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Monday, February 22, 2010

Ind. Decisions - What East Chicago case is being settled here?

On Feb. 19th Andy Grimm of the Gary Post-Tribune reported in this story:

EAST CHICAGO -- The city has ended a long-running dispute with East Chicago Second Century, agreeing to stop payments of casino revenue to the for-profit development group and split up to $10 million in the Second Century accounts between the city and the foundation.

The city released a statement Thursday announcing an agreement that would end a court battle that began in 2005. That was the year Mayor George Pabey took office and pledged to break the deal his predecessor, Robert A. Pastrick, brokered with political allies who formed Second Century's board.

The foundation took in 0.75 percent of the gross revenues from the city's casino boat, a deal that paid Second Century more than $1 million a year since 1997, when Showboat Casino first docked at the East Chicago marina. Because the foundation is a private, for-profit entity, there has been no public accounting of how the casino money was spent.

Under terms of the settlement, Second Century will no longer receive a share of the casino money, and the city will get 54 percent of the funds remaining in an escrow account holding money paid to the foundation since the start of the lawsuit. The city will use the money to fund existing economic development projects sponsored by the cash-strapped city, Pabey said in a statement that urged the City Council to ratify the deal at its regular meeting Monday.

"We have fought long and hard for the opportunity for the city to control its financial destiny," the statement reads. "This settlement is an important step in securing all future economic development payments for the city and providing a stable revenue base upon which we can support our future growth."

Indiana Attorney General Greg Zoeller had joined the lawsuit to press to open Second Century's books. He said he was not involved in settlement talks and intends to continue working to make the foundation's financial records public.

Attorney General Zoeller issued a press release stating in part:
"I continue to oppose any agreement that would allow additional funds to be given to Second Century, which has steadfastly refused any disclosure of how $16 million that was meant to benefit the people of East Chicago," said Zoeller, who said he has not seen a copy of the agreement.

"While I have not been involved in any settlement negotiations between Mayor Pabey and Second Century, I oppose any result that would allow additional funds be given to Second Century, which has steadfastly refused any public review of how it spent more than $16 million it received over 10 years that had been meant for economic development to benefit the people of East Chicago," Zoeller said.

"From the State's point of view, the major focus is not about revenue: It's about prying open the books of the for-profit entity and providing an accounting. The public needs to know how that stream of casino revenue was spent and to whom Second Century's grants were dispensed," Zoeller said. "Forward-looking disclosure is not enough; there must be disclosure going back to the founding of Second Century, created by the Pastrick organization during the period that is subject of our RICO investigation," Zoeller said.

This afternoon Jon Seidel of the Post Tribune writes:
Indiana Attorney General Greg Zoeller said he will personally ask the East Chicago City Council to vote against a court settlement with Second Century Inc. at its meeting tonight.

Zoeller said he hasn't yet seen a copy of the agreement, despite multiple requests for it, but he opposes any settlement that doesn't require Second Century to disclose how it has used $16 million in revenue it received from East Chicago's casino.

"I'd be shocked if that's in the agreement," Zoeller said.

The settlement would end a court battle started in 2005 over a deal that directed 0.75 percent, or more than $1 million, of the annual gross revenues of the city's casino boat to Second Century.

Under the reported terms of the settlement, Second Century will no longer get a share of the casino money, and the city will get 54 percent of funds remaining in an escrow account set up at the start of the lawsuit.

The East Chicago City Council is scheduled to ratify the settlement during its meeting at 6 p.m. * * *

Language in a casino bill moving through the General Assembly would require all agencies receiving casino money, such as Second Century, to fully disclose how they have used those funds.

On June 30, 2009, the Supreme Court issued a ruling in East Chicago v. East Chicago Second Century, Inc., concluding "As detailed above, the trial court is affirmed on some points and reversed on others. We remand so that there can be further proceedings on the merits."

For discussion of the ruling, see this ILB entry from the following day, July 1, 2009.

Posted by Marcia Oddi on February 22, 2010 04:04 PM
Posted to Indiana Decisions