Ex-manager files $600M suit against Indiana Live owners, others

The company that used to manage Indiana Live casino in Shelbyville is suing its owners and others, claiming they conspired to block plans to build a gambling facility in Maryland.

The $600 million defamation and invasion of privacy suit, filed Feb. 15 in Baltimore Circuit Court by the Cordish Cos., accuses the groups of trying to sabotage construction of Cordish’s Maryland casino.

Maryland-based Cordish also claims the owners of Indiana Live failed to pay the company nearly $8.4 million in management fees and made false accusations when Cordish refused to drop its bid to collect the money.

The complaint names as one of the defendants Ross Mangano, chairman of South Bend-based Oliver Racing LLC, which owns the Indiana Live casino and Indiana Downs horse-racing track.

Reached by phone, Mangano declined to comment on the suit, dismissing the charges as “allegations.”

Cordish claims it was the subject of a smear campaign that cast the company as incompetent in its role at Indiana Live. Cordish managed the casino, but advertising funded by rivals seeking to defeat its Maryland casino created the impression that it owned the Shelbyville facility and was losing money there, according to the suit.

Cordish and another defendant, the Maryland Jockey Club, have been feuding for two years over casino-operating rights in Maryland.

Indiana Downs entered into an agreement with a subsidiary of Cordish in September 2007 to develop and manage Indiana Live. According to the suit, the deal called for Cordish to be paid a fee equal to 4.5 percent of the casino’s gross revenue.

The 233,000-square-foot Indiana Live opened in March 2009 and features 2,000 slot machines and electronic table games, including blackjack, roulette and poker.

In the first six months of 2010, Indiana Live generated revenue of more than $125 million, a 12-percent increase from the same time the previous year, the suit said. Yet Indiana Downs asked Cordish to defer a “substantial” portion of the money it was owed and to temporarily accept a lower management fee, to which Cordish agreed, according to the suit.

In a June 21 e-mail contained in the suit, Mangano threatens to immediately terminate the contract if Cordish attempted to recoup the fees.

“At this point, if it turns into a legal issue it will not be good for your management company … and I’m sure it would be positive event [sic] to the people of Anne Arundel, Maryland who oppose your casino, stating your management company is very inept and not good for the city from a gaming standpoint,” Mangano wrote.

Both Indiana Live and Indianapolis-based Centaur Inc., owner of Hoosier Park in Anderson, borrowed heavily after the General Assembly in 2007 allowed the horse tracks to add slot machines in return for a $250 million licensing fee.

In addition to borrowing to pay the state’s slots-licensing fee, Indiana Live spent $210 million to buy gambling equipment and to design and build its gambling facilities. Including 11-percent interest on most of the debt, Indiana Downs had incurred more than $500 million in debt, the suit said.

Analysts have speculated that Indiana Downs could be in danger of defaulting on its debt. It missed an interest payment due Nov. 1.

In what could be a sign of financial distress, Indiana Downs terminated its management contract with Cordish in August, alleging the company breached the agreement. It has not hired another firm to manage the facility.

Cordish claims in its suit that Indiana Downs manufactured the “breach” to give rival Maryland Jockey Club ammunition to discredit Cordish as it attempted to build the Maryland casino.

“Mangano’s sole purpose was to create false and unfavorable publicity for Cordish in connection with the referendum vote pending in Maryland,” charged Cordish’s lawyers in the lawsuit.

The Maryland Jockey Club had hoped to build a casino at Laurel Park, Md., but Maryland officials rejected its bid in February 2009 because it failed to meet several requirements. State law prohibits more than one casino from being built in Anne Arundel County.

Meanwhile, the Jockey Club funded an effort to overturn the zoning Cordish needs to build its Maryland casino and was successful in getting a referendum on the November ballot that could have thrown out the zoning. Voters sided with Cordish, however, clearing the way for January’s ground breaking.

Still, Cordish’s lawyers maintain that the company has been damaged by “the intentional and malicious acts” of Indiana Downs and Maryland Jockey Club, as well as others named in the suit.

Cordish is seeking $300 million in compensatory damages and $300 million in punitive damages.