Ind. AG proposes fix to gambling revenue dispute

Keith Loria Feb. 28, 2011, 2:27am


EAST CHICAGO, Ind. (Legal Newsline) - Indiana Attorney General Greg Zoeller announced on Friday that he has reached out to the East Chicago City Council to propose setting up a trusteeship for money generated through a local development agreement.

More than $8 million in funds that was casino revenue intended for economic development in the area is currently being held in escrow. Zoeller said that the Northwest Indiana Regional Development Authority should assume responsibility for the money.

In his proposal, Zoeller offered a plan wherein the trusteeship would be created to manage the funds and decide how they would be spent. The board would consist of the RDA, the city of East Chicago and possibly other entities.

Any proposed economic development projects seeking a grant would apply to the board and the board would vote on its merits.

"The goal is to ensure that the revenue will be used for meaningful economic development projects that will truly benefit the citizens of East Chicago - and possibly just as important, will begin the process to restore the lost trust of the people of your city," Zoeller said.

"The purse strings should be controlled by a separate entity that has public credibility and provides transparency. The RDA would hold the account, but the dispensing of grants would be handled by a trustee board that would include the RDA and the city."

Zoeller's office has also looked into alleged political corruption and misuse of casino revenues by the former city administration of ex-mayor Robert Pastrick in East Chicago. A federal court ordered Pastrick to pay over $108 million in damages last year after the former mayor defaulted in a federal racketeering lawsuit.

Mediation is schedule for late April for other lawsuits involving gambling revenue and the city of East Chicago, the state of Indiana, the Ameristar Casino, the for-profit Second Century, the nonprofit Foundations of East Chicago and other parties locked in litigation.

At issue is more than $16 million in casino revenue paid over 10 years to East Chicago Second Century Inc., a for-profit entity engineered by Pastrick and allegedly run by his political allies under a local development agreement.

"I recognize that it would be a departure from past practice for the city of East Chicago to seek economic development grants from a trustee board, but I hope that people won't dismiss an idea because it is new or unfamiliar," Zoeller said.

"I hope all the mediation participants will accept this in the good faith in which it is offered and conclude, as I have, that casino revenues intended to benefit the citizens of East Chicago can be most responsibly dispensed by a broader regional entity that brings experience in making such funding decisions-and restore the faith in government lost during the decades of the Pastrick administration."

If Zoeller's plan is accepted and the trusteeship is created, then the city itself could apply to the trustee board for grants for infrastructure or economic development projects.

Zoeller also insists that Second Century not be eligible to apply for grants or receive any further funding from the casino until it provides a full accounting of how it spent the funds it received.

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