Ind. SC decides casino money issue

By Jessica M. Karmasek | Sep 23, 2010


INDIANAPOLIS (Legal Newsline) - The Indiana Supreme Court has determined that the City of East Chicago may not transfer funds that were originally earmarked for Foundations of East Chicago, Inc. -- a philanthropy funded by Resorts East Chicago Casino and Hotel -- to itself.

The Court ruled Sept. 16 on a petition for rehearing, which it granted to clarify issues related to its May decision.

The appeal concerned the constitutionality of a 2007 amendment to the state's gaming law that the City of East Chicago contended "authorizes it to redirect to itself certain revenue from the riverboat gaming licensee operating in the city dedicated in support of economic development."

However, the Court, in its newest opinion, said it earlier declined to address the constitutionality of that amendment after concluding that there was a nonconstitutional basis for resolving the instant dispute.

The Court also rejected arguments advanced by Foundations that the amendment impaired its contract rights.

Chief Justice Randall T. Shepard wrote, "We held instead that the amendment merely recognized what had been true before its adoption: that at least within certain bounds the City was free to change its mind about the local development agreement it had consummated with the original license applicant, but that the flow of funds in support of local economic development was governed by the license issued by the Indiana Gaming Commission and that alteration of this distribution was within the authority, judgment, and supervision of the Commission."

In their petition for rehearing, Foundations reported that even before the Court's decision had been certified, the city moved the trial court to terminate the escrow account into which the licenseholder's economic development contributions have been deposited and return the balance in the account to the city.

The Court wrote, "This motion was, of course, premature under the appellate rules." The trial court rightly denied the city's request on that ground alone, the Court said.

Shepard wrote in the new opinion, "Even if timely, however, the request that the trial court order the economic development funds redirected to the City on the basis of its ordinance and the 2007 amendment fell within the core of our decision in this case, and that decision was adverse to the City's position that it possessed unilateral authority to redirect the funds."

Therefore, the Court ordered that the city's motion for an order directing that the escrowed funds be transferred to the city should be denied "on its merits if timely filed."

The Court otherwise left intact its original opinion.

Foundations and Second Century Inc. have collected millions of dollars in casino boat money since 1996, when then-Mayor Robert Pastrick brokered the deals.

Since 2005, the city has been fighting in court to end the agreements and claim the money for the city. Around $14 million has accumulated in an escrow account since the legal fight started.

In May, the Court ruled that the Indiana Gaming Commission had the sole authority to ratify any changes to the development agreement between East Chicago and Foundations.

The city passed an ordinance directing certain revenue from the East Chicago casino to itself after the Indiana General Assembly enacted a provision in its 2007 budget bill that allowed the city to void the agreement.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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