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May 19, 2008 6:20 pm US/Central
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GOP Power Broker Criticized Over Hotel Deal
CHICAGO (CBS) ―
Illinois Treasurer Alexi Giannoulias wants the Feds to investigate how a Republican wheeler and dealer allegedly schemed to siphon money from the state of Illinois.
CBS 2's Mike Parker reports it was a deal crafted by then-governor Jim Thompson and Republican insider and lobbyist Bill Cellini in the early 1980s. The target: the Ramada Renaissance, later the President Abraham Lincoln Hotel and Conference Center in Springfield.
Cellini and his partners would get a $15 million loan from the state to build and buy it, but would not have to make mortgage payments unless the hotel made a profit.
Giannoulias on Monday charged that an independent audit shows Cellini and his partners hid $2 million in profits from the state and siphoned them off for their own use.
"A sophisticated scheme to cook the hotel's books and divert millions of dollars so its owners wouldn't have to make good on the state backed loan," Giannoulias said of the alleged wrongdoing. "He didn't rob Peter to pay Paul. He robbed the state to pay himself."
Giannoulias says he's turned over the information to the U.S. Attorney and the FBI.
"Unfortunately I suspect the report represents just the tip of the iceberg," Giannoulias said.
Cellini's lawyer, Kathleen Vyborny says her client is "not worried" about that and that the treasurer's report contains only "innuendos." She told CBS 2 the millions came from "a very long list of permissible spending categories."
Vyborny said the timing of the report is curious since the state agreed earlier this year to dismiss a decade-long court case against the group of investors.
"We're puzzled by the allegations of hidden expenditures since all of that information has been out there for years," Vyborny said.
The report doesn't accuse Cellini or his partners of criminal wrongdoing. But Giannoulias said he forwarded the information to state and federal prosecutors last week.
Cellini is a millionaire lobbyist-businessman known for working behind the scenes in state politics. He runs the Illinois Asphalt Pavement Association, a Springfield-based lobbying group, and is a major donor to political candidates.
Cellini's name has also come up often in a trial involving Gov. Rod Blagojevich fundraiser Antoin "Tony" Rezko for wielding an unusually powerful influence over the $40 billion fund that pays the pensions of retired downstate and suburban school teachers. Cellini has not been charged with any wrondgoing in the Rezko case.
Giannoulias commissioned the audit after beginning foreclosure proceedings against the hotel last year, gaining control of it in March. He plans to sell it and recover some of the nearly $30 million owed to the state.
The hotel was built in 1982 with $15.5 million in state loans. But the hotel's various owners have paid almost nothing on the loan.
The report said the owners used hotel funds to pay $722,000 in legal expenses, bought Christmas presents and gave money to the Illinois Asphalt Pavement Association within a 10-year period ending in 2006.
The audit said during that time, hotel managers allegedly lied on financial statements to show reduced profits and that accountants doubled tax deductions to hide money from the state. Cellini and his associates also allegedly set up his corporation to skim about $475,000 from the hotel's catering business.
Giannoulias said the state can't recoup the losses even if Cellini faces criminal charges because the hotel owners are not financially responsible if the money isn't paid back under the loan's unusual terms.
Giannoulias plans to make some renovations and sell the property to a buyer, possibly a national hotel chain, in the next few months at a public auction. It is unclear how much money the state will collect from the hotel sale.
The President Abraham Lincoln isn't the only hotel taken over by the state.
Giannoulias' office also took over ownership of a Holiday Inn in Collinsville, insisting there's evidence that site -- built with millions in unpaid state loans -- was a cash cow for its owners who claimed it couldn't make a profit.
A Chicago-based real-estate auction firm Giannoulias has hired to handle the sale is accepting bids on that 228-room site through Wednesday, then will make a formal presentation of the bids to Giannoulias next week.
Giannoulias said that auction should help taxpayers recoup some of the $32 million owed on the site.
Gov. Rod Blagojevich seems not to be taking any of this seriously, at least not yet.
"Let me show you some of my profile in courage," Blagojevich said. "Let me state categorically, I'm against any misappropriation of funds."
Some of the alleged financial chicanery occurred during the Blagojevich term, when the state was supposedly keeping a close eye on the complicated deal.
CBS 2's Mike Parker and the Associated Press contributed to this report.
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