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Casino Sale Raises Questions About A Windfall - Or A Conflict - For Pritzker

The proposed sale of Illinois’ third most-lucrative casino could mean a more than $3 million windfall for Democratic gubernatorial candidate J.B. Pritzker and free him of potential conflicts of interest should he defeat Republican Gov. Bruce Rauner this fall.

Pritzker’s billionaire family has held financial interests in casinos for decades. He now invests in a company that holds a roughly one percent stake in the Grand Victoria Casino in Elgin, according to financial disclosures and his campaign.

That means Pritzker could reap nearly $3.27 million from the potential $327.5 million sale of the northwest suburban casino to a Reno, Nev.-based gambling company called Eldorado Resorts, Inc. The deal announced this week still requires Illinois Gaming Board approval.

If the deal goes through by the end of 2018, as planned, the transaction eliminates a thorny conflict for Pritzker should he win.

But if the deal collapses or hits a snag and Pritzker is elected in November, he could run into ethical conflicts once he takes office in January. That’s because governors have the authority to appoint members to the state Gaming Board that regulates casinos, and he’d inevitably be drawn into perennial discussions at the statehouse about gambling expansion that could impact his investment.

Such a scenario would make Pritzker the first known Illinois governor to hold an interest in a state casino license.

“There could be a conflict in the sense that limiting, for example, video gaming may be something that would be beneficial to a particular riverboat casino,” said Sergio Acosta, a former federal prosecutor who was administrator of the Gaming Board from 1999 to 2001. “That would raise the issue of...if the governor is supporting particular legislation, is it because of a personal interest...or because of the public good?”

That situation isn’t even allowed in several other states with casino gambling. Nevada, New Jersey, Louisiana and Pennsylvania, for example, outright prohibit public officials, including governors, from holding any interest in state casino licenses.

“The idea that a governor would have an interest in a gambling establishment is the ultimate conflict of interest, and it’s entirely improper,” said John Dunbar, chief executive officer of the Washington, D.C.-based Center for Public Integrity, a Pulitzer Prize-winning investigative journalism non-profit whose past work has delved heavily into government ethics.

“Anybody who would enter office owning a piece of a casino, it would be really, really wrong, and they would need to divest in my view,” Dunbar said.

Neither Pritzker nor his campaign have divulged much about the candidate’s stances on casino expansion.

A campaign spokeswoman did not answer questions about his positions on an array of gambling policy questions, such as allowing slot machines at Chicago’s airports and Illinois racetracks, the authorization of new casinos, capping video-gaming licenses or tying casino expansion to a capital construction plan or pension relief.

But Pritzker spokeswoman Galia Slayen did say any change in gambling laws would be done with “the direct input of local governments”  and that Pritzker would “prevent lobbyists and special interests from taking over the process.”

Gaming was an issue that barely surfaced during the six-way Democratic primary Pritzker won in March. The most notable reference came during a WTTW candidates’ forum, when moderator Phil Ponce asked Pritzker, Chris Kennedy and state Sen. Daniel Biss for a show of hands as to who supports a Chicago casino. Pritzker did not raise his hand.

Aside from Pritzker himself, the campaign also did not respond to a request to identify all other investors in Illinois RBG, the limited liability corporation that holds a 50-percent cut of the Grand Victoria. The campaign also didn’t answer a question about any other gambling ventures of which Pritzker is a part.

Last November, Pritzker disclosed his interest in Illinois RBG when he submitted nominating petitions to run for governor. The Democrat also identified interests in other gambling entities that appear to operate outside Illinois.

“JB has had zero involvement in the management of this company and trusts benefitting him own less than two percent of the business, and therefore less than one percent of the Grand Victoria,” Slayen said.

“If elected, JB will divest from any asset he personally owns that does business with the state of Illinois or would receive any kind of government benefit from the state,” she wrote.

Slayen did not respond to a follow-up question aimed at clarifying whether divestiture meant liquidating his position in the trusts that hold stakes in the casino, putting those assets into a blind trust or transferring ownership to other family members or friends.

Illinois RBG investors also include other Pritzker family members, including sister Penny Pritzker, who valued her share in the LLC at between $5 million and $25 million in a federal ethics statement she filed in 2017 as U.S. Commerce secretary.

The other 50 percent of the Grand Victoria belongs to MGM Resorts International.

Eldorado reported in a filing with the federal Securities and Exchange Commission that it expected to finalize the deal for the Grand Victoria by the final three months of this year, which could put the closing right around the Nov. 6 election.

Meanwhile, Illinois’ top gambling regulator said the timeline of closing the sale by the end of 2018 is “tight.”

“Without them having filed anything yet [with the Gaming Board] and knowing how complex the transaction is, I can’t say for sure, but it’s certainly possible we could do that,” said Gaming Board Chairman Don Tracy.

The Grand Victoria, which opened in 1994, was the state’s top-grossing casino through 2011. But the opening of the Rivers Casino in Des Plaines and the proliferation of video gambling in Illinois hit the casino hard.

Since then, it has been in third place behind the top-grossing Rivers Casino and the second most profitable gambling venue, Harrah’s Casino in Joliet. In 2017, the Grand Victoria reported $168.7 million in adjusted gross receipts, state records show.

The Grand Victoria holds the record in Illinois as recipient of the largest fine imposed by state gambling regulators. In 2003, it agreed to pay a $3.2 million fine after a Gaming Board investigation determined that an air-filtration firm hired by the casino had alleged ties to organized crime. The Gaming Board described the fine as the largest “ever issued against any U.S. commercial casino for a regulatory violation.”

Slayen did not answer whether Pritzker held an ownership stake in the Grand Victoria at that time or whether he ever had any interactions with the firm’s owner or any member of their immediate family.

Dave McKinney and Tony Arnold cover state politics for WBEZ. Follow them @davemckinney and @tonyjarnold.

Editor’s note: In the interest of transparency, Chicago Public Media (CPM) reminds its audience that we receive philanthropic support from The Pritzker Foundation and the Pritzker Traubert Family Foundation. J.B. Pritzker, who is a candidate for Illinois governor, is not involved in The Pritzker Foundation or the Pritzker Traubert Foundation and does not contribute to it. He and his wife lead a separate philanthropic foundation, the Pritzker Family Foundation, from which CPM has never received any funding.

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