To win a license for a new Louisiana casino, Las Vegas gambling boss Jack Binion made an extraordinary promise in 1993 to funnel 70 percent of the casino’s supply contracts–from food to liquor to advertising–to firms run by minorities and women.
But according to Illinois casino regulators, who have spent over a year scrutinizing Binion’s bid to gain permanent control of the Chicago area’s top-grossing riverboat gambling operation, Binion fulfilled his Louisiana pledge partly by steering millions of dollars of contracts to shell companies run by clout-heavy minorities who contracted out the work to white-run firms.
That is only one of many controversial Binion business practices, highlighted in an internal Illinois Gaming Board report, that have complicated his campaign to win board approval to oversee operations of the Empress casino in Joliet and its sister boat in Hammond.
In one of the more closely watched board actions since Illinois legalized gambling a decade ago, the five-member panel is scheduled to vote Friday on whether it deems Binion ethically fit to run a casino in the state.
A board vote last November to authorize the $629 million sale of the Empress to the Binion-run Horseshoe Gaming LLC touched off a firestorm after the Tribune revealed the board approved the deal over the objections of its staff. Those objections were detailed in a staff report that cited a “disturbing” pattern of hundreds of incidents in which Binion was accused–and in one case slapped with a $1 million fine–of breaking gambling regulations at his Las Vegas and Louisiana casinos.
Anton Valukas, the former U.S. attorney who is now a lawyer for Binion, said Binion declined to be interviewed. But Valukas dismissed the Illinois staff report as replete with errors.
Valukas said the fact that minority-owned companies were mere shells was legal and fully disclosed to Louisiana regulators, and he added that there was nothing improper about certain local shareholders in the Louisiana casino profiting handsomely.
“The long and short of it is, so what?” Valukas said.
Controversy over the November vote led to the January resignation of board Chairman Robert Vickrey.
Although Binion has been running the Empress for months, he has yet to obtain personal certification from the Gaming Board as someone who has demonstrated “clear and convincing” evidence of good character and integrity. That certification is required of all casino operators under state law.
Friday’s vote is expected to settle whether the board is willing to bestow that seal of approval on Binion. Board rejection would cloud the future of a highly profitable gambling operation that is a major economic engine for Joliet and big tax revenue producer for the state.
Three years ago, Binion invoked his 5th Amendment protection against self-incrimination by refusing to answer questions when called before a federal grand jury investigating allegations of racketeering and extortion related to how several Louisiana casinos had been awarded their licenses.
Binion’s lawyers have said he was not a target of the investigation, which surfaced earlier this year in the federal trial in Baton Rouge of former Louisiana Gov. Edwin Edwards and six other men. They were charged with extorting millions of dollars from riverboat operators in return for approval of their casino licenses. Edwards and four co-defendants were found guilty last month, while two others were acquitted.
An FBI agent testified at the trial that a probe into influence peddling in the awarding of Binion’s Louisiana license was “terminated prematurely” by prosecutors and that the FBI had urged further inquiry into Binion’s contracts and partnerships with influential politicians and businessmen.
Under Illinois law, Binion cannot continue his association with the Empress unless the Gaming Board certifies him as a person “whose background, reputation and associations will not result in adverse publicity” for the state’s casino industry.
Supporters say Binion will bring $100 million in renovations to the Empress in Joliet, where he already has relocated the corporate headquarters of Horseshoe, which bills itself as the world’s largest privately held casino company, with expected annual revenues of $1 billion. He has wooed locals with gestures such as a newly established Jack B. Binion Scholarship Fund at Joliet Junior College.
Binion’s attempt to become a major player in the Illinois gambling market speaks volumes about how the gambling industry here has changed in a decade. Gaming was sold as a way to boost Downstate tourism and depressed river towns, but casinos near Chicago have become fabulously profitable as a result of a huge population base and limited competition.
Regulators have isolated many concerns about Binion’s record, none of which Gaming Board members had addressed in public before approving his purchase of the Empress:
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In 1993, Nevada authorities imposed a $1 million fine against Binion’s Horseshoe Casino in Las Vegas, citing violations of cash transaction reporting rules designed to prevent money laundering.
Binion’s sister, Becky Behnen, sued him for gross mismanagement of the family’s Horseshoe Casino. An out-of-court settlement left Binion with just a 1 percent interest in the casino.
In 1993, Binion posted a $2 million bond for Mexican textile executive Kamel Nacif after Nacif’s arrest in Las Vegas on a warrant from Mexico, where he was wanted on tax-evasion charges.
Binion’s lawyers explained the move, in a written response to the Illinois Gaming Board staff allegations that was obtained by the Tribune, as “a calculated personal risk that he hoped would ingratiate him with Mr. Nacif.” The lawyers said that the strategy worked: Nacif later played at the Nevada Horseshoe and lost about $13 million.
In 1996, Louisiana authorities cited Horseshoe with more than 200 instances of cash-reporting violations and 75 missing surveillance photos. The Louisiana Riverboat Gaming enforcement division recommended a $40,000 fine, but it was never levied because the state took too long to prosecute the matter.
For Binion, a rejection in Illinois would spark a new review of the Empress purchase by Indiana regulators, said Jack Thar, executive director of the Indiana Gaming Commission.
An unfavorable vote, if upheld in what are sure to be lengthy appeals, would force Binion to disassociate from the casinos. Technically, Horseshoe could continue to run them, but Binion is virtually inseparable from Horseshoe. He and family members control more than 70 percent of its shares. There are only three directors on its board: Binion and his wife’s two daughters.
Before getting preliminary approval last Nov. 30 for the Empress purchase, Binion was lauded by the Gaming Board’s sole African-American member, lawyer Staci Yandle, for his strong commitment to minority contracting–even though the board’s staff said Binion had violated the spirit, if not the letter, of a Louisiana law designed to foster opportunities for minority businesses.
Acting as high-priced brokers between the Louisiana casino and companies doing the real work, the shell companies enabled the casino to claim credit for doing huge amounts of business with minority-owned firms. The owners of some of the minority contracting firms were also politically connected co-owners of the casino, brought on board as limited partners to help get the casino’s operating license.
“Mr. Binion used these `minority’ businesses as a means to distribute money to the friends and family members of the Louisiana limited partners,” alleged the Gaming Board’s staff report.
In response to the staff allegations, Binion’s lawyers wrote that his ambitious minority contracting goals have been difficult to accomplish because of a “shortage of minority- and female-owned vendors in the construction, alcoholic beverage and food-service industries.”
Pier Distribution Inc. typifies how minority brokers for Horseshoe worked. Pier’s president and part owner, Gwendolyn Hudson, ran the company out of her home. Pier charged a 2 percent premium for food and paper products ordered and billed through Pier but actually supplied by another firm.
Hudson is the sister of lawyer Robert Piper Jr., who was given a 5 percent ownership stake in the casino after he played what he called an “instrumental” role gaining approval for the license, according to Illinois regulators.
Piper was also paid more than $2.5 million from 1993 to 1998 by Horseshoe for legal services. Piper could not be reached for comment.
Some of Binion’s contracts and partnerships became the subject of a federal grand jury investigation that, according to court documents and interviews, was focused on a state senator, Greg Tarver, in whose district Binion’s boat in Bossier City, La., was situated.
The investigation focused on whether Tarver enriched himself at Binion’s expense in return for Tarver’s influence in getting approval of the Bossier City boat license.
Although Tarver was not indicted in that investigation, he was charged along with Edwards and the others in the casino corruption case. Before the trial began, the presiding judge granted a prosecution request to present evidence that Tarver “conspired with others to corruptly procure the issuance of a certificate of preliminary approval to the Horseshoe Casino in 1993 in order to enrich his close friends and family members.”
But the evidence was never presented at trial, and Tarver was acquitted.
Mary Olive Pierson, Tarver’s lawyer, defended Binion’s contracts and ownership agreements with friends of Tarver’s, saying that Binion was using common sense by engaging support of influential people prior to the licensing process.