Casino license mired in legal proceedings

Maura Kelly

Tuesday, May 18, 2004 | 8:53 a.m.

CHICAGO -- A bankruptcy court judge Monday said a decision by Attorney General Lisa Madigan to resume revocation hearings for the license held by the bankrupt Emerald Casino Inc. won't have any bearing on whether he decides to let Emerald move forward with selling its license.

U.S. Bankruptcy Judge Eugene Wedoff didn't rule on a reorganization plan that outlines how Emerald would sell its casino license, but he indicated he would approve it if certain changes regarding potential future litigation were made.

He scheduled another hearing for Wednesday.

Wedoff said he does not have to consider whether Madigan will be successful in revoking the license as long as the preferred buyer, Mississippi-based Isle of Capri Casinos Inc., is willing to accept the risk that the license could be revoked and end up back in the state's possession.

Wedoff would not let Madigan's office participate in the daylong hearing on the reorganization plan because he said the attorney general is not a party to the bankruptcy case. Chief Deputy Attorney General Barry Gross said Madigan plans to resume the revocation hearing regardless of Wedoff's action.

"Before today, we said we were going ahead with the revocation hearing. After the court's hearing today, we're still going forward with the revocation hearing," he said after court.

"Even if he were to confirm the plan, the participants and whoever may be buying the license may wind up with nothing. They would be going forward at their own risk," Gross said.

Madigan's office has given Emerald 60 days notice that it plans to resume the revocation hearing, but no date has been set.

After the revocation hearing is held, an administrative law judge then will make a recommendation to the Illinois Gaming Board on whether Emerald's license should be revoked. The Gaming Board must accept or reject the recommendation, and Madigan can appeal the decision to the Illinois Appellate Court if she disagrees, Gross said.

Earlier Monday, Gaming Board Chairman Elzie Higginbottom testified in bankruptcy court that the board disagrees with Madigan's decision to resume the revocation hearing. Higginbottom said the board wants to proceed with the license sale process that Madigan negotiated last fall to resolve a dispute over the license.

The Gaming Board had been trying since 2001 to strip the license from Emerald because it said top company officials lied to regulators and some investors allegedly had ties to organized crime.

Higginbottom acknowledged outside court that Madigan's office has the right to resume the hearing, but he said he thinks it's premature.

The Gaming Board selected Isle of Capri, which wants to build a casino in Rosemont, as the winning bidder for the Emerald license in March. But Madigan has said the board ignored safeguards to ensure a fair bidding process, disregarded the recommendation of its professional staff and failed to explain how it was comfortable with Isle of Capri and Rosemont, where Mayor Donald Stephens has been accused of having mob connections -- allegations he denies -- and where the board opposed Emerald's plans for a casino.

If the bankruptcy judge approves the new plan of reorganization, Isle of Capri would apply for a license before the Gaming Board, which would perform a suitability review of the company, Higginbottom said.