Attorney general: E.C. insiders tapped casino cash for "enormous" salaries

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BY PATRICK GUINANE
pguinane@nwitimes.com
317.637.9078 | Wednesday, June 27, 2007 | (22 comment(s))

INDIANAPOLIS | East Chicago political insiders Thomas Cappas and Michael Pannos and their families reaped "enormous" salaries while at the helm of an embattled development firm accused of squandering millions in local casino cash, Indiana Attorney General Steve Carter states in a confidential report obtained by The Times.

The for-profit firm, East Chicago Second Century Inc., was stripped of its more than $2 million annual casino subsidy -- that was supposed to be earmarked for community development projects -- a year ago after Carter delivered his financial investigation to the Indiana Gaming Commission.

The Times made a public records request for the report in June 2006 and received a partially redacted copy this week.

The 896-page document provided by the Gaming Commission blacks out most the financial details Carter compiled using confidential state records.

However, a source familiar with the case said the amount paid to Cappas, Pannos and family members of the two men from 2002 through 2004 is in the millions and represents the vast majority of Second Century's payroll for the three years that Carter examined.

Second Century was created to develop affordable housing and other economic development projects in the city. And for a decade, it received 0.75 percent of the East Chicago casino's annual profits under a 1994 side deal that then-Mayor Robert Pastrick brokered to bring riverboat gaming to the lakefront city.

Second Century is run by Pannos, a former Indiana Democratic Party chairman, and Cappas, an East Chicago political insider whose ties to the Pastrick administration earned him the nickname "midnight mayor."

Cappas, Pannos, their wives and other family members were investors in the original Showboat casino that opened in 1997 and are believed to have made millions when Harrah's bought the East Chicago riverboat a year later. Shortly thereafter, the two men received permission to take over Second Century, telling the Gaming Commission in 1998 that they would take no salaries "but may be asking of a compensation package at some point in the future."

The compensation later paid to Cappas, Pannos and family members was "enormous" and was on the rise from 2002 to 2004, Carter says in an unredacted portion of his investigation. Other state officials who have seen Carter's full report also call the payouts excessive.

"Excessive is a kind term," said Ernie Yelton, the gaming commission's executive director.

But Second Century attorney J. Lee McNeely said Carter's report gives his clients no reason to blush.

"We are a private corporation, despite hysterical comments to the contrary by officeholders," McNeely said. "We have paid salaries, and we have paid expenses like any private corporation does. It's perfectly appropriate."

East Chicago, led by Mayor George Pabey, has waged a two-year legal war to wrest control of the more than $2 million in annual casino funds that had flowed to Second Century. And Carter has filed briefs in the case -- now before the Indiana Court of Appeals -- demanding Second Century provide a full account of the $16 million it has received.

Carter and Pabey argue Second Century was created to foster a public benefit, and therefore its finances should be brought to light. McNeely, meanwhile, says greater attention should be paid to the more than $361,000 in legal fees East Chicago has amassed in its court battle with Second Century and two separate nonprofits that receive another $6 million a year in casino funds.

East Chicago Corporation Counsel Carmen Fernandez called the city's legal fees a "drop in the bucket" compared to the $8 million annual windfall at stake in the casino cash clash.

"We look at it as an investment for the city of East Chicago," Fernandez said of the legal fees. "If we don't do this, the money keeps going down a black hole."

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Joker wrote on Jul 1, 2007 10:17 AM:

" So all that crapola we heard about casino money revitalizing NW Indiana by these so called ''elected leaders'' was just that...crapola...how can tell when they're lying?..their lips are moving... "

unknown wrote on Jul 1, 2007 3:16 AM:

" It's all about the money,if you got the money your in the right,til your broke.Go to www.the lies of the mayor. And why would Pabay bite the hand that fed him all the time he was a officer,then a chief police,He acted as if he was Scarface,no one could touch him. But God see everyone and everything.And he will have the last word,to this. "

Whats new... wrote on Jul 1, 2007 12:24 AM:

" Lake County..... East Chicago.... Why should any of this surprise any resident of Lake County.. Its an accepted practice.. CORRUPTION "

Maria P. wrote on Jun 29, 2007 4:14 PM:

" As City attorney, Fernandez�s responsibility, is to speak on behalf of Pabey and the City. Pabey never lied about his 2.5% interest in the casino. There is nothing wrong with his being an investor. He was in the right place at the right time. The casino benefited also because all casinos in NWI that successfully bid for gambling licenses included local investors of some prominence to increase their chance of winning a license. Pabey wasn't just a "big man in security" he was the Director of Security. In his position, he went out of his way to hire EC residents for his department - until he was "discouraged" from that practice. He eventually left when he realized that management didn't plan on keeping up their bargain of hiring as many EC residents as possible. How do I know this, besides some of this info being public knowledge, I worked for Harrah's in the beginning. I sincerely hope that the City of East Chicago is successful in their bid to gain control of the casino monies which rightly belongs to the residents and not the "Foundations-to-Screw-over-the-residents-of-East Chicago" "

east chicago resident wrote on Jun 29, 2007 12:20 PM:

" Carmen Fernandez is George Pabey cousin and she does all the talking for him. He need a lawyer that not kin to him George is pointing finger at the former mayor. And he had partnership in that boat he also work at the boat to in 1997 as a big man in security he needs to stop lying because before harrah's sold. The Hammond Times wrote a story on who had money invests in the boat and Mr.Pabey was one other them. "

your average joe wrote on Jun 29, 2007 5:49 AM:

" all I want to know is why couldnt I invest in Showboat casino when it was formed? Then, I could make a boatload of money when Harrahs buys the company, just like Cappas. It is the same old story..its not what you know..its who you know.. "

grandma wrote on Jun 29, 2007 5:32 AM:

" Tell me who you work for,and I'll tell you,Your the same way just different name. Was'nt Pabey police,then chief of police under Pastrick? Then why everyone said they're tired of Pastrick? Should'nt someone else that was'nt under Pastrick a better canidate Duuuu? When it comes with big money it should be check every month.and not every when ever you feel like it.So yoou tempt people who don't have money and they assume it's their's What goes around comes around nothing can be hidden under a thumb. "

Keep looking wrote on Jun 28, 2007 11:35 AM:

" The Foundations are next! Like the Song "Don't Stop Thinking about Tomorrow. "

Hmmmm wrote on Jun 28, 2007 11:30 AM:

" Sad thing is these guys built the Foundations and appointed Russ Taylor. "

Hey EC Guy wrote on Jun 28, 2007 11:29 AM:

" I don't know of any attorney who has the expertise in gaming contracts. Fernandez has led many battles against the injustices that East Chicago has experienced. It sounds if you have a personal bitterness-let it go! Save it for group. "

WOW wrote on Jun 28, 2007 11:25 AM:

" East Chicago political insiders Thomas Cappas and Michael Pannos and their families reaped "enormous" salaries while at the helm of an embattled development firm accused of squandering millions in local casino cash, Indiana Attorney General Steve Carter states in a confidential report obtained by The Times. ENOUGH SAID IN THE OPENING1 "

Bitter wrote on Jun 28, 2007 11:23 AM:

" Pannos and Cappas need to enjoy their retirment and get out of here. "

sick and tired of being tired wrote on Jun 27, 2007 11:01 PM:

" Oh well hear they go again... Stop it East Chicag, Stop it... Stop your whinning. Don't make out like Pannos and Cappas are such bad guys for taking what they consider a fair compensation... The question is did they committ an illegal act.. If not then yes we are wasting tax payer money trying to make their actions illegal.. Ever since the river boat dock on the shores of East Chicago, all we have had in nothing but trouble..May be the citizens should lobby against river boat gambling..... Think about it ... then we would not have to worry and argue over this blood money..... are sick and tired of being tired? "

joker wrote on Jun 27, 2007 4:00 PM:

" This is just like the GUEA circus....nobody will go to jail... "

Raise in EC wrote on Jun 27, 2007 3:07 PM:

" "The sad part of all of this is that this is a smoke screen. Everyone is pointing the finger back and forth, the mayor, second city, lawyers... all of them are crooks. We need a change in EC and all they are looking for is someone to blame. All of them should sit down open the books and let all the citizens know where all the casino money is going. This about less than 1%, where is the REST of the money. Didn't Pabey say he would let us know? Oh yeah, he also said we would get an elected school board. We've gotten how much better since Pastrick? Hey but we do have new side walks... "

JDM wrote on Jun 27, 2007 2:19 PM:

" This sort of thing has been going on in Lake and Porter Counties ("the region")for years. The voters keep electing thieves who only know to deal with other thieves, so what do the people of the area expect? A total housecleaning, may, and I mean MAY, be a start in fixing this; however, it is so ingrained in the political structure who knows if it ever will change. "

Native wrote on Jun 27, 2007 12:50 PM:

" It is disgusting to read about the amount of money that is being taken away from the city. If that money was invested properly into the city it could assist with funding programs, police, and building homes and businesses that will in turn reduce the mass amounts of senseless violence, drugs, and teens running wild. Those families don't live in E.C. and probably don't give two cents about it or anyone that lives there. I say it's time to expose all of those lying, cheating, rodents!!! Reap the benefits now and pay later when you meet your Maker. "

a YOUTH of E.C. wrote on Jun 27, 2007 11:59 AM:

" i've read almost every article, in the times, about our city's corruption. i thought paby was here to make a CHANGE, MIERDA!!!!!!!! im a lil vague but what was the theme of campaign? ITS TIME FOR CHNAGE, is that wat it was? n as a youth the only thing that i've seen change is the color of the GOT DARN roads, WHO NEED RED SANDSTONE BRICK IN THE MIDDLE OF THE INTERSECTION? nice park but they have turned the lights to the basketball courts off sense the end of May, n STILL no lights. it sucks the people of e.c. are easily minipulated into thinkin sumthin has actually CHANGED, another APPOINTED school board, im sorry IDIOT school board, them n the ppl who appointed them, wheres the CHANGE GEORGE FATbey? bigger belt size? we still headline the times with our corruption articles, WHERE IS THE CHANGE, GOD DONT LIKE UGLY "

Ex-EC Resident wrote on Jun 27, 2007 10:36 AM:

" Perfectly appropriate? Give us a break Mr. McNeely. It's perfectly appropriate if you're associated with the previous administration and his "make my friends rich" attitude. The Cappas and Pannos families have been making a bundle off of the EC boat since it started floating. Contrary to what the Cappas and Pannos families think, those funds that Second Century has been receiving are public funds. It may say something different in a contract that the Cappas family probably wrote, but let's be truthful. That money belongs to the residents of East Chicago. Mr. McNeely then tries to deflect the publics attention from the subject at hand by bringing up the amount the city has had to spend to try and wrestle this money away from Second Century. Too bad there probably won't be any prosecutions forthcoming since all of this thievery is probably "legal", albeit not moral. If only the AG could track the kickbacks that have probably been going to the previous mayor. A final comment: Mr. McNeely, I believe Jojuana Meeks is looking for a new attorney. Maybe you can give her a call. "

ss wrote on Jun 27, 2007 9:55 AM:

" What a bunch of bums! They should have to pay back every dime that they have taken!!!!!!!!!!!!!! "

ec guy wrote on Jun 27, 2007 8:36 AM:

" Does Carmen Fernandez do any legal work without other lawyers holding her hand? "

Oldest Spear wrote on Jun 27, 2007 7:55 AM:

" Hopefully, it seems that Mr. Carter will bring Cappas, Pannos and their families to court, soon. These leeches have been living off of dumb East Chicago since the 1970s, so when will these blood suckers be tried? And for the TIMES, print the photos of these guys because we NEVER know how they look because they always act in the background all those years! "

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