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January 23, 2019

Accountability and Public Funds
The governor signed a piece of legislation last week that's designed to increase accountability in the monitoring of public funds in local governments.

The bill was pushed by Indiana Attorney General Greg Zoeller with the intent to order groups receiving money through agreements tied to casinos to produce annual public reports.

The proposal supported by Zoeller pretty much targeted Second Century Inc., a politically connected company which has collected at least $16 million in East Chicago's casino proceeds since the mid-1990's. Four weeks ago, the Indiana Supreme Court reinstated a lawsuit against Second Century that had been dismissed by a Marion County Superior Court judge in 2007.

Since Shelby County receives millions in casino revenue, I thought some of you might find the following three news articles of interest.

Public Accountability Legislation

The public-accountability legislation that Indiana Attorney General Greg Zoeller supported won final passage in the Indiana General Assembly and was signed by the governor on May 13.

"The hard work of legislators on both sides of the Statehouse and all parts of the state has forged an effective tool that we can use statewide to recover missing funds for the public," Zoeller said.  "With this legislation, we will learn of missing public funds earlier and can act swiftly to seek recovery for taxpayers."

House Enrolled Act 1514 passed by a vote of 62-35 in the Indiana House and a vote of 47-3 in the state Senate during the final minutes of the Legislature's regular session Wednesday night before adjournment.

Zoeller has supported legislation to boost accountability and transparency in the monitoring of public funds in local governments and schools. To achieve that, HEA 1514 does several things:

- Brings the Attorney General's office into the investigative process earlier.  Under current law, if there are suspicions public dollars have been diverted or stolen from a government office, then the State Board of Accounts performs an audit.  That process could take anywhere from several months to more than a year before a final certified audit is referred to the Office of the Indiana Attorney General.  In the meantime, any remaining funds might be at risk.

HEA 1514 accelerates the process so the Attorney General's office will be notified much earlier. The State Board of Accounts will provide a preliminary audit of a substantial loss early in its examination - not just at the end. The attorney general then can move at the outset to seek a court order freezing the funds of the office or school so they won't be depleted, diverted or squandered.  After a final audit is completed, then the attorney could file a lawsuit against the individual responsible to recover any missing public funds.

- Raises the bond amounts that public officials must post.  Government officials who handle public money have to post a surety bond - in essence, an insurance policy to cover financial losses in case funds are stolen or missing.  Under current law, the minimum bond requirement for most officials is $15,000 and can be posted just once in an official's four-year term. But with HEA 1514, the bond officials must carry will be higher - $30,000 - and they must post it once a year. That reflects the need to have larger amounts available to reimburse public coffers in case of theft or embezzlement.

During the session's final days, provisions from other, unrelated bills were amended into HEA 1514. 

"Compromise and negotiation are part of the legislative process, and not everything we had sought ended up in the final version. Nonetheless, the important achievement is that the overall public-accountability bill passed," Zoeller said.

House Enrolled Act 1514 takes effect July 1.

Court reinstates casino suit

INDIANAPOLIS - The Indiana Supreme Court has reinstated a lawsuit the city of East Chicago and the attorney general's brought against the development company Second Century Inc., sending the case back to court in Marion County.

Attorney General Steve Carter and the city sued Second Century in 2005, claiming its owners pocketed more than $16 million in casino receipts they had agreed to use for development projects within the city.

Second Century argued it was incorporated as a for-profit corporation and therefore did not have to account for its spending.

The Marion County Circuit Court and the Indiana Court of Appeals both dismissed the case, ruling the private company did not have to account for the casino money it has received since 1997.

But in reversing the lower courts, the Supreme Court said Monday the attorney general's office has authority to investigate organizations receiving public funds.

"Given the broad common law and statutory authority conferred upon the attorney general to protect the public interest in charitable and benevolent instrumentalities, we conclude that it was error to dismiss the attorney general's counterclaim on grounds that Second Century is a for-profit corporation," reads the Supreme Court ruling written by Chief Justice Randall Shepard.

Attorney General Greg Zoeller said the unanimous decision by the Supreme Court "underscores the fundamental concept that a charitable trust is supposed to be used to benefit the general public, not enrich private individuals."

"The bottom line is that being a for-profit trust does not mean you are beyond the reach of the office of the attorney general or unaccountable," Zoeller said.

Second Century attorney J. Lee McNeely said the suit was politically motivated. But he said he still expects to win in court.

"I'm confident the attorney general has no chance of proving his case," McNeely told the Post-Tribune of Merrillville.

He said Second Century owners Tom Cappas and Michael Pannos were targeted by the administration of East Chicago Mayor George Pabey because of their association with former East Chicago Mayor Robert Pastrick. Pabey defeated Pastrick, who had been mayor for 32 years, in 2004.

Pabey's administration contended the casino revenue amounted to "public funds." Second Century began collecting 0.75 percent of the casino's gross receipts in 1997, in an agreement brokered under Pastrick, a political ally of Cappas and Pannos.

Source: Indianapolis Star April 14, 2009

Second Century back under the microscope

The Indiana Supreme Court resurrected the Indiana attorney general's campaign to open the financial records of a politically connected East Chicago development firm that still holds millions in casino cash.

The high court on Monday ordered a judge in Indianapolis to hear the merits of the attorney general's demand that Thomas Cappas and Michael Pannos, political allies of former East Chicago Mayor Robert Pastrick, must account for $16 million funneled to their business, Second Century Inc., between 1997 and 2006.

Read the Supreme Court's ruling here

Cappas and Pannos created Second Century as a side agreement to the deal that brought one of Northwest Indiana's riverboat casinos, now called Ameristar -- to the city's lakefront.

Attorney General Gregory F. Zoeller alleges in his suit that the money was supposed to be used to spur economic development, but instead has "led mainly to the unjust enrichment of the directors and officers of Second Century."

In a statement, Zoeller said he was pleased with the court's ruling.

"This unanimous decision by the Indiana Supreme Court, siding with our office on every count, underscores the fundamental concept that a charitable trust is supposed to be used to benefit the general public, nor enrich individuals," Zoeller said.

"It is our belief that this lawsuit will shine the spotlight of public attention onto the historic problems of corruption that have plagued East Chicago and part of Lake County. Gambling proceeds from the riverboat were supposed to benefit the citizens of East Chicago. Now we have the opportunity to find out how those $16 million really were spent," he said.

Marion County Superior Court Judge Cale J. Bradford dismissed the lawsuit in 2007 on grounds the attorney general had no legal standing to question the East Chicago arrangement.

The high court ruled the attorney general has broad authority to protect the public interest in cases of a charitable public trust, like Second Century was designed to be.

J. Lee McNeely, an attorney representing Second Century, said Monday the decision will only result in more tax dollars wasted by the attorney general pursuing a case he cannot win.

"The attorney general must still prove his lawsuit, which he cannot do. Ultimately, we will prevail on this issue," McNeely said.

McNeely said in 2006, Second Century did public good by helping build millions of dollars worth of new housing, including North Harbor, a 61-unit apartment complex in East Chicago.

Mayor George Pabey, who defeated Pastrick in 2004, argues Second Century has squandered the money. The Indiana Gaming Commission, citing a state investigation showing Cappas, Pannos and their families had taken "enormous" salaries from Second Century, terminated the firm's subsidy in 2006.

More than $5.2 million sits in escrow pending a resolution of the legal battle.

Source: The Times of Northwest Indiana - April 14, 2009

Reader Comments

Posted: Sunday, May 24, 2009
Article comment by: Smell the Glove


You have to figure that someday "the chickens are going to come to roost" and all of the truth will come out about these matters. You are right that this will never be made public by our so-called newspaper. I would think that the editor and reporters would be embarrassed to be constantly made to look foolish by one intelligent and dedicated guy working by himself in a home office (talking about Dee Bonner here).

It's kind of scary to think that we only get the truth from one local journalist, and he is not even getting paid to write the stories, insightful commentary, and do the cartoons - the things our local newspaper should be doing but chooses to ignore.

I guess there are enough bird cages that need lining to keep that publication in business?

Posted: Wednesday, May 20, 2009
Article comment by: Still Silly Sally

OMG Is there anything that J. Lee doesn't have his hands in? It is so ironic to see him comment and complain about something being politically motivated. He sure seems to be able to play both sides of the fence regarding politics.

He appears to be an excellent choice to represent Second Century given all the experience he has acquired. He seems to know a lot about governments and public funds. And secondly, given the fact that he is the mayor’s father-in-law, he also probably knows a lot about politics.

it seems as if everyone who has asked questions and wanted some accountability of our public funds that may have been used to build a personal building (which is attached to a government owned building) at the Intelliplex has been called a troublemaker, CAVE dweller, or kook. No wonder why more citizens don’t stand up and voice their concerns here in the ‘Ville.

Maybe, just maybe, if the powers that be are ever removed from office, we, the little, taxpayer people of Shelbyville can ask for a review of the public funds used and deals made regarding the Intelliplex. If so, I imagine individuals involved will CRY OUT -- "Politics, Politics, Its all politically motivated".

Thanks again Dee for providing all of us with investigative information that we can’t find in our local paper. Our “local” paper is too busy with keeping their advertisers happy to keep the paper afloat and the doors open. Besides, they probably need to bring in enough money to pay their attorney. Any guesses who that might be?

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