Chicago has a sordid history of organized crime. So how will regulators make sure the city’s new casino is up and running? – Chicago Tribune

A decade ago, Chicago came close to having its first casino, a controversial idea that nonetheless received legislative approval before being vetoed by the then-governor. Pat Quinn because, in his words, the bill contained “mobster loopholes.”

Quinn, a self-proclaimed outsider among Illinois Democrats, was by no means the first to express concern about how a state-chartered gambling emporium could stay free of corruption in a city with a wealthy and often sordid history of organized crime. . In a city where Al Capone and Joey “The Clown” Lombardo are household names, the potential for mob infiltration was anything but hypothetical, as evidenced by the debacle in the early 2000s to build a casino in the suburbs of Rosemont.

Now, after Governor JB Pritzker signed legislation in 2019 authorizing a city casino and Mayor Lori Lightfoot this month turned to Bally’s to develop a $1.74 billion gaming and entertainment complex along the Chicago River, the The debate over whether Chicago should get a casino appears to be over. . Questions remain, however, about how public officials and regulators will ensure that everyone, from the company’s main investors to the subcontractor paving the parking lot, is free.

“You want to make sure the city doesn’t do business with some nefarious people,” said Jeff Cramer, a former federal prosecutor who has been involved in investigations involving casino investors. “You don’t want to find that out after the fact.”

Most of that work will fall to the Illinois Gaming Board, a state agency that has historically been understaffed and underfunded. The launch of the Chicago casino comes as the Gaming Board has seen its staff reduce modestly since Pritzker enacted a massive gaming expansion law that dramatically increased the regulatory agency’s workload.

While regulators will focus on ensuring the last vestiges of the Outfit don’t gain a foothold in a Chicago casino, that’s by no means the only threat, experts said. In recent years, international criminal elements have found casinos around the world to be an attractive opportunity to launder money.

“The stakes now make what happened at Rosemont look cute,” said Cramer, who now works for an international investigative firm.

At the same time, the board will likely be under political pressure to quickly approve the Chicago casino so money can start flowing into the city’s struggling pension funds and the state’s capital construction program. Lightfoot’s administration even recently said it hoped to submit his choice to the Gaming Board for approval in time to include $40 million in initial payments from Bally’s in the fiscal 2023 budget this fall, months before Lightfoot is up for re-election. .

But the vetting process of investors and others connected to the casino won’t begin until the city formally submits that license application to the Gaming Board.

The board does not publicly discuss its vetting process, but Administrator Marcus Fruchter, a former Securities and Exchange Commission attorney Pritzker hired in 2019, insisted the agency’s investigators are up to the task.

“While the Illinois Gaming Board has historically been understaffed and under-resourced under previous successive administrations, the dedicated and hard-working sworn and professional civilian staff of the IGB have risen up to meet the many challenges and mandates of expansion laws. of recent games (during a global crisis). health pandemic),” Fruchter said in an email response to questions.

Despite seeing its budget increased under Pritzker, the board’s staff has shrunk slightly since the game’s expansion became law three years ago, reflecting both the bureaucracy of the state hiring process and the staffing challenges it faces. faced by employers across the country, particularly law enforcement agencies. during the pandemic. There are about 217 state employees at the agency now, up from 234 in June 2019, according to a board spokesperson. That includes the loss of 25 Illinois State Police officers assigned to the Gaming Board, about a third of the number three years ago.

Still, Fruchter said, the board has thoroughly investigated more than a dozen casino license applicants, including those from Waukegan, the southern suburbs, Rockford, Danville and southern Illinois, as well as gambling applications. casino-style at Hawthorne Racecourse in Cicero. and Fairmount Park near St. Louis. The agency also launched sportsbooks and vetted applicants for physical bookmakers and online sportsbook licenses, he said.

“The IGB is prepared to process and evaluate the Chicago casino application (once submitted) in an ethical, efficient, independent, complete, timely and transparent manner that satisfies the important legal obligations of the IGB and maintains public confidence in the IGB. Illinois games, just like the IGB did (and is doing)” for all those other applicants, he said.

A Bally spokeswoman declined to comment for this story.

In its vetting process, the board looks into applicants’ criminal, civil, and financial records, looking for felony convictions, or anything else that would “disgrace or damage the reputation of the State of Illinois and its gaming industry, or result in adverse publicity for it. .”

The casino applications themselves, which have extensive disclosure requirements, and the details of the board’s investigations are protected from public review under state law. Sometimes, however, the problems that arise become public.

During the board’s review of the new Hard Rock Casino in Rockford, for example, investigators discovered that an investor who owns the restaurant and convention center that serves as a temporary location for the casino during construction of the permanent facility had failed to disclose a minor arrest. in 2020. The other backers of the casino had to buy out the investor’s stake in the project and buy the restaurant.

Some research has gone much deeper. Most egregiously, the mob connections cited by investigators scuttled the ill-fated Emerald Casino proposal in Rosemont nearly two decades ago.

State regulators have withdrawn the gaming license held by a consortium of powerful investors trying to build a new casino in the northwest suburb. The Gaming Board alleged that the group was unfit to run a casino because some shareholders had ties to organized crime, while others had lied to board investigators about backroom ownership deals.

A Chicago casino has been discussed for decades and organized crime has always been a persistent concern. In the 1990s, then-Mayor Richard M. Daley floated the idea, which ultimately went nowhere.

Robert Lombardo, a professor emeritus of criminology and criminal justice at Loyola University Chicago who has taught courses and written books on organized crime in Chicago, said if the casino had taken off in the 1990s when Daley first proposed it, “There definitely would have been efforts (by the mob) to get involved.”

Lombardo said there is a less serious risk of that happening these days.

But Edward McNamara, who spent a quarter-century with the FBI’s organized crime squad in Chicago before retiring in 2019, said while the FBI made a significant dent in the mafia structure through the landmark Operation Family Secrets case and other investigations, “We didn’t eradicate them.”

Those who stay will inevitably try to find a way into the casino in Chicago, said McNamara, who also served as the FBI’s liaison with the Gaming Board for about a decade.

As the casino industry has become big business, dominated by publicly traded companies like Bally’s, mobsters tend to turn their attention to obtaining subcontracts to provide any of the various goods and services that run a casino. McNamara said.

“It’s a game of cat and mouse,” he said. “You have to try to keep them out, and they will try to get in.”

The game of cat and mouse in recent decades has gone international, Cramer said.

“I would worry less about organized crime infiltration (and) much more about money laundering, international money laundering, because casinos are a cash business,” said Cramer, who is now a senior managing director at the casino. international research Guidepost Solutions.

Regulators in other states he has worked with, Cramer said, have identified investors who have been indicted abroad for crimes such as extortion, money laundering and terrorist financing. Cramer was involved in an investigation that in 2010 led to the disqualification of one of the bidders to run the Illinois lottery after foreign criminal charges were uncovered against a high-ranking official.

“The risks are much more dangerous now because there are, again, international money launderers, not just two-bit organized crime people trying to get involved in a casino,” Cramer said. “That was easy to remove and we did it and processed it and … they didn’t have a casino.”

That kind of digging often requires “boots on the ground” in foreign locations, something Cramer believes is beyond the ability of Illinois regulators.

“I don’t think anyone who knows this industry would say that they’re doing adequate due diligence,” Cramer said.

McNamara, the former FBI agent, said the bureau in the past has routinely assisted the Gaming Board by searching its databases for overseas criminal records.

Fruchter, the administrator for the Gaming Board, declined to go into detail about the agency’s investigative process, though he said the board does not hire outside investigators for any part of its criminal background checks.

The board’s “experienced law enforcement professionals have experience conducting criminal background investigations of domestic and foreign individuals and entities,” Fruchter said.

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