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Today’s long read

Tuesday, Aug 19, 2014

* The AP doesn’t do this opinion justice

A federal appeals court has taken on the issue of pay-to-play corruption in Illinois under disgraced ex-Gov. Rod Blagojevich.

The U.S. 7th Circuit Court of Appeals reinstated a lawsuit by riverboat casinos in a late Friday ruling. The suit alleges that racetrack owners bribed Blagojevich to push through legislation that transferred 3 percent of casino revenue to the racetracks.

The Chicago-based court says the case required it to “once again to decide whether some shenanigans” in the Legislature “and governor’s office crossed the line from the merely unseemly to the unlawful.”

* This is an almost literary, well thought-out and quite reasonable opinion

Deals are the stuff of legislating. Although logrolling may appear unseemly some of the time, it is not, by itself, illegal. Bribes are. This case requires us once again to decide whether some shenanigans in the Illinois General Assembly and governor’s office crossed the line from the merely unseemly to the unlawful. It involves a subject we have visited in the past: two industries that compete for gambling dollars. […]

In 2006 and 2008, former Governor Rod Blagojevich signed into law two bills (to which we refer as the ’06 and ’08 Acts) that imposed a tax on certain in‐state casinos of 3% of their revenue and placed the funds into a trust for the benefit of the horseracing industry. Smelling a rat, the plaintiff casinos brought suit under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964, alleging that the defendants, all members of the horseracing industry, had bribed the governor to ensure that the bills were enacted. Viewing the evidence in the light most favorable to the plaintiffs (and of course not vouching for anything), we conclude that there was enough to survive summary judgment on the claim that the governor agreed to sign the ’08 Act in exchange for a bribe. […]

Illinois legalized riverboat casino gambling in 1990. Ever since, the state’s once‐thriving horseracing industry has been in decline. In late 2005 and early 2006, the state General Assembly considered legislation to help the horseracers. One bill would have imposed a 3% tax on casinos earning more than $50 million annually and deposited the proceeds into a fund for the benefit of the horseracing industry. It was modeled on similar initiatives in three other states. Lobbying on all sides was intense. On the first few votes in the General Assembly, the bill failed to garner a majority.

The bill’s fortunes changed later in the spring of 2006. For one thing, it was modified so that the tax applied only to casinos earning more than $200 million annually, thereby limiting its effect to the large casinos in northern Illinois near Chicago. For another, Governor Blagojevich began to take an interest in the matter after his senior aide and alleged pay‐toplay facilitator, Christopher Kelly, met with a horseracing executive, John Johnston. On the floor of the General Assembly, the bill’s opponents cried foul. “Why are some of you called down to the Governor’s office, then you come back up and change your vote?” asked Representative William Black. Added Representative Brent Hassert, “The Governor has weighed in on [the ’06 bill] … heavily in the last night or so, calling people and asking people to vote on this. It is my understanding … that there’s promises have been made to support this bill.” Soon after, the ’06 Act cleared the House by a vote of 70‐32; a week later, the Senate passed it 40‐16. Governor Blagojevich signed the bill into law the next day. Johnston and other racing executives thanked the governor for his support of the bill in a personal letter. Using various subsidiaries, they then contributed $125,000 to his campaign fund.

“Smelling a rat.”

Heh.

Chief Judge Diane Wood is one heck of a story teller. She had me locked in from the opening paragraph and I just couldn’t stop reading.

* The court found no addressable legal issues with the original 2006 bill

The Casinos have not pointed to evidence that would allow a factfinder to conclude that the Racetracks’ alleged bribery scheme caused the legislature to pass the ’06 Act. To begin with, the Casinos make no allegation and have no evidence that the Racetracks ever bribed or attempted to bribe state legislators. Nor do the Casinos point to evidence that the governor agreed to exert improper influence over state legislators in order to win their support of the ’06 Act in exchange for a bribe. […]

The worst comment the Casinos identify is Rep. Hassert’s obviously inadmissible statement that it was his “understanding … [that] promises [were] made to support this bill.” Not only is that comment an out‐of‐court statement offered to prove the truth of the matter asserted; the underlying sentiment is not based on personal knowledge… Worse, we have no idea what promises he was talking about. If the promise referred to support for re‐election, or a commitment to cosponsor a bill, without any taint of bribery, nothing would be wrong. […]

The record contains no admissible evidence that Governor Blagojevich unduly pressured members of the legislature to support the ’06 Act. Nor is there competent evidence that would permit an inference that any identifiable group of legislators “voted as a bloc” at the governor’s behest. No legislator was bribed. It takes more than the Casinos have shown here to support their proposed conclusion that the workings of an entire state legislature were coopted by the bribery of one official. […]

Evidence is similarly lacking to support a finding that the Racetracks bribed Governor Blagojevich to sign the ’06 Act into law. The Casinos point to a meeting between Johnston and Blagojevich’s aide Chris Kelly in 2006 while the Act was stalled in the legislature. But they provide no evidence that Johnston offered Kelly a bribe in exchange for Governor Blagojevich’s signature during that meeting. The letter from the Racetracks to Blagojevich after the ’06 Act passed merely thanked him for his support; it did not suggest that Blagojevich had agreed to sign the bill in exchange for a bribe. The fact that the Racetracks later made campaign contributions cannot, without more, support liability for acts of political corruption. To hold illegal an official’s support of legislation furthering the interests of some constituents shortly before or after campaign contributions are solicited and received “would open to prosecution not only conduct that has long been thought to be well within the law but also conduct that in a very real sense is unavoidable so long as election campaigns are financed by private contributions or expenditures, as they have been from the beginning of the Nation.”

That makes sense.

* The 2008 bill is another matter, however

As with the ’06 Act, the record contains little evidence to show that the Governor’s influence caused the legislature to pass the ’08 Act. But that is not all that the Casinos alleged. They also asserted that the Racetracks and the governor agreed to a quid pro quo: in exchange for the governor’s signature on the ’08 Act, the Racetracks promised to give $100,000 to his campaign fund.

The summary judgment record contains considerable evidence that, if credited, would support the allegation of a quid pro quo between the Racetracks and Governor Blagojevich. When Blagojevich did not immediately sign the ’08 Act into law, Racetracks executive Johnston stated to a colleague in an email: “We are going to have to put a stronger bit in his mouth!?!” Johnston complained to Blagojevich’s chief of staff Monk that the delays in signing the bill were costing Johnston $9,000 per day. A factfinder could conclude that Blagojevich was talking about Johnston’s commitment to pay $100,000 when he informed Monk that he would “like some separation between that and signing the bill.” After the FBI recorded Monk and Blagojevich scheming about getting Johnston to pay, Monk met with Johnston and, according to Monk, delivered the message that the bill would not be signed until he paid. According to Monk, Johnston countered with an offer to pay half the money at once and half later. Monk called Blagojevich immediately after the meeting with Johnston to report his belief that Johnston would soon pay. After learning of the criminal allegation that Blagojevich threatened not to sign the ’08 Act bill unless he was paid $100,000 by someone in the horseracing industry, Johnston admitted, “I didn’t know if anybody else had given 100,000, but I knew I did.” Finally, Johnston signed an immunity agreement in which he acknowledged that he had information that “may tend to incriminate” him. From this and other evidence in the record, a reasonable juror could conclude that the Racetracks agreed to pay $100,000 to Blagojevich’s campaign fund in return for his signature on the ’08 Act.

Yep. Agreed.

* Now, on to the conclusion

That brings us to the heart of the matter: Was the Racetracks’ alleged agreement to bribe the governor to sign the ’08 Act sufficiently immediate to serve as a legal cause of the Casinos’ injuries for purposes of RICO? […]

We see nothing in RICO, as the Supreme Court has interpreted it, that would bar the Casinos from pursuing their claim with respect to the ’08 Act. There was no more directly injured party standing between the Casinos and the alleged wrongdoer, and thus no one else to whom they could look for relief; their injuries were not derivative. The money they paid pursuant to the ’08 Act did not compensate the State of Illinois for any losses to the state. Rather, the Casinos themselves suffered the only injury resulting from the Racetracks’ alleged conspiracy to enact the ’08 statute. […]

The ’08 Act taxed only five entities in the entire state. Other taxpayers and citizens were unaffected. Moreover, the Casinos are not challenging the tax itself in this litigation, having lost earlier efforts pursuing that theory. Rather, they seek damages from a private party for an alleged conspiracy to use the power of state government to take money from them. Their injury is easily measured, and it is directly traceable to the Racetracks’ alleged conduct (bribing the governor to sign the ’08 Act) and remediable by this court. […]

In closing, we stress that the only RICO element we are deciding is the issue of proximate cause. To sustain their section 1962(d) conspiracy claim, the Casinos must ultimately show “that (1) the defendant[s] agreed to maintain an interest in or control of an enterprise or to participate in the affairs of an enterprise through a pattern of racketeering activity, and (2) the defendant[s] further agreed that someone would commit at least two predicate acts to accomplish these goals.” … We recognize that our rejection of the Casinos’ claims based on the ’06 Act may have an impact on their ability to show that the defendants agreed to the commission of two predicate acts… or that the defendants “knowingly agreed to perform services of a kind [to] facilitate the activities of those … operating the enterprise in an illegal manner,”

The Balmoral and Maywood tracks could be in deep trouble here.

Also, this is the same court which is deciding what to do about Blagojevich’s appeal of his prison sentence.

- Posted by Rich Miller        


13 Comments
  1. - lake county democrat - Tuesday, Aug 19, 14 @ 11:31 am:

    Is the Blago appeal being heard en banc? Otherwise it could be three entirely different judges. At the lower court level there’s this non-binding principle that once a district court judge makes a call on what an ambiguous area of law means, the other judges will follow it unless they are firmly convinced of a different position (the idea being there should be some predictability within the district). I think appellate court judges feel less bound: they *do* have to follow the precedent of earlier panels but sometimes theory and practice are different: if the issue in the second case isn’t clearly the same as what the earlier panel ruled, they may go off in their own direction.


  2. - Anonymoiis - Tuesday, Aug 19, 14 @ 11:32 am:

    So Pat Quiin’s “honest and trustworthy” former running mate is back in the headlines just as Labor Day approaches. Good timing


  3. - OneMan - Tuesday, Aug 19, 14 @ 11:36 am:

    Seems a logical argument to me…

    Curious if the plaintiffs win at the end of this who ends up paying?


  4. - Formerly Known As... - Tuesday, Aug 19, 14 @ 11:50 am:

    Diane Wood’s work here is phenomenal.

    John Grisham wishes he could write like her.


  5. - OldSmoky2 - Tuesday, Aug 19, 14 @ 11:51 am:

    Supporting legislation in exchange for campaign contributions - who’d have thought that ever happens in our system? Yep, this is very fishy and the racetracks might lose bigtime here, but where is the line? We all know this happens everyday in Springfield, in Washington, in every state capitol. Until and unless we go to public campaign financing and limits on campaign spending, it will continue to happen. Most politicians are smart enough to not leave a trail of direct evidence. Blagojevich was too delusional and too cocky to manage that feat.


  6. - Naperville Tollway - Tuesday, Aug 19, 14 @ 12:00 pm:

    What does it all mean? Blago goes free?


  7. - Sir Reel - Tuesday, Aug 19, 14 @ 12:06 pm:

    I believe it’s called extortion.

    Just imagine what Blago could’ve done if he’d had any influence in the General Assembly.

    He was limited to stalling for dollars.


  8. - Archiesmom - Tuesday, Aug 19, 14 @ 12:17 pm:

    My appellate lawyer pals call her brilliant. Really well-written opinion. The Seventh Circuit has some really heavyweights on it.


  9. - Belle - Tuesday, Aug 19, 14 @ 12:33 pm:

    This reads so well. Plus, it’s so fascinating to see that someone is taking a stab at all of this.
    It will be interesting to see the outcome


  10. - downstate hack - Tuesday, Aug 19, 14 @ 12:33 pm:

    Its time to separate the casinos from the racetracks. The general Assembly needs to pass a gaming bill giving the racetracks slots.


  11. - lake county democrat - Tuesday, Aug 19, 14 @ 12:54 pm:

    Wood would have been so much better a Supreme Court judtice than Sotomayor, who has been pretty much as nondescript as Lawrence Summers predicted.


  12. - Tom Joad - Tuesday, Aug 19, 14 @ 1:14 pm:

    That bill was one of the most obvious pay to play bills during the Blago regime.


  13. - walker - Tuesday, Aug 19, 14 @ 2:54 pm:

    She makes a lot of sense. Is she that clued in? Or was it an especially good lawyer taking her thru the realities of the situation.

    Blago (especially him) had limited power and influence on the GA legislators. So the claim that he caused the bill to be passed, as one part of some quid pro quo with racetrack owners, stumbles at the gate.

    His power was at the veto turn — that’s where the real race began.


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