From Truck Stops To Elections, A River Of Gambling Money Is Flooding WaukeganBy Jason Grotto, ProPublica Illinois
From Truck Stops To Elections, A River Of Gambling Money Is Flooding WaukeganBy Jason Grotto, ProPublica Illinois
Updated at 11 a.m. Aug. 9
The first and only official truck stop in Waukegan sits on a lot so small that a tractor-trailer would have a hard time pulling in to pump gas, let alone parking for the night. It’s also located nearly 5 miles from the nearest interstate and is missing the kinds of amenities many truck drivers count on, such as a sit-down restaurant or showers.
But what the Waukegan Thorntons lacks as a truck stop, it more than makes up for as a video gambling destination. Its five slot and poker machines bring in more than $100,000 a month, making it not only Waukegan’s most lucrative video gambling spot but also one of the most profitable in Illinois.
The story of how this truck stop came to be a gambling gold mine, the story of why it’s even considered a truck stop, is one element in a brazen series of maneuvers over several years by a video slot and poker operator to squeeze money from a struggling city. It also offers a glimpse into how Illinois’ gambling expansion is playing out across the state, particularly in communities desperate for its promised riches.
Located on the banks of Lake Michigan 40 miles north of Chicago, Waukegan once teemed with people and industry. Good jobs and affordable housing drew immigrants from around the world. But like in so many other Rust Belt cities, manufacturing’s decadeslong decline bled resources from the local government, hammered small businesses and, according to U.S. Census data, eroded the population, which has fallen 2.6% since 2010, to just shy of 87,000.
Since the early 1990s, city officials have lobbied the state for a casino, believing it would help pull Waukegan out of its financial doldrums. After repeated attempts fell short, the city went all in on video gambling after it was legalized in 2009 and quickly became one of the state’s top markets for it.
Then the city’s luck changed. In June, at the end of this year’s legislative session, Gov. JB Pritzker signed a massive gambling expansion bill that included six new casinos, including one in Waukegan.
And Waukegan’s largest video gambling operator was ready. Long before lawmakers approved the new casino, the owners of Tap Room Gaming, led by former state Sen. Michael Bond, had used big campaign contributions to help elect city officials sympathetic to their interests, which include controlling the new casino and steering it to a site abutting land one of them had purchased, a ProPublica Illinois investigation found.
Several people familiar with the writing of the gambling expansion law say that Bond, whose ties to the Democratic Party run deep, used his connections to state lawmakers to try to insert language into an earlier version of the bill that would have guaranteed Tap Room’s owners control of a Waukegan casino.
While Bond’s efforts on the bill ultimately failed, Tap Room scored a victory when the video gambling industry successfully beat back an attempt to tighten rules that would have barred the Waukegan Thorntons and dozens of other gas stations from running video slot and poker machines.
Bond remains in the running for the Waukegan casino. City officials said Monday they received six bids to develop and operate a casino, including one bid from Bond and a Las Vegas-based casino operator called Warner Gaming.
Pritzker and other state and local leaders say the latest gambling expansion will help fund borrowing for a $45 billion statewide building campaign, called Rebuild Illinois. The Waukegan casino, they say, will create much-needed jobs for the city while shoring up its woefully underfunded police and fire pension funds.
But promises tied to a gambling windfall have come up short in the past. In 2009, lawmakers rushed through a similar bill legalizing video slot and poker machines. They claimed the industry would generate hundreds of millions of dollars a year to pay borrowing costs for a similar building campaign, Illinois Jobs Now!
A ProPublica Illinois/WBEZ Chicago investigation in January found it took nearly a decade to reach the state’s rosy revenue projections, accelerating Illinois’ financial tailspin and saddling the state with new, unfunded regulatory and social costs in the meantime. In February, ProPublica Illinois/WBEZ Chicago showed how the state had failed to meaningfully address the fallout of gambling addiction.
The Bad Bet: A multi-part investigation examining the legalization of video gambling in Illinois.
Read Part 1: How Illinois Bet On Video Gambling And Lost
Read Part 2: Illinois Allowed Video Gambling And Left Addicts With A Losing Hand
Under the gambling legislation, Waukegan will receive just 3.5% of casino revenue, leaving some local officials skeptical about whether a casino will actually benefit the city as many officials hope.
“Gambling takes money from people, mainly poor people, and gives it to government and corporations,” said Alderman Lynn Florian, a Democrat from Waukegan’s 8th Ward on the Northwest Side, who opposes a city casino. “And in the case of the casino, our city will get just a fraction of that money.”
A political newcomer and gambling
The tale of how Tap Room used video gambling money to tilt Waukegan politics in its favor begins in March 2017, the homestretch of the mayor’s race, when the campaign staff for Lisa May noticed large contributions pouring into the race from a political action committee called Video Gaming United.
Sam Cunningham, an insurance broker who was seeking to become Waukegan’s first black mayor, received more than $40,000 in help from Video Gaming United donations in a matter of weeks, accounting for roughly half his campaign funds, according to disclosure reports. Cunningham didn’t respond to multiple requests for comment.
Video Gaming United was created by Bond, who started Tap Room with his aunt less than a year after leaving office, in August 2011. Bond has hired the son of a senate leader, Chicago Democrat Antonio Muñoz, as well as the vice chairman of the Lake County Democratic Party, Pete Couvall, who worked as a contract employee for Tap Room until he died in December, according to records from the Illinois Gaming Board, which regulates gambling in the state.
Bond moved the political action committee’s money through the Waukegan Democratic Organization, a PAC controlled by Couvall and David Koss, a former campaign manager for state Sen. Terry Link’s 2010 race for lieutenant governor. Bond did not respond to several requests for comment.
A relative newcomer to politics, May was blindsided by the Video Gaming United donations. As an alderman, she had voted to bring slot and poker machines to Waukegan in 2012. But she also had raised concerns about how ubiquitous the machines had become in Waukegan, and in candidate forums during the mayor’s race she had expressed skepticism about a casino in the city, noting that the city-owned Fountain Square site, favored by most casino proponents, would not benefit the Waukegan school district because it sat outside its boundaries. She favored focusing instead on revitalizing downtown and the lakefront to attract middle-class families.
“I wasn’t a hard, 100% no against the casino,” she said. “But someone had to prove to me that this was going to benefit the city of Waukegan.”
The mailers started arriving soon afterward. Funded by Bond’s PAC, they portrayed May as a Republican, her picture alongside those of President Donald Trump and Bruce Rauner, the Republican governor at the time. It was a heavy-handed tactic in the waning days of a tight race. But in a Democratic stronghold like Waukegan, which also has a history of low voter turnout, the attacks were disconcerting to May and signaled a sharper tone in the election.
They were also false. May ran as an independent, hoping to become the city’s first female mayor. She supported closing the coal-burning power plant on the lakefront. Her campaign staff was composed of Sierra Club operatives. Her stance on immigrant rights had attracted volunteers who were undocumented, she said.
“I’m more of a progressive than anything,” said May, whose father was an immigrant from Slovenia. “It was shocking the first time you come home and see the flyers, or when your mother calls you and says, ‘I just got this mailer with you and Donald Trump on it.’”
Despite the huge infusions of last-minute cash and the misleading flyers, May came up just 303 votes short out of the 9,115 cast in the April 2017 election. She’s hesitant to blame her narrow loss on Video Gaming United. After all, as an independent, she had no party apparatus behind her, which meant she had to build a campaign infrastructure from scratch.
But she understood for the first time that video gambling interests had become a major player in Waukegan’s elections.
A land deal
Four months after the mayoral election, in August 2017, the next piece fell into place. A Skokie-based real estate company called Next Fountain Square purchased two tracts of vacant land for $975,000. The land abutted a site called Fountain Square, which had been vacant for 14 years.
The city had purchased Fountain Square in 2003 as part of a failed bid to land the state’s 10th casino license, which eventually went to Des Plaines, northwest of Chicago, where Rivers Casino was built.
The founder of Next Fountain Square is Andrew Hochberg, Tap Room’s third partner. Before starting Next Realty, he worked for his father’s company, the sporting goods retailer Sportmart. He also dabbled in politics, putting up nearly $1 million of his own money on a Republican primary race for the U.S. House in 2000. He lost to Mark Kirk, who went on to win the general election and later became a U.S. senator.
After Hochberg joined Tap Room in 2014, the company received a series of loans from private lenders that allowed it to buy out rivals, according to gaming board records and interviews. Before the acquisitions, Tap Room was a small player in the booming video gambling industry.
Between 2014 and 2015, Tap Room’s annual revenue climbed more than 500%, from less than $1 million to more than $6 million. By 2018, its revenues had reached $24 million.
Tap Room is now the seventh-largest video gambling operator in the state, providing video slot and poker machines to nearly 300 locations, according to an analysis of gaming board data.
Hochberg did not respond to requests for an interview. In a written response, a spokesman for Hochberg said his efforts to operate the casino are independent of his ownership in Tap Room. He also said connecting the purchase of the Fountain Square property to Tap Room’s political donations is inaccurate. He noted that, when Hochberg bought the property, it had long been considered ideal for a casino.
“The adjacent city-owned land has been considered a logical casino site for many years,” said Michael Millar, Hochberg’s spokesman and the principal of Wilmette-based Open Slate Communications.
One of Tap Room’s owners now controlled land next to where everyone expected the casino would be built, and the company had provided crucial support to help Cunningham secure the mayor’s office. With the November 2018 gubernatorial race delivering a pro-gambling governor, only a handful of City Council members were still questioning how much a casino would benefit the city.
“That’s no more of a truck stop than I am”
After her defeat in the mayor’s race, May returned to the City Council to finish out her term as alderman. To her surprise, Cunningham kept her on as chair of the judiciary committee, which regulated how video gambling operated in Waukegan.
May set out to rein in the industry. She had seen firsthand how video gambling money could be used in local elections, and she’d heard from constituents who believed the town had become oversaturated with slot and poker machines, with more than 260 machines spread across 54 locations.
“I honestly don’t think I was that vocal about video gambling before the election. Not even during. It wasn’t the hot topic,” she said. “But then all the money comes in, I lose and have to go back to being an alderman. So now, yeah, I’m totally zoned into it.”
In November 2017, May helped push through a six-month moratorium on new video gambling locations and began working with her colleagues on a new set of rules designed to limit the number of video gambling locations while giving the City Council more oversight.
The following February, the City Council passed an ordinance barring new gaming licenses within 1,500 feet of an existing location. It also increased the distance a video gambling location had to be from a church or school, from 100 feet to 400 feet, and made liquor and video gambling licenses subject to City Council approval rather than an administrative matter handled by the clerk’s office.
Three days before the moratorium went into effect, a Thorntons gas station applied for a video gambling license. Tap Room was listed as the gambling operator at the site, which is located on the corner of Green Bay Road and Grand Avenue.
Within three years, the site would become Waukegan’s most prolific video gambling location and Tap Room’s biggest moneymaker. It would also be a windfall for a real estate company Hochberg controlled.
Hochberg’s company, Waukegan Petrosites LLC, purchased three parcels on the corner for $2.135 million in September 2015.
First, Hochberg leased one of the parcels to Thorntons, giving the Kentucky-based gasoline and convenience store chain the right to build a gas station on the land. After the station was built, Thorntons purchased the property, in December 2016, for $4.124 million. Seven months later, Thorntons agreed to pay Hochberg’s company $1,000 a month to lease the other two parcels, a pair of grass-covered lots. Then it applied for its video gambling license with Tap Room as the operator.
Waukegan approved Thorntons’ video gambling license in February 2018 and, seven months later, the state gaming board granted it a truck stop license. That allowed Tap Room to run five video slot and poker machines, the legal limit at the time, which the vast majority of truck stops had. And because it was a truck stop, the operators can keep them going 24 hours a day. Three months after getting its gaming license from the state, Thorntons bought the vacant, grass-covered parcels that allowed it to qualify as a truck stop, paying Hochberg’s company $1 million.
Taken together, Hochberg had more than doubled his real estate investment in just three years. He also makes money from the video gambling machines inside the gas station. Until the expansion law increased taxes on video gambling, Tap Room and Thorntons each received 35% of the revenues while the state got 25%. Waukegan’s cut: 5%.
Millar, Hochberg’s spokesman, said “the transactions between Waukegan Petrosites LLC and Thorntons were made at arm’s length and involved no exchange of gaming revenues.”
Truck stops are the most lucrative video gambling locations in the state because they are the only ones that aren’t required to hold a liquor license to pour alcohol. In fact, the top 10 most profitable gambling locations in Illinois are all truck stops. The Thorntons brings in more than $100,000 a month and ranks 8th out of nearly 7,000 establishments in revenue, according to gaming board data from June.
Under the 2009 Video Gaming Act, a location like Thorntons had to pump at least 10,000 gallons of diesel fuel a month to qualify for a truck stop license. It also had to be located on at least three acres of land, presumably so trucks could park there.
The Waukegan Thorntons sits on just 1.6 acres, leaving little room for a tractor-trailer to maneuver. But the Video Gaming Act is so vague that Thorntons was allowed to use the two vacant, grass-covered lots leased from Hochberg to count toward the three-acre requirement, according to documents from the gaming board and the city of Waukegan. Thorntons did not respond to multiple requests for comment.
The site narrowly escaped being shut down as the legislature rushed through the gambling expansion bill this year. Only a last-minute change saved the lucrative Tap Room site and dozens of other gas stations across the state.
Regulators at the gaming board have struggled for years with truck stop licenses because companies use the poorly worded law to shoehorn gas stations into the designation. So, as part of this year’s gambling expansion, the gaming board sought to tighten the requirements.
To qualify as a truck stop under the proposal, a location had to sell 50,000 gallons of fuel a month, include a separate diesel island for commercial vehicles to fuel up and have designated parking spaces. In exchange for tighter rules, a truck stop would be allowed to have 10 video gambling machines. The new requirements would have disqualified Thorntons.
The proposed amendment was included in the expansion bill that passed out of committee in the state House. But right before it went to the House floor for a full vote, the old truck stop rules were put back into the bill and a new category called “large truck stop” was created with the tighter requirements. Only large truck stops could get 10 machines.
The bill passed the House on a Saturday evening before sailing through the Senate the following afternoon. Once the governor signed the bill, on June 28, video gambling at the Waukegan Thorntons was in the clear.
Blue Island Democratic Rep. Bob Rita introduced the amendment, which included multiple provisions in addition to the one for truck stops. A spokesman for Rita said Link and Rockford Republican Sen. David Syverson were responsible for the truck stop language. Syverson didn’t respond to requests for comment.
Link said in an interview with ProPublica Illinois that the bill was changed because “it was so restrictive that 90% of the truck stops” in the state would be barred from having video gambling machines. At the same time, Link conceded that the current rules are too loose, allowing gas stations like the Waukegan Thorntons to qualify. He suggested the General Assembly would revisit the issue.
“That’s no more of a truck stop than I am,” he said. “I think this is something we will be addressing in the future.”
Dark money and the Waukegan City Council
City Council races in Waukegan don’t usually attract much attention — or money — from outsiders. That changed during this year’s aldermanic elections, when Tap Room and its affiliates poured more than $200,000 into six races, according to an analysis of campaign finance records.
Most of the money came through the Waukegan Voter Alliance, a political action committee formed in January. The WVA is run by Koss, the former Link campaign manager who is also the treasurer of the Waukegan Democratic Organization PAC, the conduit for Tap Room donations to Cunningham during the 2017 mayoral race. Koss, who co-manages a media consulting group based in Waukegan called the Really Resourceful Group, declined to comment.
In addition to contributions directly tied to Tap Room, other donations came from Cunningham’s political campaign and Effingham-based J&J Ventures, the second-largest video gambling operator in the state.
In aldermanic elections that typically raise less than $10,000, the WVA had built up a war chest in a matter of weeks that allowed it to bankroll candidates for nearly every seat on the City Council.
The WVA backed six of the nine Waukegan aldermen. It spent the most in the city’s 9th Ward, where the alliance poured more than $77,000 into an effort to unseat Ann Taylor, who supported limits on video gambling and had been skeptical of a Waukegan casino. In races marked more by door-to-door canvassing than television commercials, WVA spent nearly $70,000 on TV ads for Taylor’s opponent, Annette Darden, according to state campaign records.
Taylor, who spent about $38,000 on her campaign, has since filed a complaint with the state Board of Elections alleging that Darden violated campaign rules by failing to report in-kind donations from the WVA. Darden and Taylor declined to comment. The Board of Elections complaint is pending.
Even after Taylor handily won the election, Darden continued to receive money from Tap Room-affiliated PACs. In April, yet another political action committee appeared, this one called the Small Business Coalition. It gave Darden more than $56,000. That group was founded by Jon Kozlowski, a Tap Room employee. The group’s address is listed on state records as a UPS Store a block from Fountain Square. Its only contributors are companies affiliated with Bond, including Tap Room Gaming, Tap Room Amusements and Bond’s public relations firm, State Street Public Affairs. Kozlowski did not respond to requests for comment.
Among the other aldermanic candidates the WVA supported was Roudell Kirkwood, who represents the city’s 4th Ward, which includes downtown. Gaming board records show Kirkwood owns a Chinese restaurant called Long Sing that has had video gambling since October 2017. Tap Room is the video gambling operator for the establishment, gaming board records show. Kirkwood did not respond to a request for comment.
When a local reporter began asking questions about the donations, Bond defended the WVA, saying it was formed to “protect hundreds of small businesses who have been under attack by some members of the Waukegan City Council.” The Tap Room donations, meanwhile, did not sit well with some local officials.
“I don’t care what kind of company you are,” said Florian, who didn’t get money from gambling PACs. “Even if you’re selling bicycles, anyone who is that interested in spending that much money on our City Council is a problem.”
In March, a dark money group called the Waukegan Jobs Coalition sprung up. Its address is the same UPS Store as the Small Business Coalition, a block from Fountain Square. Because the group is not required to file campaign disclosures, it’s impossible to know who funded it. But state corporate records show the group’s manager, James Parks, was a longtime contract employee for Tap Room. He declined comment.
Within weeks of the group’s creation, television commercials and colorful mailers pushing for a casino at Fountain Square began appearing. Invoices for the television time the Waukegan Jobs Coalition purchased went to Koss’ company, the Really Resourceful Group, according to billing records obtained by ProPublica Illinois.Around the same time, Cunningham and City Council members who received donations from Tap Room-funded groups started pushing to repeal some of the restrictions on video gambling. He also has testified at legislative hearings about the gambling expansion, praising video gambling and lobbying for a casino in Waukegan.
The WVA-backed candidates won four of the six seats on the nine-member City Council. Along with Cunningham, who breaks ties on City Council votes, Waukegan’s city government is now composed of five elected officials who received significant support from Tap Room. Site selection for the new casino is underway, and the City Council will have final say over which firms are sent to the gaming board for approval.
But for a Rust Belt city still smarting from the 2008 financial crisis, with crushing pension debt and a $3.7 million operating deficit, what a casino will do to lift it up remains to be seen.
Meanwhile, some local businesses that have come to rely on video gambling are worried about competition from a new casino cutting into their business.
“Of course I am concerned,” said Quan Hui Chen, owner of Hunan Hibachi Buffet, a Chinese restaurant and Tap Room client located across the street from Fountain Square. “The [video gambling] numbers will go down. And it pays the rent. But we can’t stop it.”
May, the former mayoral candidate, has watched these developments with despair. Her supporters have pressed her to make another run for mayor in 2021, she said. But after her bruising mayoral run, she had promised her husband she would get out of politics. They’ve even discussed leaving Waukegan altogether.
“I’m heartbroken,” she said. “I tried really hard and for the right reasons. But all the money flowing in from out of town. …”
Her voice trailed off as she wiped away tears. “I raised my kids here, in the same neighborhood I grew up in. I love this city.”
Correction, Aug. 9, 2019: This story originally misidentified James Parks as an employee of the Village of Antioch. He no longer works for the village.
Jason Grotto is a reporter at ProPublica Illinois. Follow him on Twitter at @jasongrotto.