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Wednesday, April 29, 2009

Ind. Decisions - "East Chicago on a roll in battle for casino funds"

The Court of Appeals decisions yesterday in the case of Foundations of East Chicago v. City of East Chicago and State of Indiana (see ILB summary here) is the subject of a story today in the NWI Times by Bill Dolan. Some quotes:

EAST CHICAGO | Mayor George Pabey's lucky streak continued Tuesday's with another court judgment that could allow him to rack in tens of millions of dollars in new casino revenues for the city.

The Indiana Court of Appeals announced Tuesday it has upheld a 2007 state law giving the mayor and the East Chicago City Council permission to gain control of an additional 2 percent of Ameristar Casino and Hotel's adjusted gross receipts.

It came as a blow to The Foundations of East Chicago, an agency created under former Mayor Robert Pastrick, that had been receiving the 2 percent in casino revenues and distributing it to charities, churches, private schools and other public agencies until the money became tied up in litigation two years ago.

Carmen Fernandez, the city's corporate counsel, welcomed the ruling, saying Tuesday, "We have shovel-ready projects waiting for that money."

Foundations' attorney, Peter J. Rusthoven, said his client will appeal to the Indiana Supreme Court.

This comes one week after city officials welcomed an Indiana Supreme Court ruling giving them hope they can win -- through a parallel lawsuit -- additional millions of dollars previously channeled to Second Century, a politically connected East Chicago development firm also favored by Pastrick's administration. * * *

Pastrick brokered deals with Foundations and Second Century in 1994 that had subsidies flowing freely to the entities. Then Pastrick's 2003 re-election was overturned by the Indiana Supreme Court, and Pabey won office the following year in a special election.

Pabey successfully lobbied passage of a new law giving his administration the ability to rewrite the casino deals and cut the Foundations and Second Century out of future casino funds.

Foundations sued to have that law declared unconstitutional. Appeals court judges decided in a 2-1 ruling that East Chicago always had the authority to reshuffle the casino deals.

The Indiana Attorney General yesterday issued a press release (not yet available online, the AG press page seems to be running several days behind) that reads in part:
The Indiana Court of Appeals has ruled in the State of Indiana’s favor, finding that the new administration in the City of East Chicago had the legal right to break development contracts with two nonprofits that received casino money. * * *

Tuesday, the Court of Appeals ruled in a case brought by Foundations of East Chicago Inc., an entity created by the merger of East Chicago Community Development Foundation Inc. and Twin City Education Foundation Inc. Under a 1995 agreement with Pastrick’s administration, the two foundations each were to receive 1 percent in revenue flowing from the casino in East Chicago to use for economic-development purposes. That deal and one involving a for-profit entity, East Chicago Second Century Inc., have been the subjects of investigation and scrutiny for several years.

In January 2005, the newly-elected administration of Mayor George Pabey came into office and sought by ordinance to cancel the prior Pastrick-era contracts with the foundations. The Indiana General Assembly in 2007 passed a state law to give the city legal authority to break the local development agreements so the city could decide for itself how to use the revenue.

In the litigation that ensued, the foundations tried to block the city from canceling the agreements, contending the state law was unconstitutional. A lower court sided with the city, but the foundations appealed. The Office of the Indiana Attorney General defended the statute and argued that the new administration had the right to cancel prior deals.

Tuesday, the Indiana Court of Appeals affirmed the lower court. The majority opinion written by Chief Judge John Baker noted that the city had the right to change the recipient. Enforcing the old agreements would have been a “patent violation of public policy,” he wrote.

“To enforce this policy would be akin to permitting a corrupt public official to enter into an agreement that would bind his or her constituents in perpetuity; it would also bind a community to its current needs, notwithstanding the fact that it might need a park today and a hospital five years from now. To enforce such a policy would be profoundly unwise,” Judge Baker wrote in the 10-page decision.

This comes on the heels of the April 13 decision by the Indiana Supreme Court that reversed a lower court and reinstated the attorney general’s lawsuit against East Chicago Second Century Inc. That for-profit company received $16 million in revenue from the East Chicago casino over 10 years in a deal brokered by Pastrick. The attorney general’s lawsuit now will be heard in Marion County.

“These two recent appellate court rulings have validated the efforts of our office to demand accountability and openness in the use of gaming revenue to support economic development,” Attorney General Greg Zoeller said. “Moreover, we believe that former Mayor Pastrick’s upcoming racketeering trial will shed light on the abuses of the public trust that existed in East Chicago for far too long.”

Posted by Marcia Oddi on April 29, 2009 07:52 AM
Posted to Ind. App.Ct. Decisions