Ind. SC sides with Zoeller in East Chicago case

John O'Brien Apr. 13, 2009, 6:29pm


INDIANAPOLIS (Legal Newsline) - A private development firm must submit an accounting of what it has done with cash it has been paid as a result of a 1994 deal that brought riverboat gambling to East Chicago, Ind.

The Indiana Supreme Court made the ruling Monday, agreeing with state Attorney Greg Zoeller in a case in which his predecessor, Steve Carter, intervened. Carter wants the funds Second Century is supposed to use for economic development of East Chicago placed in a constructive trust.

"There has been no proof that these funds intended for economic development have not been wasted," Carter said. "The public is left to wonder how the $16 million has actually helped them."

In the 1990s, the City of East Chicago and the Showboat Marina Partnership entered into a pair of agreements that allowed Showboat to operate the East Chicago riverboat casino in exchange for some of its gaming revenue.

To get the gaming license, East Chicago agreed to support the Showboat application if the company would fund economic development with 3 percent of its future adjusted gross receipts. In 1997, Showboat earned the application, coming to a second agreement that it would fund Second Century with .75 percent of the receipts from its casino operation.

In 1999, the license was transferred to Harrah's, which continued to make the payments to Second Century. Five years later, RIH Acquisitions, doing business as Resorts East Chicago, applied to have Harrah's license transfer to it. The state Gaming Commission approved the transfer without addressing the Second Century agreement.

Second Century asked for a declaratory judgment requiring RIH to continue the payments. Carter intervened, seeking a constructive trust on the money paid to Second Century.

Second Century would not provide an accounting of where the money had been spent, and two lower courts agreed with it before Monday's ruling.

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