Updated: 9:20 p.m.
In one of the ornate legislative meeting rooms in Springfield last spring, veteran state Rep. Luis Arroyo became highly agitated.
The Democratic politician from Chicago’s Northwest Side ripped into a former top Illinois Gaming Board lawyer during his testimony before an Illinois House panel. The attorney had criticized controversial “sweepstakes” machines, which look and work much like licensed video gambling machines but aren’t regulated by the state.
“If it’s illegal, I want to know – I’d like to know that, because I wouldn’t be supporting the people I’m supporting for something that’s illegal,” Arroyo said of the sweepstakes machines, which have continued operating widely despite the gaming board’s opinion that they’re a form of illegal gambling.
What Arroyo did not reveal during the legislative hearing in May was that his support for the machines extended beyond his role as an elected official – and also included a side gig as a registered lobbyist for the sweepstakes industry at Chicago’s City Hall.
Nearly six months later, Arroyo’s dual roles as a state legislator and a sweepstakes company’s lobbyist were at the center of a federal corruption case unsealed against him Monday morning.
Authorities say an unidentified state senator who was cooperating with them caught Arroyo on a recording in August as he was paying the first of what were to be a series of $2,500 bribes to the other politician. The state senator was to introduce pro-sweepstakes legislation in the Illinois General Assembly session that began Monday.
Instead of being in Springfield with the rest of his fellow lawmakers, though, the 65-year-old Arroyo appeared before a judge at the federal courthouse in downtown Chicago, where he was charged with corruption in a 13-page criminal complaint.
According to court records, Arroyo met with the senator-turned-government mole on Aug. 22 at a restaurant in Skokie and allegedly gave him the bribe check, telling him, “This is the jackpot.”
The cooperating witness agreed to help Arroyo’s lobbying client by sponsoring legislation beneficial to the sweepstakes business but asked Arroyo, “What’s in it for me, though?”
Arroyo replied, “If I’m doin’ O.K., you’re gonna do O.K.,” according to federal authorities.
An aide to Arroyo said he expects to be “completely vindicated.”
But Illinois House Speaker and state Democratic boss Michael Madigan issued a statement saying Arroyo should resign immediately from the General Assembly or face “steps to begin the process to remove him from office.”
Both the Chicago Tribune and the Chicago Sun-Times report that the unnamed cooperating witness is Democratic State Sen. Terry Link, of Vernon Hills, citing unnamed sources.
But in an interview with WBEZ late Monday, Link emphatically denied he has cooperated with federal investigators or offered to accept kickbacks from Arroyo to sponsor sweepstakes legislation.
“The answer is no,” Link said when asked point-blank whether he’s the cooperating witness the feds cite in Monday’s court documents. “Just leave it at that. I really don’t know what to say. I am not witness No. 1.”
Link added: “I wouldn’t know why anybody would want cooperate with any law enforcement if this is the abuse you’re going to take if you are cooperating.”
Murky legal questions surround sweepstakes industry
Arroyo has been a lawmaker since 2006, rising to become a top member of Madigan’s caucus in the state House. Last month, Arroyo held a political fundraiser in downtown Chicago where Madigan and Chicago Mayor Lori Lightfoot led the list of host committee members, according to an invitation for the event obtained by WBEZ.
In addition to his high-profile work as an elected officials, Arroyo also has been moonlighting as a lobbyist at Chicago City Hall through his company called Spartacus 3, city ethics board records show.
Since last year, according to disclosures he filed with the city ethics officials, Arroyo has lobbied unspecified aldermen for “sweepstakes machines legislation” on behalf of a client called VSS Inc. The company has been paying him $2,500 a month for about a year, according to city and federal court records.
The sweepstakes devices have spread rapidly across Chicago and other parts of the state and set off intense debate over whether they should be allowed to operate openly. A proposal to issue an outright ban in Chicago was never approved, despite former Mayor Rahm Emanuel’s vehement opposition to sweepstakes machines.
Unlike the video gambling machines that the state has regulated and taxed since 2012, the sweepstakes device operators don’t pay taxes to state or local governments.
And the state does not conduct background checks of sweepstakes machine operators or the businesses that install them, as is required for video gambling licenses. Last year, a WBEZ investigation revealed that some bars that were deemed unfit for video gambling by state officials have simply gotten around that obstacle by installing sweepstakes machines instead.
“Somebody here is lying”
The murky legal situation has sparked proposals in Springfield to either ban the machines explicitly or license them and make the operators pay fees to the state. Arroyo injected himself into that debate with a full-throated defense of the sweepstakes interests in May, according to a recording of the legislative hearing in the Capitol.
He became the most animated as he grilled a former Gaming Board lawyer, William Bogot, who came to Springfield to testify at the hearing.
Bogot, who is now in private practice, told lawmakers that “every published case in the country that has looked at a sweepstakes vending machine has held them to be illegal.”
At that point, Arroyo interrupted Bogot.
“I’m just concerned with Illinois,” Arroyo said. “Not New York, none of the other states. I don’t care what goes on in any of those other states. I want to know what’s happening here.”
Arroyo said a lobbyist for the sweepstakes companies had testified that there were court cases in their favor.
“He says it’s not illegal, you’re saying it’s illegal,” Arroyo told Bogot. “Somebody here is lying. Why are you up here saying it’s illegal? Either you’re lying or the gentleman in the back [of the] room is lying.”
On Monday, Bogot said he heard about the federal case against Arroyo and thought immediately of Arroyo’s testy comments to him in Springfield in May.
“I did not shed a tear because he was caustic at the hearing,” Bogot told WBEZ. “I guess I know why now. He was pretty hostile. He called me a liar, if I remember correctly.”
Bogot said he was not aware Arroyo was a lobbyist for the sweepstakes interests on that day at the Capitol and only learned about it in the media after the federal case against Arroyo was announced.
“I did not know the guy and did not expect his reaction,” Bogot said. “It was pretty shocking. He was not an objective participant looking for the truth.”
Asked for his reaction to the federal case against Arroyo, Bogot replied, “Nothing surprises me in Springfield, I suppose.”
During that May hearing, Arroyo added that, if the machines truly were breaking any laws, “That puts me in a pickle. That puts me in an opportunity that I don’t want to be in.”
Arroyo also said the conflicting opinions about sweepstakes from different lawyers had left him confused: “I think I’m going to have to get a lawyer myself,” he said, laughing.
Dan Mihalopoulos is an investigative reporter for WBEZ. State politics reporter Dave McKinney contributed.