EAST CHICAGO, Ind. -- Concluding a lawsuit that began nearly a decade ago, Indiana Attorney General Greg Zoeller turned over to the City of East Chicago more than $331,000 the State has collected from former Mayor Robert Pastrick and his co-defendants through the Attorney General’s civil prosecution of a racketeering lawsuit against the former city officials who squandered taxpayers’ money in the 1999 “sidewalks for votes” scheme.
The distribution to the City of East Chicago facilitated by the Attorney General includes $145,416.70, the amount liquidated from Pastrick after the U.S. Bankruptcy Court ruled March 25 that his assets were not exempt from a separate federal court judgment in the civil racketeering case.
Zoeller also distributed to the City $186,250, the amount remaining from settlements and judgments paid by Pastrick’s co-defendants who were named in the Attorney General’s original lawsuit brought under RICO, the federal Racketeer Influenced Corrupt Organizations statute.
In total, $331,666.70 has been distributed to the City as a partial payment toward the approximately $24 million that Pastrick and his associates in his political organization had illegally squandered in the sidewalk paving scheme intended to influence the 1999 mayoral primary election. Zoeller announced the distribution today with current Mayor Anthony Copeland.
“The loss of public trust is the legacy of the Pastrick regime, one that will take time to restore. In the end, our legal actions once again show that no one is above the law. Today marks a milestone in restoring public trust and I salute Mayor Copeland for striving to have an ethical administration that seeks to earn the trust of the people,” Zoeller said.
“While history may record where we have been, the future will reveal that we have accepted our past. But it will not determine our future. We have taken the lessons learned from it in order not to repeat it,” Mayor Copeland said.
“I’m glad that the Attorney General went after these funds and I’m glad to see they are coming back to the residents of East Chicago,” said Lenny Franciski, president of the East Chicago Common Council.
In its complaints filed in court, the Attorney General’s Office noted Pastrick’s 33 years as mayor where the East Chicago municipal government was operated through patronage to perpetuate Pastrick’s political organization, often called “the Pastrick machine.” To boost his re-election chances in the 1999 mayoral primary, Pastrick and his allies engaged in a scheme that spent $24 million on a pre-election sidewalk-paving and tree-trimming operation – some of it on private properties – to curry favor with voters. The massive expenditures depleted the city treasury.
Starting with a State Board of Accounts audit that asked the Attorney General’s Office to recover the $24 million, then-Attorney General Steve Carter in 2004 filed suit against Pastrick and co-defendants in U.S. District Court under RICO seeking repayment and treble damages. The same year, Pastrick was defeated in a special election ordered by the Indiana Supreme Court when it found the 2003 mayoral election had been tainted by fraud. (It was through the intervention of the Attorney General’s Office in challenging the 2003 election that the results were overturned and a special election ordered.)
In the RICO lawsuit, a federal district court in June 2009 entered a judgment against Pastrick on every racketeering count the State alleged. The judgment was the first time a U.S. court had found that a municipal government – the Pastrick administration – was a corrupt enterprise under federal racketeering law. In March 2010, U.S. District Court Judge James Moody ordered a treble damages award of $108 million against Pastrick. After Attorney General Zoeller started collection efforts through Rubin & Levin, a collection law firm, Pastrick filed a Chapter 7 bankruptcy petition to avoid consequences of the judgment. Initially the ex-mayor claimed the judgment could be discharged, or avoided, through bankruptcy.
The State, represented by Attorney General Zoeller’s office, objected, contending Pastrick’s civil judgment could not be legally discharged through bankruptcy due to the underlying theft and statutory penalties imposed. The State filed a motion for partial summary judgment in U.S. Bankruptcy Court and ultimately, Pastrick conceded: On August 16, 2012, Pastrick filed an amended answer, admitting liability on one of the counts the State alleged – that the debt is not dischargeable – and consenting to an entry of judgment for the full amount. On March 25, the U.S. Bankruptcy Court in South Bend ruled in the State’s favor and found that Pastrick can’t use bankruptcy to avoid the judgment.
The ruling by Judge Harry C. Dees marked the end of the State’s adversary proceeding in U.S. Bankruptcy Court. In the remaining case, under the court’s supervision, the bankruptcy trustee already had collected and sold for payment what portion remained of Pastrick’s assets that legally were considered non-exempt. The City of East Chicago and the State of Indiana were the only creditors. The State received the trustee’s distribution of $145,416.70 and Zoeller said the payment was turned over entirely to the city treasury, under the new management of current Mayor Copeland.
In litigating the original RICO suit, the Attorney General’s Office previously obtained judgments against or settlements with co-defendants of Pastrick who were political associates or contractors who benefited from Pastrick’s “sidewalks for votes” scheme. Zoeller also turned over the remaining unallocated funds paid by those co-defendants, $186,250 after legal expenses, to the City.
“From the beginning, the goal always has been to have full accountability and public exposure of the systemic corruption of those who ran city government then for their own self-interest rather than for citizens they were supposed to serve. It is my sincere hope that this long legal battle will allow others to rebuild the public trust that the ‘Pastrick machine’ squandered,” Zoeller said.
Zoeller thanked his predecessor, former Attorney General Steve Carter, as well as other attorneys who served as co-counsel on the related cases, for their efforts on behalf of the State and City.