Going to haunt us: Inside lawmakers' passage of gaming bill that sparked corruption case

The 2019 gaming legislation at the center of former state Rep. Sean Eberhart's corruption conviction started on an optimistic note.

The bill would be a “once-in-a-generation reset” on gaming in Indiana, state Sen. Mark Messmer, R-Jasper, said when he introduced it. It earned accolades from lawmakers across the aisle.

“This is, in my opinion, one of the biggest gaming bills, maybe, in the history of Indiana," apart from the bill that brought gaming to Indiana, said Sen. Ron Alting, R-Lafayette, during an early committee hearing.

But by the end of the legislative process, both Republicans and Democrats expressed their queasiness ― to varying degrees ― about what the bill had become. Their comments at the time have newfound significance in light of the case against Eberhart, a Republican from Shelbyville, and the implication from federal prosecutors that there could be more indictments to come.

Some statements seem downright prophetic in hindsight.

“I think this issue is going to come back and haunt us in the future," Rep. Ben Smaltz, R-Auburn, said on the House floor before final passage.

Eberhart pleaded guilty last month to conspiracy to commit honest services fraud. He admitted to influencing the bill to the benefit of casino operator Spectacle Entertainment in exchange for a promised six-figure job there.

The bill at the center of the controversy had a brow-raising path through the legislature, capped by a surprising vote at the uneasy end.

February: Optimism in the Senate

The omnibus gaming bill started out as Senate Bill 552, introduced by Messmer and Sen. Jon Ford, R-Terre Haute. The bill called for allowing sports betting at riverboats and horse-racing casinos, an earlier start date for live table games at race tracks, and the license holder of Gary riverboat licenses ― Spectacle ― to move them inland to Gary or Vigo County.

The bill passed two Senate committees unanimously and the full Senate by a 38-11 vote on Feb. 26, 2019. Support for the bill was bipartisan, with especially vocal support from Democratic lawmakers representing northwest Indiana, where a new Gary casino along the expressway was expected to draw more money to the city.

The bill left the Senate with language that required those relocated casino license holders to compensate Indiana communities that feared revenue loss from relocating casinos or increased competition, also known as "hold harmless" language. It earmarked $2.7 million for Evansville and a portion of wagering tax revenue to Hammond, East Chicago and Michigan City for the first four years.

Sen. Eddie Melton, D-Gary, praised the amended bill: "In terms of our opportunity for all our counties to work together in northwest Indiana, I think this sets a very strong precedent for the future."

March: Eberhart enters the picture

In the House public policy committee, the bill's first stop in that chamber, an amendment from Smaltz, the committee chair, removed the hold-harmless language and introduced the idea that the relocation of one Gary riverboat to an inland location in the same city should require a $100 million fee paid to the state. Under this amendment, the second license that Spectacle wanted to move to Vigo County would have to go to a competitive bidding process ― in which Spectacle would likely have participated.

Rep. Todd Huston, who wasn't yet the House speaker and who carried the bill in the House, argued in favor of a transfer fee, while allowing that the price tag could be negotiated.

Eberhart, a member of the committee, advocated for eliminating the fee, saying the state shouldn't penalize a company that plans to make a significant investment. His actions during this meeting are mentioned in charging documents as one of the "acts in furtherance of the conspiracy."

“The state’s going to come out way ahead on whatever we decide is the right price to move these licenses,” Eberhart said. “I just have a hard time understanding charging, in this case, Spectacle, a $100 million fee to take that one license to the highway, and at the same time, they’re going to forfeit that second license. To me, that’s a tough one to swallow. That’s an extreme amount of money. … I think it should be a zero fee.”

He called Rod Ratcliff, then Spectacle's CEO, and Centaur, the name of the company that preceded Spectacle, "extraordinary partners in Shelbyville."

"We couldn’t have asked for a better ownership group," he said. "Top-notch operator."

April: Divisions arise

In the House ways and means committee, Huston, who was co-chair, proposed lowering the transfer fee from $100 million to $50 million as a nod to the projected increase in state and local tax revenue that the casino move would produce, he explained.

The bill's next stop, on the House floor, is when tensions started to rise over insinuations of improper appearances.

Rep. Pat Bauer, D-South Bend, successfully amended the bill to require that any discussions held with the governor of Indiana about gaming be considered public meetings. He said the amendment was prompted by an IndyStar article from two weeks prior shedding light on an undisclosed private-jet flight that Ratcliff treated Gov. Eric Holcomb to the day before Ratcliff announced plans to acquire the two Gary riverboat casino licenses.

Bauer suggested the suspicion surrounding those events cast a cloud over the changes made to the bill in the ways and means committee, which he called "troubling."

“We went through gaming bills in this state, and they were constantly saying, somebody’s gonna go to jail from this General Assembly," Bauer said. "Not a single legislator has ever gone to jail. For that matter, not a single governor has ever gone to jail. I think you and I should try to preserve that."

Republican Rep. Alan Morrison of Brazil spoke against Bauer's amendment, saying it would set up a double standard for the gaming industry.

"It’s interesting how we treat gaming in this state compared to other industry,” he said. “We fall over ourselves to offer incentives, tax breaks, programs, and then when it comes to gaming, we punitively charge them to do business. There’s so many industries in this state that work with our governor, work with us, work with other departments throughout this government; they’re fluid situations, they have conversations, they have meetings."

Late April: Big changes after closed-door negotiations

Because the House and Senate passed different versions of the bill, lawmakers had to iron out their differences in a conference committee. These negotiations typically occur behind closed doors, and then the committee sends the final agreement to the House and Senate floors for votes.

Big changes happened to the casino bill in conference committee between April 16 and 22, and Eberhart played a part, according to charging documents.

The contents of Senate Bill 552 were moved onto House Bill 1015 for logistical reasons, and Huston was made author.

The start date for live table games was moved up by a year to January 2020, something Eberhart allegedly pushed for, according to text messages from Eberhart quoted in the charging documents.

"I worked my ass off for that," Eberhart wrote on April 18. In the same text exchange, he referred to “A little clean up to make it right for (lndividual A),” according to the charging documents. Individual A is authorities' reference to a person they believe to be part of the conspiracy who has not yet been charged or identified.

The transfer fee for the Gary riverboat license relocation was reduced from $50 million to $20 million, to be paid over the course of five years. And in exchange for relinquishing the second riverboat license, the revised bill would give Spectacle a $40 million tax credit.

The hold-harmless language ended up in the final bill, to the apparent anguish of Individual A and Eberhart. According to another text change during these negotiations, this issue seemed to be a sticking point.

Eberhart wrote in a text that he told an unnamed lawmaker that he "couldn't believe she would let the bill die because of hold harmless language.” He then wrote, “Just told (Individual A) to hold tight.”

The net positive for Spectacle of the final terms compared with the $100 million transfer fee originally proposed was striking. The last-minute changes prompted strong reactions, and skepticism, from House members across the aisle as they spoke on the floor just before the bill's final vote.

“I have negotiated many transactions over the years, and I’ve never seen anything like what I’ve seen here," said Rep. Ed Delaney, D-Indianapolis. “I said in sort of a cynical moment to one of my friends, ‘I want to know who represented the industry, and I want to know who represented the state, and I’m going to fire whoever it was that represented me and hire whoever it was that represented them."

Smaltz, the House public policy committee chair who first pitched the $100 million fee, said he was "concerned" and questioned why this bill was even necessary in the first place.

“Todd Huston and I are great friends, and I would venture to guess he feels the same way about this whole thing as I do, and our close association we’ve had with it, and probably both wish that we didn’t," Smaltz said. "I think everybody’s got their own little piece in here they like, but when you look at the whole, it’s not that good."

Rep. Randy Frye, R-Greensburg, criticized the bill for benefiting wealthy casino operators on the backs of poorer areas of the state, citing a significant financial hit to a small riverboat in Rising Sun. With exasperation, he also referenced the last-minute nature of the significant changes.

“This is a major change in gaming language. We need to think this through," Frye said. "A lot of this was thrown together in the last couple of hours! This is a big deal.”

Rep. Peggy Mayfield, R-Martinsville, likened the bill to a grenade.

“This bill is throwing a grenade into the middle of our gaming industry, and strangely enough, everybody seems to be on board, when the slightest tweak two years ago sent everybody running for their legislator to work on their behalf," she said.

Eberhart took the floor to defend the bill and the process. He argued that the state should give back a little to the "golden goose" that is the gaming industry.

"Transparent from the beginning to the end, folks. You cannot say that you did not have an opportunity to weigh in on this bill," he said. "This isn’t a grenade. I think this is a chance for us to leverage the assets that we have in place, with the gaming partners. And yes I said gaming ‘partners,’ because they are. They’re our partners, they’ve been that from the beginning, we need to embrace that."

For Eberhart, the partnership was more personal. Earlier that year, an unidentified Spectacle executive had offered him a job paying $350,000, the FBI unveiled last month. But on that April day on the House floor, Eberhart went on to reference his own role in crafting the bill.

"We talked about negotiations up here," he said. "Most of the bills that we have in this chamber are based on negotiations. And I know who was involved in negotiations. It was me and a lot of folks in this room. And everyone had that opportunity, again, to negotiate."

Huston, who signed off on the final version of the bill as chair of the conference committee, called the negotiation process "very, very unique" in that it involved compromise for many interested parties.

“This is where a different set of negotiations than you imagined could take place, happened," he said.

As then-House Speaker Brian Bosma tallied the votes, Huston's was the very last to appear, not a second before the voting closed. He voted no on the gaming bill.

Bosma recused himself from voting because one of his law firm’s clients is the Vigo County Capital Improvement Board, which stood to benefit from a casino coming to Terre Haute. That contract was arranged by Greg Gibson, one of two principal investors in Spectacle Entertainment.

In the Senate, the tone was far more complimentary. Alting reiterated the historic nature of the bill, and praised the legislature's scandal-free history with gaming.

“Ladies and gentlemen, I’m here to tell you that in Indiana we have never, ever had a scandal in the area of gaming," he said. "And that’s due to members of the General Assembly of good restrictions that we’ve put in, and dotting our I’s and crossing our T’s, both in the House and in the Senate. So I support this bill.”

Contact IndyStar state government and politics reporter Kayla Dwyer at kdwyer@indystar.com or follow her on Twitter @kayla_dwyer17.

Investigative reporter Tony Cook contributed.

This article originally appeared on Indianapolis Star: Lawmaker corruption: Inside the gaming bill at heart of Eberhart case