Reviving a lawsuit accusing racetrack owners of offering a bribe to then-Gov. Rod Blagojevich, a federal appeals court has addressed when political horse-trading crosses the line “from the merely unseemly to the unlawful.”
The 7th U.S. Circuit Court of Appeals did not rule on the merits of the claim that Blagojevich in 2008 signed legislation favored by the racetrack industry in return for the promise of a $100,000 campaign contribution.
But the court ruled there is enough evidence — if true — to support a finding of a quid pro quo exchange between Blagojevich and the industry.
And assuming such an exchange took place, the court continued, it directly harmed four riverboat casinos in northern Illinois by leading to the implementation of the Horse Racing Act.
That statute levied a 3 percent tax on the four casinos — the most profitable in Illinois — and passed the money on to five horse racetracks in the state.
Such an impact allows the casinos to seek damages under the federal Racketeering Influenced and Corrupt Organizations Act, the court wrote, because “only persons injured directly by the defendant’s misconduct may recover under RICO.”
The court overturned U.S. District Judge Matthew F. Kennelly’s decision to throw out the RICO counts related to the 2008 legislation leveled against the racetrack industry in the suit.
The 2008 legislation renewed the original 2006 law that imposed the tax and had a sunset provision. The tax was phased out in 2011.
The suit was filed by the owners of the casinos subject to the tax: Hollywood Casino in Aurora, Grand Victoria Casino in Elgin and Empress Casino and Harrah’s Casino, both in Joliet.
The suit alleged that the racetrack industry bribed Blagojevich to push the initial passage of the Horse Racing Act.
John Johnston and other racetrack executives rewarded Blagojevich for signing the bill with $125,000 in contributions to his campaign fund, the suit alleged.
When the legislation came up for renewal in 2008, the suit alleged, Johnston promised on behalf of the racetrack industry to contribute $100,000 to the fund.
Blagojevich was arrested on federal charges after agreeing to take the money, the suit alleged. Though he signed the legislation, he never received the $100,000.
Blagojevich, who was not named as a defendant in the suit, ultimately was convicted of corruption charges and sentenced to 14 years in prison.
His appeal is pending before the 7th Circuit. United States v. Rod Blagojevich, No. 11-3853.
In the civil case, Kennelly granted summary judgment to the racetrack industry. He held there was not enough evidence to support the casinos’ claims.
In its opinion Friday, a three-judge panel of the 7th Circuit affirmed Kennelly’s ruling on the counts related to the 2006 legislation.
The casinos do not allege that members of the Illinois General Assembly were offered or took any bribes to pass the bill, the panel wrote.
And deeming officials’ support of legislation to be illegal merely because campaign contributions were solicited and received about the time the legislation was enacted, the panel wrote, would leave the officials open to prosecution for conduct long thought legal.
Such an action, the panel continued, quoting McCormick v. United States, 500 U.S. 257 (1991), also would lead to prosecutions for conduct “that in a very real sense is unavoidable so long as election campaigns are financed by private contributions or expenditures, as they have been from the beginning of the nation.”
It’s a different story, the panel wrote, when it comes to the 2008 renewal legislation.
Evidence that Blagojevich signed the bill in exchange for the promise of a $100,000 contribution included the criminal trial testimony of Blagojevich’s former chief of staff, Alonzo Monk, and Johnston’s admission that he offered the bribe, the panel wrote.
Johnston received immunity from prosecution, and Monk pleaded guilty to corruption charges.
“Unlike the allegation that the racetracks bribed the governor to persuade the 150-member legislature to enact the bill, the ’08 Act became law as a direct result of the alleged agreement to trade money for one person’s action — the governor’s signature,” Chief Judge Diane P. Wood wrote for the panel.
Joining the opinion were Judges Ann Claire Williams and David F. Hamilton. Empress Casino Joliet Corp., et al. v. John Johnston, et al., No. 13-2972.
Robert M. Andalman of A&G Law LLC, who argued the case before the 7th Circuit on behalf of the casinos, could not be reached.
William J. McKenna of Foley & Lardner LLP argued the case on behalf of Johnston and the racetracks.
McKenna said he is pleased the court affirmed the summary judgment on the counts related to the 2006 bill but disappointed it revived the counts related to the 2008 bill.
“We’re evaluating all our options,” he said.