Racketeering Lawsuit Filed Against Rod Blagojevich by Three Casino Companies

Three casino companies have filed a $267 million racketeering lawsuit against former Illinois Gov. Rod Blagojevich and a prominent racetrack owner over a controversial law that requires casinos to funnel part of their revenues to struggling horse tracks.

The complaint, filed in U.S. District Court in Chicago Friday, grew out of a federal investigation into an alleged pay-to-play scheme the former governor is accused of running.

A federal affidavit alleged Mr. Blagojevich attempted to pressure John Johnston, whose family owns and operates several tracks in the Chicago area, for a $100,000 contribution in return for the governor's signature on legislation to help the struggling horse-racing industry. The legislation requires the state's four top-earning casinos to give 3% of their gross adjusted annual revenues to the horse-racing industry.

The suit, filed by Harrah's Entertainment Inc., MGM Mirage and Penn National Gaming Corp., says Mr. Johnston and various businesses under his control donated tens of thousands of dollars to Mr. Blagojevich in return for the former governor's support for the legislation, which was approved twice by legislators. Attorneys for Mr. Blagojevich didn't return calls for comment.

Dan Reinberg, a lawyer for Mr. Johnston, said the suit "wasn't unexpected. The reality is that this is desperation by the casinos."

The casino suit comes days after the U.S. Supreme Court decided to stay out of the issue, and passed on hearing an appeal from the casinos on the matter.

In their complaint, naming Mr. Blagojevich, his campaign fund, Friends of Blagojevich, and Mr. Johnston, the casinos allege "Blagojevich had sold, and Johnston purchased, enactment of this law." A spokeswoman for Harrah's said the suit was filed Friday. A copy of that suit was provided by the plaintiffs.

The law was enacted in 2006 and mandated that the casino funds be transferred to the horse tracks for two years. The complaint says that after the 2006 passage, "Blagojevich and Johnston and possibly others in the horse racing industry, agreed that Johnston or his affiliates would pay Blagojevich or Friends of Blagojevich money in exchange for ensuring the enactment" of the law. The complaint says that a month after Mr. Blagojevich signed the 2006 law, Mr. Johnston contributed $125,000 to Friends of Blagojevich though various affiliates. "To conceal their unlawful scheme, Johnston arranged for this money to paid through several entities under his control," the suit alleges.

A similar bill extending the transfer of funds was passed in 2008, which Mr. Blagojevich signed last December.

Mr. Reinberg said Mr. Johnston refused to pay Mr. Blagojevich. The alleged attempt to extort money from his client "speaks to the former Governor's integrity but has nothing to do with the merits of the bill itself,'' Mr. Reinberg said.

Mr. Reinberg said Mr. Johnston's campaign contributions to Mr. Blagojevich were routine, and timed to an annual June fundraiser for the Governor, and not payment for enactment of the initial 2006 law, as the suit alleges.

Mr. Johnston "never made a contribution to Governor Blagojevich or any other politician with a quid pro quo or any expectation that the Governor would act on his behalf," Mr. Reinberg said.

The complaint accuses Messrs. Johnston and Blagojevich of racketeering under the Racketeer Influenced and Corrupt Organizations Act, or RICO law.

So far, casinos have paid $89.2 million into an escrow account being held for the horse-racing industry while the legal battles over the law have raged.

Thanks to Tamara Audi