Let's hear the Emerald evidence

May 12, 2002

A dollar sign is alluring. Especially when it's followed by a number like 330 million. That's what officials of Emerald Casino reportedly are willing to pay for the right to collect $615 million from a Las Vegas-based company eager to open a casino in Cook County.

Gov. George Ryan can almost taste that $330 million. His state budget faces a serious shortfall. So when an attorney for Emerald went around the Illinois Gaming Board to try to interest Ryan in the buyout deal Emerald is frantically pushing for itself, the governor responded. He quietly sent two aides to let Gaming Board members know how badly he could use all that money.

Which raises three questions: Why shouldn't the Gaming Board just cave in and approve a deal that would help Ryan, even if it enriches some Emerald shareholders? Why not pocket $330 million of what MGM-Mirage will pay to get a foothold in Rosemont? What's the problem?

Here's the problem. On May 20, an administrative law judge will begin hearing evidence on charges against officials of Emerald that haven't received much exposure. This proceeding ties back to accusations by state investigators that, in January 2001, led the Gaming Board to find Emerald unfit to run a casino in Illinois.

Many of the lawyers, lobbyists and public relations people now pushing an 11th-hour Emerald deal want to pre-empt the May 20 proceeding. Some confide they don't want the charges against Emerald probed in a potentially embarrassing light. Among the allegations: that officials perpetrated "a continuous pattern . . . of providing false and misleading information to the Board and to its staff, as well as a pattern of improper and irregular conduct." Examples:

- Emerald allegedly agreed to sell shares to the Sherri Boscarino Trust, named for the wife of alleged mob associate Nick Boscarino, and to the brother of alleged mob associate Vito Salamone. (Emerald attorney Michael Ficaro says Emerald didn't know of possible mob ties, and that it's the job of the Gaming Board, not Emerald, to determine the suitability of investors.)

- Emerald officials allegedly met secretly with Rosemont Mayor Donald Stephens to discuss opening a casino there. The Gaming Board's administrator alleged that Emerald officials "continually and repeatedly insisted that Emerald never considered Rosemont as a prospective site" when those talks occurred. Stephens says such talks with Emerald did indeed occur. (Ficaro says Emerald was merely offering to operate another type of casino in Rosemont, not the proposed one now in dispute.)

- Despite having been ordered to be "over-inclusive" in telling the Gaming Board about its actions, Emerald began building a casino--without Board approval--at a site "based in part on prior agreements reached with the Village of Rosemont that had not been disclosed to the Board." (Ficaro says Emerald was building at its own risk, and that construction was arranged in a way that there was no agreement Emerald was obligated to disclose to the Gaming Board.)

- Emerald denied the existence of secret agreements to give California billionaire Marvin Davis and Arlington Park Chairman Richard Duchossois opportunities for major stakes in the casino. A separate lawsuit alleges those deals were cut to enlist political help in Springfield. (Ficaro: No such deals existed.)

- A subcontractor Emerald allegedly used at its casino site was mob-connected. (Ficaro says the company was a debris-hauler at a nearby site, and wasn't working for Emerald.)

The charges of deceit and impropriety are extensive. Who's right and who's wrong? That's what the scheduled legal proceeding should determine. The only unarguable point is that the charges are serious--especially in a gaming industry long tarnished by organized crime.

The only fair path now is obvious. Short of a deal in which shareholders would get back their initial investments and nothing else, the Gaming Board should let the Emerald case play out. The evidence will show whether Emerald officials were fairly or unfairly charged--and whether Emerald shareholders deserve to profit if another firm buys their interests. The shareholders all took risks in Emerald in anticipation of big rewards; there's no more obligation for taxpayers to enrich those who say they did nothing wrong than there is for subsidizing Enron investors victimized by officials of that firm.

No deal that gives shareholders any profit should be cut until the charges against Emerald are resolved. Atty. Gen. Jim Ryan pledges to block any such deal. What's more, the U.S. attorney's office and the FBI are now investigating Emerald's dealings with the Gaming Board.

Bottom line: In such a hothouse atmosphere, any last-minute deal to rescue Emerald's politically connected investors will deserve the bitter public cynicism it surely would provoke.