Illinois: New gamblers in town

New gamblers in town
By Joseph Ryan, Tribune reporter

Nicky Nichols became a major player in the Louisiana world of video gambling while cutting key politicians in on the game. Now he has brought some notable business partners to his Illinois ventures: Louisiana legislators.

As Illinois struggles to roll out video gambling machines in bars and truck stops, one of the key players setting up shop here is a master of the game in Louisiana.

Nicky Nichols grew a Louisiana video poker empire while striking up business relationships with lawmakers who help regulate the industry. And his father-in-law was a major figure in the state's storied gambling scene who admitted bribing the governor to get a casino license.

Now Nichols is angling to be a dominant player in Illinois' behind-the-scenes gold rush, competing with scores of other applicants for a share of an estimated $1 billion pot. To do that, Nichols is bringing his Louisiana business style to Illinois.

He has brought Bayou State lawmakers and a top gambling lobbyist along as investors as he seeks deals in Illinois. And he's embracing the local culture of contributing heavily to the political funds of friendly lawmakers.

State Rep. Lou Lang, D-Skokie, Springfield's go-to guy on gambling legislation, has received about $70,000 in contributions from Nichols and his related companies since shepherding the 2009 law that legalized video poker. Since then, Lang has twice pushed for measures that regulators say would weaken their ability to control the new industry.

Lang said the contributions are just a show of appreciation for his support of gambling and don't affect his actions. But he bristles at the idea of lawmakers getting into a business they help regulate.

"Whether it is legal or not, it shouldn't be done," Lang said.

Regulators have yet to issue any licenses and the fledgling video poker industry could be stopped cold if the Illinois Supreme Court declares the underlying law unconstitutional. A decision is expected Monday.

Big bucks are at stake and businessmen like Nichols are unlikely to fold their cards. Lang may push new legislation if the Supreme Court jettisons the original law.

Nichols, through his Illinois attorney Paul Jenson, declined to answer specific questions from the Tribune. Jenson said Nichols has multiple gambling licenses in good standing.

"Indeed, we believe Mr. Nichols will be a credit to this exciting new industry as an operator of successful businesses that hope to employ many people while being socially minded and charitably inclined," Jenson wrote in an email to the Tribune.

Two Louisiana lawmakers defended their business relationships with Nichols.

"There is nothing illegal or unethical about it," said Louisiana Rep. Damon Baldone, a Nichols investor and vice chairman of a committee overseeing video poker.

A rough history

Louisiana has a rough history with legalized gambling, and in the middle of it was Nichols' father-in-law, Robert Guidry.

The millionaire tugboat operator was a regular at $10,000-ante poker games held by legendary Gov. Edwin Edwards, a relationship that helped Guidry win a fortune in the state's burgeoning gambling industry.

Louisiana launched video poker in 1992. Bars can have three machines and truck stops can have as many as 50, making them mini-casinos.

Early on, Guidry's video poker company came under fire from Louisiana State Police, who accused him of hiding a business relationship with a reputed organized crime associate. Guidry fought the allegations with the governor's help, and he won a court battle to keep the license.

Then Guidry landed a casino license. He later testified in Edwards' 2000 corruption trial that he paid nearly $1.5 million in bribes for the license, sometimes dropping off paper bags filled with rolls of $100 bills.

Guidry pleaded guilty to conspiracy to commit extortion and was a star witness against Edwards.

Guidry became an issue for Nichols when he applied in 2006 for a slot machine supplier license in Pennsylvania. The license was approved on the condition that no one in the firm discuss business in Guidry's presence.

Baldone and Alton Ashy, a lobbyist for many Louisiana gambling operators including Nichols, said Guidry has nothing to do with Nichols' video poker enterprise.

The Louisiana game

In recent years, Nichols has become part-owner or manager of several truck stop casinos and the video poker company Redman Gaming in Louisiana. He is also listed as an officer with companies that handle video bingo gambling machines in areas of the state in which video poker is banned.

Nichols' companies have repeatedly cut key officials in on their business.

When Redman Gaming sought to build a truck stop casino across the Mississippi River from New Orleans in 2009, The Times-Picayune newspaper in New Orleans reported key officials there had secured a deal to invest in other truck stops linked to the company. The deal, which included the Jefferson Parish administrator and former parish president, fell apart amid an unrelated investigation of the administrator. But Redman's truck stop casino was approved.

Louisiana Rep. Ernest Wooton, chairman of the committee that handles gambling laws, has reported he was a security consultant for convenience stores partly owned by Nichols in 2009 and before that he made $24,000 over two years consulting for Redman Gaming.

Wooton, a former sheriff, said he informally checked with attorneys for the state's ethics board to make sure his security work was legal.

"I don't want to be like your governor and a few other people from Louisiana," Wooton said, referring to convicted former Gov. Rod Blagojevich.

Baldone, an attorney with wide-ranging business interests, reported in state disclosure filings that he made $959,480 from 2008 to 2010 from his investments in Nichols' Redman and Tall Timbers truck stop companies. Baldone said he took up Nichols' offer to invest in his companies about four years ago when he was looking to build a truck stop casino of his own.

During their decade-plus legislative careers, Wooton and Baldone have repeatedly backed pro-video poker measures, including some that critics argued would weaken regulation of the industry.

Baldone said he has long supported gambling because it is supported by his constituents. He said he has no conflict of interest, comparing his gambling votes to a lawyer voting on laws affecting the courts.

Others disagree.

"I'm really having trouble digesting that. It is so blatant," said Edward Chervenak, assistant political science professor at the University of New Orleans. "They have a vested interest."

Coming to Illinois

Within weeks of Illinois approving video poker in 2009, Nichols started filing paperwork to create gambling-related companies in the state. Now he is tied to about a dozen companies in all.

The law allows bars, truck stops and clubs to have up to five machines. Video poker operating companies can place machines in multiple locations while taking roughly a third of the revenue.

The Illinois Gaming Board is facing more than 80 applications for that type of license. Most of the companies tied to Nichols are seeking operator licenses. They cite addresses across the state, from Collinsville to Chicago, and involve various partners, some local and some from Louisiana.

Nichols also has ties to Illinois Gaming Management LLLP, which is seeking a license to distribute machines to video poker operators. Illinois Gaming includes a full circle of Louisiana clout: a top video poker lobbyist, video poker companies and state lawmakers.

Public records in Illinois show more than 20 partners, including Baldone, lobbyist Ashy, some of Nichols' video poker business partners and Louisiana state Sen. Robert Marionneaux — former chairman of a committee overseeing video poker

Baldone and Ashy said they were approached to invest by Nichols. Marionneaux, now head of a powerful tax committee, didn't return phone calls seeking comment. Ashy and Baldone said the Illinois Gaming application could be rescinded because the firm's deal with a video poker manufacturer may have recently fallen apart. But they also said they and other investors might instead place their bets on other video poker ventures in Illinois.

Still, Baldone said he is frustrated with the hang-ups in Illinois' rollout of poker machines.

"I invested my money a long time ago and I'm not getting any return," he said. "I hope they do this right and they do it expeditiously."

Roadblocks

Lang blames the gaming board for most of the delays in rolling out the machines.

"They have dragged their heels very much on video gaming," he said. "I don't believe they are in a hurry to make it happen."

Lang has pushed through measures he says are aimed at speeding up the process and making it more equitable — over the complaints of regulators.

Gaming Board Chairman Aaron Jaffe has said it is time-consuming for his understaffed agency to develop rules and procedures for overseeing tens of thousands of machines in thousands of locations.

He blasted the Lang measures, including a new law last year he said would make it harder for regulators to keep bars and clubs out of the industry if they had been previously raided for illegal machines.

Jaffe also criticized a provision tucked into a major casino expansion proposal this year that would force the board to issue provisional video poker licenses within 60 days even if the establishments haven't been fully vetted. The change is up in the air as Quinn debates the overall package, which includes a Chicago casino.

Lang said he supports video poker because he believes it is a good way to raise an estimated $300 million in taxes to bankroll construction projects. He said his moves are not influenced by contributions from gambling interests, including Nichols.

"I haven't seen any effort by Mr. Nichols in Illinois to improperly influence anybody to do anything," he said.