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

A decade ago, Chicago was on the verge of getting its first-ever casino, a controversial idea that nevertheless received approval before it was vetoed by then-Gov. Pat Quinn because, in his words, the bill contained “loopholes for mobsters.”

Quinn, a self-styled 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 free of corruption in a city with a rich and often-sordid history of organized crime . In a town where Al Capone and Joey “The Clown” Lombardo are well-known names, the potential for mob infiltration was anything but hypothetical, as evidenced by the debacle in the early 2000s to build a casino in suburban Rosemont.

Now, after Gov. JB Pritzker signed legislation in 2019 authorizing a city casino and Mayor Lori Lightfoot this month tapped Bally’s to develop a $1.74 billion gambling and entertainment complex along the Chicago River, the debate about whether Chicago should receive a casino appears to have ended. In addition, questions remain about how public officials and regulators will ensure everyone from the company’s top investors to the subcontractor who paves the parking lot is aboveboard.

“You want to make sure the city is not in business with some nefarious individuals,” said Jeff Cramer, a former federal prosecutor who has participated in investigations involving casino investors. “You don’t want to find that 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 launch of the Chicago casino comes as the Gaming Board has seen its staff shrink modestly since Pritzker signed into law a massive gambling expansion that drastically increased the regulatory agency’s workload.

While regulators will focus on ensuring any last vestiges of the Outfit don’t gain a toehold in a Chicago casino, that’s by no means the only threat, experts said. In recent years, international criminal elements have found casinos across the globe to be an attractive opportunity to launder money.

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

At the same time, the board likely will be under political pressure to swiftly approve the Chicago casino so that money can begin flowing to the city’s struggling pension funds and the state’s capital construction program. Lightfoot’s administration even recently said it was hoping to submit its choice to the Gaming Board for approval in time to include $40 million in upfront payments from Bally’s in the 2023 fiscal budget this fall, months before Lightfoot is expected to run for reelection.

But the process of vetting investors and others tied to the casino won’t get underway until the city formally submits that license application to the Gaming Board.

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

“While the Illinois Gaming Board has historically been understaffed and under-resourced under prior successive administrations, the IGB’s dedicated and hardworking civilian and sworn staff of professionals has nonetheless risen to meet the many challenges and mandates of the recent gaming expansion laws (during a global health pandemic),” Fruchter said in an emailed response to questions.

Despite seeing its budget increase under Pritzker, the board’s staff has shrunk slightly since the gambling expansion was signed into law three years ago, reflecting both the bureaucracy of the state hiring process and the staffing challenges facing employers across the nation, 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 board spokesperson. That includes the loss of 25 Illinois State Police troopers assigned to the Gaming Board, about one-third of the detail from three years ago.

Still, Fruchter said, the board has thoroughly vetted more than a dozen applicants for casino licenses, including those in Waukegan, the south suburbs, Rockford, Danville and southern Illinois, as well as applications for casino-style gambling at Hawthorne Race Course in Cicero and Fairmount Park near St. Louis. The agency also launched sports wagering and investigated applicants for bricks-and-motor and online sportsbook licenses, he said.

“The IGB is prepared to process and evaluate the Chicago casino application (once submitted) in an ethical, efficient, independent, thorough, timely, and transparent manner that satisfies the IGB’s significant statutory obligations and maintains public trust and confidence in Illinois gaming — just as the IGB did (and is doing)” for all those other applicants, he said.

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

In its vetting process, the board digs through criminal, civil and financial records of applicants, looks for felony convictions or anything else that would “dishonor or harm the reputation of, or result in adverse publicity for, the state of Illinois and its gaming industry .”

The casino applications themselves, which have broad disclosure requirements, and the details of the board’s investigations are shielded from public review under state law. Sometimes, though, issues that arise become public.

During the board’s review of the new Hard Rock Casino in Rockford, for instance, investigators discovered an investor who owned the restaurant and convention center that served as the casino’s temporary location during construction of the permanent facility had failed to disclose a minor 2020 arrest. The casino’s other backers had to buy out the investor’s stake in the project and purchase the restaurant.

Some investigations have gone much deeper. Most notoriously, mob connections cited by investigators sank the ill-fated Emerald Casino proposal in Rosemont nearly two decades ago.

State regulators yanked the gambling license held by a consortium of powerful investors who were trying to build a new casino in the northwest suburb. The Gaming Board alleged the group was unfit to run a casino because some shareholders had ties to crime while others had lied to board investigators about organized backroom ownership 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 floated the idea, which eventually went nowhere.

Robert Lombardo, an emeritus professor in criminology and criminal justice at Loyola University Chicago who has taught courses and written books on organized crime in Chicago, said had the casino got off the ground in the 1990s when Daley first proposed it, “there would have definitely been efforts (by the mob) to get involved.”

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

But Edward McNamara, who spent a quarter century on the FBI’s organized crime squad in Chicago before retiring in 2019, said that while the FBI made a significant dent in the mob structure through the landmark Operation Family Secrets case and other investigations, “We didn’t 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 to the Gaming Board for about a decade.

As the casino industry becomes big business, by publicly traded companies like Bally’s, mobs tend to focus their attention securing subcontracts to provide any of the various goods and services that make a casino run, McNamara said.

“It’s a cat-and-mouse game,” he said. “You’ve got to try and keep them out, and they’re gonna try and get in.”

The cat-and-mouse game in recent decades has gone international, Cramer said.

“I’d worry less about organized crime infiltration (and) far worse about money laundering, international money laundering, because casinos are a cash business,” said Cramer, who is now senior managing director at international investigation firm Guidepost Solutions.

Regulators in other states he’s worked with, Cramer said, have identified investors who have been indicted overseas for crimes such as extortion, money laundering and terrorism financing. Cramer was involved in an investigation that in 2010 led to the disqualification of one the bidders to run the Illinois lottery after past overseas criminal indictments of a top official were uncovered.

“The risks are far more dangerous now because you’ve got, again, international money launderers, not just some two-bit organized crime people trying to get involved in a casino,” Cramer said. “That was easy to flush out and we did and we prosecuted that and… they didn’t have a casino.”

That type of digging often requires “boots on the ground” in foreign locales, something Cramer thinks is beyond the capacity of Illinois regulators.

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

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

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

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

dpetrella@chicagotribune.com

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