What's Happening with Emerald Casino?

Gambling casinos and high rollers are making national news again in the nation’s number one gambling destination, Las Vegas (New York Times 6/13/2007). You may or may not know the Chicago area ranks third in the country, behind the Las Vegas Strip and Atlantic City, NJ, in terms of gambling revenue from casinos. In 2006, Chicago earned revenues of nearly $2.6 billion. Taxes generated from these revenues help keep the state running.

However, because of the conflict revolving around the now infamous “10th license,” the state has collected $1 billion less than it could have over the past several years. However, compared to the 18 minority investors who stand to lose over $33 million - representing for some, as I’ve been told personally, their life’s savings - the state is not the biggest victim of this debacle. The decision by the Illinois Gaming Board (IGB) to strip Emerald Casino of its gaming license has also profoundly damaged confidence within the minority community in the state’s willingness to keep it’s promises.

For over five years now, 18 Chicago minorities - blacks, Latinos, and women - have fought to protect their investment in Emerald Casino, pointing out that state legislation mandated their involvement in the project. Together this group of minority investors put up $33 million, assured by the IGB that the state would protect their investment should anything go awry. Now, nearly six years later, these minorities are learning the hard way that government affirmative action can be a double edged sword. When the Illinois Legislature allowed Emerald Casino to relocate to Rosemont, it stipulated that Emerald must obtain 20 percent minority and female ownership. The goal of the legislation was to open up the gaming industry to minorities and women. The state gaming board conducted a thorough background check on all of the minority investors to ensure that they were not being used as fronts for white corporate interests. However, the gaming board failed to investigate the other 80 percent with the same rigor. Now the 18 innocent investors are being punished for the wrongdoing of a few white managers.

The 18 folks who committed their money are now being punished for putting their trust in political promises. Minorities would do better to trust the free market. Despite all its assurances, the state never relinquished its authority to revoke the license and leave the investors holding the bag. Clearly, the investment was anything but safe. Now 18 minorities are being financially ruined because several partners of Emerald Casino were deemed ‘unsuitable’ by the state. Amazingly, Illinois would rather revoke the license entirely, foregoing $600 million in the process, than allow the license to be transferred to another bidder. The IGB could hardly erode the good will of Illinois’ minorities any further if it set out to do so deliberately.

There may have been valid reasons for the IGB to revoke Emerald Casino’s license. I certainly do not condone crime, lying to state regulators or shady business practices. However, one bad apple should not cause the whole barrel to be thrown out. There is ample precedent for punishing managers without sticking it to innocent investors. For example, recently a major Chicago newspaper was in the news for the wrongdoing of one of its directors. However, the state punished the offender without shutting down the paper and bankrupting the investors. The state is currently involved in a massive overkill.

It is particularly interesting to note that the minority investors are overwhelmingly members of the Democratic Party. With both state houses and the Governor's mansion in Democratic hands, one might think they would be well represented. Perhaps there is a lesson here about the danger of putting all of your political eggs into one basket. Democrats, who pride themselves on their compassion, have not shown much sensitivity to the victimized minorities in this story. And there is little reason for Republicans to protest the Democrats shabby treatment of Chicago’s minorities.

Because minorities, blacks in particular, are a one-party voting block, they frequently get taken for granted. In this instance, 18 minority investors found their trust in their Democratic friends largely misplaced. It is time to understand what corporate America has known all along: the marketplace is apolitical. This is why corporations so frequently contribute money to both political parties. I believe the investors in this instance are being wrongly deprived of their money, but I hope the wider community learns the right lesson from their misfortune.