Illinois begins probe of LV execs

Monday, June 17, 2002 | 11:30 a.m.

Illinois Attorney General Jim Ryan's office has subpoenaed top casino executives after they flew to Chicago to devise a counterattack to the state's steep casino tax increase, the Chicago Tribune reported today.

The meeting Tuesday raised suspicions among state antitrust lawyers that the casinos are plotting anti-competitive agreements to punish the state with reduced casino revenues until the tax is lifted, the newspaper said.

"We are sending civil subpoenas to the casino executives regarding the meeting," Ryan spokeswoman Lori Bolas said Friday, adding that the subpoenas demand copies of documents related to the high-level casino conference.

"The object is to determine whether the action taken at this meeting violates state or federal antitrust law."

The subpoenas were sent out Friday, officials said.

Harrah's Entertainment Inc. spokesman Gary Thompson said nothing was improper about the meeting, and that industry executives meet regularly to discuss legislative matters and other issues that affect casinos.

Thompson told the Las Vegas Sun he believes the subpoenas were politically motivated.

"Apparently the Attorney General of Illinois, in his zeal to raise his political profile for his race for governor, has forgotten that the Constiution allows people the right to assemble."

Ryan is the GOP nominee for governor in Illinois. The subpoena was a surprise for Las Vegas-based Boyd Gaming Corp., company spokesman Rob Stillwell told the Sun. "I find it hard to believe that there could be legal ramifications for the industry that was meeting about legislation that had been passed," he said.

Tom Swoik, executive director of the Illinois Casino Gaming Association, said he was also taken aback by the move. "I think the allegations are unfounded," Swoik told the Sun. "It surprised me."

Neither Harrah's nor Boyd had yet received subpoenas by early today, representatives said. Harrah's operates riverboat casinos in Metropolis and Joliet, Ill. Boyd owns the Par-A-Dice casino in East Peoria.

Operators of the state's nine riverboat casinos include Argosy Gaming Co, which owns casinos in Alton and Joliet; Jumer Hotels & Casino, which runs a casino in Rock Island; Hollywood Casinos, which runs a casino in Aurora; and Mandalay Resort Group of Las Vegas, which has 50 percent ownership in a riverboat casino in Elgin.

Executives from six of the seven companies with casinos operating in Illinois huddled to compare notes in a private conference room at Signature Aviation, an O'Hare International Airport operator serving corporate jets, the Tribune reported.

Among those attending were Boyd Chief Executive William Boyd, Harrah's Senior Vice President of Governmental Relations Jan Jones and Harrah's President Gary Loveman.

The meeting Tuesday was made public during a conference call with securities analysts by Argosy Gaming Chief Executive Officer James B. Perry, the Tribune reported.

According to Perry, the gathering was to discuss lobbying efforts to rescind the tax increase and make Illinois casinos more lucrative by expanding the maximum allowed number of slot machines and table positions, the Tribune said.

If lawmakers fail to comply, casino executives say Illinois can expect to see casinos cancel construction projects, reduce operating budgets, slash marketing efforts and lay off workers. Charitable donations from casinos will dwindle while state coffers get less revenue than expected as casinos significantly slow their growth.

When local governments start to feel the impact of job cuts and the cessation of capital projects, "I think we can build a consensus to go forward and try to push for an expansion of gaming," Perry said in the conference call, the Tribune reported.

Illinois raked in the second highest tax windfall from gaming operations last year, second only to Nevada. The state has the highest graduated tax rate on casinos in the nation.

Casino operators lobbied for the state to allow them to expand the number of gaming positions at their properties -- now capped at 1,200 per location -- in exchange for higher taxes.

That didn't happen. Casinos were hit with a planned tax rate increase from 35 percent to 50 percent of gross revenues for the most lucrative sites. Admissions taxes for customers also increased from $2 to $3 per person. Anti-gambling advocates had expressed concerned about expanding casino games, saying the social costs outweigh potential revenue gains.

Industry representatives had projected more than $200 million in tax revenue and more than $700 million in capital improvement projects had they been allowed to expand their gambling activities.