United State Dollars/Euros (Buyers Face Value) 6. Price : Buy:32%+1, Lease: 4%+2 7. Subsequent tranches: To be mutually agreed between both parties 8. Issuing Bank: Top RATED world banks like HSBC, Barclays, ING Dutch Bank, Llyods e.t.c 9. Delivery Term: Pre advise MT199 or MT799 first. Followed By SWIFT MT760 10. Payment Term: MT799 & Settlement via MT103 11. Hard Copy: By Bank Bonded Courier Interested Agents,Brokers, Investors and Individual proposing international project funding should contact us for directives.We will be glad to share our working procedures with you upon request. Name:Richardson McAnthony Contact Mail : intertekfinance@gmail.com

  3. Affordable Loan Offer (ericloanfinance@hotmail.com) NEED A LOAN?Sometime i really wanna help those in a financial problems.i was wondering why some people talks about inability to get a loan from a bank/company. have you guys ever try Eric Benson lending service.it cost dollars to loan from their company. my aunty from USA,just got a home loan from Eric Benson Lending banking card service.and they gave her a loan of 8,000,000 USD. they give out loan from 100,000 USD - 100,000,000 USD. try it yourself and testimony. have a great day as you try.Kiss & Hug. Contact E-mail: ericloanfinance@hotmail.com

  4. From the article's fourth paragraph: "Her work underscores the blurry lines in Russia between the government and businesses . . ." Obviously, the author of this piece doesn't pay much attention to the "blurry lines" between government and businesses that exist in the United States. And I'm not talking only about Trump's alleged conflicts of interest. When lobbyists for major industries (pharmaceutical, petroleum, insurance, etc) have greater access to this country's elected representatives than do everyday individuals (i.e., voters), then I would say that the lines between government and business in the United States are just as blurry, if not more so, than in Russia.

  5. For some strange reason this story, like many on this ezine that question the powerful, seems to have been released in two formats. Prior format here: http://www.theindianalawyer.com/nominees-selected-for-us-attorney-in-indiana/PARAMS/article/44263 That observed, I must note that it is quite refreshing that denizens of the great unwashed (like me) can be allowed to openly question powerful elitists at ICE MILLER who are on the public dole like Selby. Kudos to those at this ezine who understand that they cannot be mere lapdogs to the powerful and corrupt, lest freedom bleed out. If you wonder why the Senator resisted Selby, consider reading the comments here for a theory: http://www.theindianalawyer.com/nominees-selected-for-us-attorney-in-indiana/PARAMS/article/44263

ADVERTISEMENT