Robert M. Andalman
David F. Hamilton
A federal appeals court Tuesday slashed two-thirds off the $77.8 million awarded to four riverboat casinos that were the victims of a pay-to-play deal between racetrack owners and then-Gov. Rod Blagojevich.
The 7th U.S. Circuit Court of Appeals affirmed a jury’s finding that the casinos are entitled to nearly $26 million in compensatory damages on claims for conspiracy and unjust enrichment brought against the racetracks under Illinois law.
The casinos presented enough evidence to support the allegation that Blagojevich signed legislation in 2008 favored by the racetrack industry in return for the promise of a $100,000 campaign contribution, the court held.
But the court also held the casinos did not present enough evidence of a pattern of racketeering activity to be entitled to have that sum tripled under federal law.
To prove there was a conspiracy in violation of the Racketeer Influenced and Corrupt Organizations Act, a panel of the court wrote, a plaintiff must show the defendant agreed to commit or to have someone else commit two predicate acts.
A rational jury could find that racetrack owner John Johnston violated that prong of the RICO statute, the panel wrote.
Johnston’s agreement to bribe Blagojevich, it wrote, as well as the agreement that Blagojevich would sign the legislation in return for the bribe both would count as predicate acts.
So would the use of cellphones to arrange the bribe in violation of Blagojevich’s obligation to provide honest services to his constituents, the panel wrote.
“Using wires for lobbying and political log-rolling is not honest services wire fraud,” Judge David F. Hamilton wrote for the panel, “but arranging and paying a quid pro quo bribe certainly is.”
However, he continued, the casinos failed to meet the prong of the RICO statute requiring a showing that the conspirators agreed to engage in a pattern of racketeering.
While the predicate acts were related to one another, they were not part of long-term criminal conduct, Hamilton wrote.
An example of such conduct, he wrote, is a protection racket whose members extort monthly “insurance” payments from businesses.
“Continuity limits RICO to schemes meant to exist over a period of time, not one-off crimes,” Hamilton wrote.
He wrote the pay-to-play scheme between the racetracks and Blagojevich was a one-off crime.
“A one-time bribe to a corrupt public official is criminal and wrong,” Hamilton wrote, “but without more it is not enough to prove a pattern of racketeering activity.”
Robert M. Andalman of A&G Law LLC argued the case before the 7th Circuit on behalf of the casinos.
Andalman said he’s pleased both the jury and the 7th Circuit agreedwith the theory he has pursued on behalf of his clients for years.
“We believe the riverboats were the victims of a bribery scheme,” he said. “The jury agreed with that view of the evidence and the 7th Circuit affirmed that verdict.”
He said the riverboats will not seek a rehearing on the court’s ruling that they did not prove the existence of a RICO conspiracy.
William J. McKenna of Foley & Lardner LLP, who argued the case on behalf of the racetracks, declined to comment.
The legislation signed by Blagojevich levied a 3 percent tax on the four riverboat casinos — the most profitable in Illinois — and passed the money on to five horse racetracks in the state.
The legislation renewed the original 2006 law that imposed the tax and had a sunset provision. The tax was phased out in 2011.
Plaintiffs in the suit were the owners of Hollywood Casino in Aurora, Grand Victoria Casino in Elgin and Empress Casino and Harrah’s Casino, both in Joliet.
Defendants were Johnston and his companies, Balmoral Racing Club Inc. and Maywood Park Trotting Association Inc.
Blagojevich was shielded from liability in the action. He is serving a 14-year prison sentence following his conviction on unrelated public corruption charges.
In the suit, a jury in U.S. District Judge Matthew F. Kennelly’s court returned a verdict against Johnston and the racetracks in 2014.
In addition to ordering the defendants to pay $25.9 million in compensatory damages, the jury directed Johnston to pay each of the four casinos $1 million in punitive damages out of his own pocket.
Johnston settled with the casinos and then dismissed his appeal before the 7th Circuit.
In its opinion, the 7th Circuit panel rejected the notion the casinos did not prove there was a pay-to-play arrangement between Blagojevich and the racetrack industry.
The panel conceded Johnston and Alonzo Monk, Blagojevich’s former chief of staff, testified there was no such “agreement.”
But the failure to label the arrangement with a particular word doesn’t change the facts, the panel wrote.
“Monk and Johnston did not have to use the word ‘agreement’ in their testimony to allow a jury to find a quid pro quo agreement,” Hamilton wrote. “The jury was entitled to put two and two together.”
Joining the opinion were Chief Judge Diane P. Wood and Judge Anne Claire Williams. Empress Casino Joliet Corp., et al. v. Balmoral Racing Club Inc., et al., No. 15-2526.