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Former Emerald Casino Players Still Embroiled in Legal Battle

Posted on November 10th, 2010

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In the state of Illinois, the Emerald Casino has had a very long and unfortunate history. The sad news is the end does not seem to be near and industry insiders claim that its legal issues may not be over anytime soon. The 7th floor of the state’s federal courthouse in Chicago serves as the site of a trial that has been dragging on quietly, for the past week. The parties in contention are a bankruptcy trustee and seven officers and directors who used to be connected to Emeralsd The seven ex-officers and directors are led by the father and son team of Donald and Kevin Flynn. The trustee is represented by Frances Gecker, a lawyer based in Chicago. Gecker claims that that the defendants committed “gross misconduct” by violating gaming law and regulations of the state. She claims that through the actions of the defendants, Emerald had to lose its license.

By the end of the trial, Gecker is hoping to win a total of $519 million in damages, which she claims is the value of the company before the other party destroyed it. This trial may be the end of a supposedly lucrative casino project to be located in the area of Rosemont. The project also has alleged ties to mob financing, investors that are considered some of the most influential in the state and a piece of legislation that was touted as one of the grandest special interest bills ever. With the Emerald Casino embroiled in its legal battle, it’s license had to be given to another company. In 2008, the license was finally awarded to a company that has plans of building a casino in Des Plaines.

The license was given up by Emerald in 1997. During that time, the Silver Eagle Casino located on the Mississippi River in Jo Daviess County has shut down. Included in the original shareholders of the casino are Eugene Heytow, a banker based in Chicago who passed away in August, and Peer Pedersen, one of the most influential lawyers in Chicago. Another original investor was Donald Flynn, who used to be an accountant for Arthur Andersen. He amassed a huge fortune with Waste Management and Blockbuster Entertainment. He then gained control of the casino in 1996, with his son Kevin becoming the chief executive of the casino. The Flynns then lobbied for a casino to be built in Chicago.

In 1999, with the help of Donald Stephens, who was then the Mayor of Rosemont, a bill was passed by the state legislature which amended the Riverboat Gambling Act. The Flynns decided to use the casino license on the Emerald project. The Illinois Gaming Board however, was not too keen on the idea. It voted to reject the Emerald project. Added to that, the board also revoked the license from Emerald and the Flynns. According to the board, the Flynns are not fit to operate a casino because they alleged that some shareholders of emerald had ties to the mob, while others had given incorrect statements to board investigators. State gaming officials also felt bypassed as the owners already started construction without the their blessing.

The license was revoked from the Flynns in 2005. They filed an appeal, but the original board decision was affirmed. A number of the creditors of Emerald filed an involuntary Chapter 7 petition in 2002. Gecker, who was a trustee since March 2008, filed a lawsuit nine months later. Her complaint in bankruptcy court is the same with the allegations she made in another suit which she filed in 2009 in Cook County. She filed the suit on behalf of a group of minority and female shareholders at Emerald, all of whom have tried to get back their losses, which are estimated to be at $20 million. So far, their efforts have not been successful. In 2006, they lost in federal court and the suit Gecker filed on their behalf was dismissed early this year. The trial is expected to last a few more weeks. Should Gecker’s camp win, they may be awarded a portion of the money they have lost, but they should not expect everything to be given back to them, according to insiders.