Two casino operators had past issue with campaign contributions

Editor's note: The headline accompanying this story was changed at 7 p.m. on July 30, 2013. The original headline unintentionally implied casino investor Steve Gray was involved in a 2009 campaign law violation case. Gray was not one of the parties investigated in that incident.  

CEDAR RAPIDS - Two of the casino executives now hired to develop and operate a Cedar Rapids casino were entangled in allegations that they and their company, Peninsula Gaming Partners, made an illegal campaign contribution in late 2009 to then-Gov. Chet Culver's unsuccessful 2010 re-election campaign.

The controversy then was not that casino executives in Iowa make contributions to gubernatorial candidates. They do. And case in point is Steve Gray, lead investor with the local investor group that is working to build a casino in Cedar Rapids, who held a fundraiser for Gov. Terry Branstad in October 2012 about the time Gray and his group said they would seek a state gaming license.

What caused the stir in Culver's 2010 campaign was centrally this: that Peninsula Gaming Partners LLC and its two top executives provided $25,000 for the Culver campaign contribution to those in Fort Dodge who wanted Peninsula to build a casino there, and the Fort Dodge backers then made the contribution to the Culver campaign in their name, not in the name of Peninsula or its executives.

A governor does not have a say in the granting of state gaming licenses, though the governor appoints the five members of the Iowa Racing and Gaming Commission.

Back in March 2010, Culver publicly said he supported new gaming licenses for four new casino applicants, including the Fort Dodge applicant, though the commission two months later granted only one, in Larchwood in far northwest Iowa.

Charges were filed, then dismissed

In the fallout from the contribution controversy, serious misdemeanor charges of making a campaign contribution in the name of another were filed against Peninsula Gaming Partners LLC, Brent Stevens, the company's chief executive officer, and Jonathan Swain, its chief operating officer, though the charges subsequently were dismissed against the company's executives and the company in a court action in Polk County District Court.

However, a non-criminal settlement agreement between the Iowa Ethics and Campaign Disclosure Board and Peninsula Gaming Partners on behalf of Peninsula and its executives required Peninsula to pay a $4,000 civil administrative penalty to the state board on July 22, 2011, related to the campaign contribution.

Stevens and Swain and a third former Peninsula executive now are involved in the proposed Cedar Rapids casino.

The Culver campaign episode was precipitated in October 2009 when a Fort Dodge group, Webster County Entertainment LLC, asked Peninsula Gaming Partners LLC - which operated the Diamond Jo casinos in Dubuque and Worth County, Iowa, at the time - to open and operate the proposed Diamond Jo Casino in Fort Dodge.

In November 2009, the two entities applied for a license with the Iowa Racing and Gaming Commission to operate a casino in Fort Dodge.

According to the Iowa Ethics and Campaign Disclosure Board's settlement agreement with Peninsula, Peninsula reported to the board that then-Gov. Culver's campaign asked for a $25,000 campaign contribution from Peninsula. After Peninsula said it conferred with legal counsel, Peninsula paid Webster County Entertainment LLC $25,000, which three members of Webster County Entertainment LLC then paid to the governor's campaign as Peninsula said had been Peninsula's expectation. Culver ultimately sent the money to a charity after questions about the money arose.

The settlement agreement between the state board and Peninsula came about because Iowa campaign law does not permit someone to make a campaign contribution in the name of another. The agreement states that Peninsula and its executives denied they intended to violate the law.

Brian Ohorilko, administrator with the Iowa Racing & Gaming Commission, said on Friday that both of the former Peninsula-owned casinos in Iowa “demonstrated nice growth” and both have seen the casino company reinvest back into the facilities.

He added: “In terms of compliance with the rules and regulations of gaming, we have not experienced any material issues with Peninsula. They have historically responded promptly and reacted accordingly to the IRGC in the event inquiries have come up.”

Peninsula sold its two Iowa casinos and the three others it owned elsewhere in November 2012 to Boyd Gaming.

In addition to the potential Cedar Rapids project, Stevens is a major investor in the development group working to build the $118.5 million Hard Rock Hotel & Casino in Sioux City. The project was granted a license by the Iowa Racing & Gaming Commission in April.

Eventually, Webster County Entertainment pleaded guilty to a simple misdemeanor, accessory after the fact, and an outside legal counsel for Peninsula received a deferred judgment on a simple misdemeanor charge of interference with official acts.

In 2010, the Iowa Racing and Gaming Commission rejected three of four requests for new state gaming licenses, including the request from the Fort Dodge group. In 2010, too, Culver lost his re-election bid.

At the time, Culver's campaign also acknowledged that it sought a campaign contribution from a Dan Kehl-led casino investment group, which, like the Fort Dodge group, had a pending application for a state gaming license in front of the Iowa Racing and Gaming Commission.

Kehl did not provide a contribution to Culver's 2010 campaign, saying in news stories at the time that he thought it would look bad to contribute to governor's campaign at the same time that his company had an application for a state gaming license pending in front of the commission.

The commission subsequently granted the license for the Kehl casino at Larchwood in far northwest Iowa.

However, Kehl personally contributed to Culver's campaigns in 2007 and 2008, he confirmed on Monday.

During the 2010 gubernatorial campaign, Gary Kirke, the chairman of Iowa casino operator Wild Rose Entertainment, provided  then-gubernatorial candidate Terry Branstad's 2010 campaign with campaign contributions. Wild Rose sought to build a new casino south of Des Moines in Warren County earlier this year and has a current proposal for a casino in Greene County.

Cedar Rapids Casino

On Sunday, Steve Gray, lead investor for the Cedar Rapids casino investor group, announced that it had hired former Peninsula executives Stevens, Swain and Natalie Schramm to help develop the Cedar Rapids casino and to operate it if it secures a state gaming license.

Gray said the local investors had three primary criteria in picking a casino manager: previous financial and operating performance; relationship and record with the Iowa Racing and Commission; and the ability and willingness to invest.

“The settlement with (the) Campaign Disclosure Board specifically provides that they relied upon advice of counsel and settlement does not constitute any wrongdoing or admission of violation of reporting by the executives.” Gray said Monday. “JNB Gaming is the right choice for Linn County's casino development, because of their successful track record in Iowa's gaming industry, their history of commitment to the communities where they operate and their integrity.”

Related: Experienced executives to join casino project