Subpoenas listed in Illinois gaming probe

By Liz Benston (contact)

Tuesday, June 18, 2002 | 11:26 a.m.

Casino industry representatives said they are frustrated and surprised by an announcement that Illinois Attorney General Jim Ryan's office has subpoenaed top casino executives who met in Chicago recently to discuss the state's steep tax hike on gaming revenues.

But the attorney general is simply doing his job by investigating a situation that could hurt the state if companies forged anti-competitive agreements in response to the tax, state representatives said.

Civil subpoenas were issued Friday to 10 executives, demanding documents relating to the meeting and other gatherings among casino operators after April 1.

The meeting, revealed in a conference call to investors by the chief executive of riverboat casino operator Argosy Gaming Co. last Tuesday, raised concerns that the gathering may have violated state and federal antitrust laws.

Subpoenaed were: Donald Malloy, secretary and general counsel, Argosy Gaming; Timothy Wilmott, president and secretary, Harrah's Entertainment Inc./Casino Cruises Inc.; Jeffrey Watson, legal representative for the Casino Queen; Ronald Wicks, president, Rock Island casino; William Boyd, president, Boyd Gaming Corp.; Philip Satre, chairman and chief executive officer, Harrah's Entertainment; James Perry, chief executive officer, Argosy Gaming; Rodney Phillipe, vice president and general counsel of Hollywood Casinos Corp.; Michael Ensign, chairman, chief executive officer and chief operating officer of Mandalay Resort Group; and Walter Hanley, legal representative for Emerald Casino.

Mandalay, Harrah's and Boyd are all based in Las Vegas.

The subpoenas could be a political move by Ryan, a GOP candidate for governor, company representatives told the Sun.

Meetings to discuss regulations and other issues affecting casinos are a regular occurrence, they said.

Lori Bolas, a spokeswoman for the attorney general's office, dismissed the concerns.

"Our antitrust lawyers are not running for office," she said. "Any time there's an election year, that accusation can be made.

"Our major concern would be that any kind of action or agreement taken in concert that would have a direct economic impact on Illinois could run afoul of state and federal antitrust laws."

The list encompasses all Illinois riverboat casino operators, Bolas said, though each may or may not have attended the recent meeting.

Emerald Casino is already the subject of an investigation. The casino's license is in revocation proceedings with Illinois gaming regulators over allegations that some shareholders have ties to organized crime. Separately, Ryan has said he would attempt to block any deal where Emerald shareholders could profit.

MGM MIRAGE of Las Vegas recently rescinded its $615 million offer to purchase the casino license from Emerald operators. The gaming company giant said the implications of the recent tax increase -- not the casino's licensing problems -- prompted the move.

The actions of the Illinois Legislature have been a source of discontent for the industry and investing community, one Wall Street analyst said Monday.

The state has increased taxes twice over the past several years -- apparently focused on increasing state revenues at the expense of an industry that supports it, said Jason Ader, a gaming analyst with Bear, Stearns & Co.

Industry representatives had hoped for an increase in casino operations -- games at each location are now capped by the state -- as a tradeoff for higher taxes. Uncertainties about taxes have spread to nearby Indiana, which is also weighing a tax increase to boost state coffers.

"It's a much different operating agreement today, even for Hollywood Casinos, which began an expansion project last year," Ader said.

In a conference call, Argosy chief James Perry said industry executives met to discuss lobbying efforts to rescind the tax increase and push for an increase in casino games, the Chicago Tribune reported. Perry suggested that the tax hike -- which raised taxes from 35 percent to 50 percent of revenues at the most lucrative casinos -- could torpedo capital spending projects and lead to job cuts.

The governor has yet to sign the tax increase legislation, which would be used to help stopgap a state budget deficit. Anti-gambling advocates had raised concerns that the industry's push for more casino games could create more problems than it would generate in revenues.