Casino regulators defend rules in court, say problems led to new licensing rules

Saying that “public trust requires strict regulation,” the Indiana Gaming Commission has asked a judge to dismiss a lawsuit filed by casino company investors challenging emergency rules the agency passed this year.

The commission filed its response Thursday in Marion Superior Court to the lawsuit filed by seven investors in Spectacle Entertainment, the parent company of two casinos in Gary and a casino under construction in Terre Haute. Among the plaintiffs in the suit are longtime business executive Stephen Hilbert of Carmel and a former state lawmaker, Matthew Whetstone of Brownsburg, who is now a lobbyist.

The commission’s new rules mean that investors in casino companies will be required to provide extensive personal and financial information, including 20 years of employment data, along with details about business relationships, criminal history, assets and taxes.

In its response to the suit, the gaming commission said state law authorizes it to collect any “information the commission considers necessary for the effective administration” of casino licensing laws.

And it said the rules became necessary because of problems associated with the ownership of Spectacle Entertainment.

The court battle comes two months after former Spectacle CEO Rod Ratcliff was permanently banned from the state’s gambling industry as part of a settlement agreement to a lawsuit he filed against the Indiana Gaming Commission in January.

The state agency had been investigating Ratcliff and his companies after he was connected to a federal campaign finance scheme. Ratcliff has not been charged with any crimes.

But in September, prosecutors indicted former state Sen. Brent Waltz and former state lawmaker John Keeler, a former Spectacle Entertainment vice president, on federal charges related to violating federal campaign finance laws.

“These events have cast a shadow over the industry and served to undermine its reputation and integrity,” the gaming commission said.

Regulators have said they’ve struggled to obtain complete and accurate information about Spectacle and its subsidiaries. “Refusal to provide information for licensure creates a blind spot in the commission’s ability to ascertain the nature of casino transactions, the associations of casino owners, and the overall suitability to hold casino ownership,” the court filing said.

But Brent Embrey, an attorney representing the plaintiffs, told IBJ last month that the investors “face potentially significant financial harm for no particularly good reason” because the lawsuit could decrease the value of their ownership stakes.

In their lawsuit, the plaintiffs also said they believe the Indiana Gaming Commission plans to reject their licenses should they apply. But the agency said in its response that “the commission has formed no such intention and taken no such action. Indeed, it cannot responsibly act on an application until the application is received and reviewed.”