How regulators will try to ensure Chicago’s first casino is corruption-free – Chicago Tribune

A decade ago, Chicago was on the cusp of getting its first casino, a controversial idea that nevertheless received legislative approval before being vetoed by the then-governor. Pat Quinn because, in his words, the project contained “loopholes for mobsters”.

Quinn, a self-proclaimed outsider among Illinois Democrats, was by no means the first to raise concerns about how a state-sanctioned gambling emporium would be able to stay corruption-free in a city with a rich and oftentimes rich history. sordid organized crime. . In a town where Al Capone and Joey “The Clown” Lombardo are household names, the mob’s infiltration potential was anything but hypothetical, as evidenced by the debacle in the early 2000s to build a casino in suburban Rosemont.

Now, after Governor JB Pritzker signed legislation in 2019 authorizing a city casino and Mayor Lori Lightfoot this month leveraged Bally’s to develop a $1.74 billion gaming and entertainment complex along the Chicago River, the debate over whether Chicago should get a casino seems to be over. . However, questions remain about how public officials and regulators will ensure that everyone from the company’s key investors to the subcontractor who paves the parking lot is honest.

“You want to make sure the city isn’t dealing with some nefarious individuals,” said Jeff Cramer, a former federal prosecutor who has been involved in investigations involving casino investors. “You don’t want to find out after the fact.”

Most of that work will fall to the Illinois Gaming Board, a state agency that has historically been understaffed and underfunded. The Chicago casino’s launch comes as the Gaming Board has seen its staff shrink modestly since Pritzker sanctioned a massive gambling expansion that dramatically increased the regulatory agency’s workload.

While regulators are focused on ensuring the last vestiges of the Outfit don’t gain a foothold in a Chicago casino, that’s not the only threat, experts said. In recent years, international criminal elements have discovered that casinos around the world are an attractive opportunity to launder money.

“The risks now make what happened in Rosemont look cute,” said Cramer, who now works for an international investigations firm.

At the same time, the board will likely be under political pressure to quickly approve Chicago’s casino so that money can start flowing into the city’s pension funds and the state’s capital building program. Lightfoot’s management recently said it hoped to submit its choice to the Gaming Board for approval in time to include $40 million in advance payments from Bally’s in the 2023 fiscal budget this fall, months before Lightfoot runs for re-election.

But the process of vetting investors and others connected with the casino will not begin until the city formally submits the license application to the Gaming Board.

The board does not publicly discuss its background investigation process, but administrator Marcus Fruchter, a former Pritzker Securities and Exchange Commission attorney hired in 2019, insisted the agency’s investigators are up to the task.

“While the Illinois Gaming Board has historically been under-resourced and under-resourced under successive previous administrations, the IGB’s team of dedicated civil and sworn professionals and hard workers has nevertheless grown to address the many challenges and mandates of recent gaming expansion laws. (during a global crisis). health pandemic),” Fruchter said in an emailed response to questions.

Despite seeing its budget increase under the Pritzker, the board’s staff has shrunk somewhat since the game’s expansion was enacted three years ago, reflecting both the bureaucracy of the state’s hiring process and the staffing challenges faced by employers across the board. country, particularly law enforcement agencies. during the pandemic. There are about 217 state employees at the agency now, down from 234 in June 2019, according to a council spokesperson. That includes the loss of 25 Illinois State Police soldiers assigned to the Gaming Board, about a third of the details from three years ago.

Still, Fruchter said, the board has scrutinized more than a dozen casino license applicants, including those in Waukegan, southern suburbs, Rockford, Danville and southern Illinois, as well as applications for casino games at Hawthorne Race Course in Cicero. and Fairmount Park near St. Louis. The agency also launched sports betting and investigated applicants for online and physical sports betting licenses, he said.

“The IGB is prepared to process and evaluate the Chicago casino application (once submitted) in an ethical, efficient, independent, complete, timely and transparent manner that satisfies the IGB’s significant legal obligations and maintains the public’s trust in gambling. Illinois — just like the IGB did (and is doing)” for all other candidates, he said.

A spokeswoman for Bally’s declined to comment on this story.

In its vetting process, the board combs through applicants’ criminal, civil and financial records, looks for criminal convictions or anything else that “dishones or damages reputation or results in adverse publicity for the state of Illinois and its gaming industry.”

The casino apps themselves, which have extensive disclosure requirements, and the details of board investigations are protected from public review under state law. Sometimes, however, the issues that arise become public.

During the board review of the new Hard Rock Casino in Rockford, for example, investigators found that an investor who owned the restaurant and convention center that serves as the casino’s temporary location during the construction of the permanent facility did not disclose a minor arrest in 2020. The other casino sponsors had to buy the investor’s stake in the project and buy the restaurant.

Some investigations went much deeper. Most notoriously, the Mafia connections cited by investigators sunk the ill-fated Emerald Casino proposal in Rosemont nearly two decades ago.

State regulators withdrew the gaming license from a consortium of powerful investors that was trying to build a new casino in the northwest suburb. The Gaming Board claimed the group was unable to run a casino because some shareholders had ties to organized crime, while others lied to board investigators about behind-the-scenes property deals.

A Chicago casino has been discussed for decades and organized crime has always been a lingering concern. In the 1990s, then-Mayor Richard M. Daley pitched the idea, which ultimately came to nothing.

Robert Lombardo, professor emeritus of criminology and criminal justice at Loyola University Chicago who has taught courses and written books on organized crime in Chicago, said that if the casino had taken off in the 1990s, when Daley first proposed it, “definitely, were efforts (of the crowd) to get involved.”

Lombardo said there is a less serious risk of that happening these days.

But Edward McNamara, who spent a quarter of a century with the FBI’s Chicago organized crime squad before retiring in 2019, said that while the FBI made a significant impact on the mafia structure through the historic case of Operation Family Secrets and other investigations: “We did not eradicate them”.

Those who remain will inevitably try to find a way into the casino in Chicago, said McNamara, who also served as the FBI’s liaison with the Gaming Board for about a decade.

As the casino industry has become big business, dominated by publicly traded companies like Bally’s, mobsters have tended to focus their attention on getting subcontracts to supply any of the various goods and services that make a casino work, he said. McNamara.

“It’s a game of cat and mouse,” he said. “You have to try to keep them out, and they will try to get in.”

The game of cat and mouse in recent decades has become international, Cramer said.

“I would worry less about the infiltration of organized crime (and) much worse about money laundering, international money laundering, because casinos are a money business,” said Cramer, who is now the senior managing director of the international investigation firm. Guidepost Solutions.

Regulators in other states he has worked with, Cramer said, have identified investors who have been indicted abroad for crimes such as extortion, money laundering and terrorist financing. Cramer was involved in an investigation that in 2010 led to the disqualification of one of the bidders to run the Illinois lottery after earlier criminal charges by a senior official were uncovered.

“The stakes are much more dangerous now because you have, again, international money launderers, not just some organized criminals trying to get involved in a casino,” Cramer said. “That was easy to dismiss and we did and we processed it and… they didn’t have a casino.”

This type of excavation often requires “boots on the ground” at foreign sites, something Cramer believes is beyond the capabilities of Illinois regulators.

“I don’t think anyone who knows this industry would say they’re doing due diligence,” Cramer said.

McNamara, the former FBI agent, said the agency has in the past routinely assisted the Gaming Board by searching its databases for criminal records abroad.

Fruchter, the administrator of the Gaming Board, declined to go into detail about the agency’s investigation process, though he said the board does not hire third-party investigators for any part of its criminal background checks.

The council’s “experienced law enforcement professionals have experience conducting criminal background investigations of domestic and foreign individuals and entities,” said Fruchter.

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