Erie Mayor Rick Filippi and two business partners used the mayor's inside information in an attempt to benefit from the purchase of four properties near a former industrial site being eyed for development of a racetrack and slot machine casino, state prosecutors alleged Wednesday.
Filippi was trying to broker a deal that would allow Presque Isle Downs Inc., an offshoot of MTR Gaming Group Inc. of Chester, W.Va., to develop a former International Paper Co. plant into a thoroughbred track and casino. Meanwhile, a company founded by his associates, Aiko Acquisition, was buying up property near the racetrack site.
"The grand jury found that the entire time that Filippi was involved with Aiko purchasing properties around the (International Paper) site, he was also engaged in confidential negotiations with (MTR) about developing the site," Attorney General Jerry Pappert said.
Tamara Pettit, spokeswoman for Edson R. "Ted" Arneault, MTR's chief executive, said the company has no comment on the case. Pettit also declined to comment on the status of MTR's planned track and slots development near Erie. The state has licensed the company to build a thoroughbred track, and MTR is guaranteed a $50 million slots license under Pennsylvania's new gambling law.
"The last public information that the company issued (on Nov. 8) on that project is that they're continuing to pursue their development efforts in ... Pennsylvania," said Lauren Barbera, MTR's counsel for investor relations with The Equity Group in New York. She would not say whether the criminal action had placed the project in jeopardy.
"If anything, MTR is essentially a victim in this," said Kevin Harley, a spokesman for Pappert. "They have the IP site. They own it, they're trying to develop it. Whether or not it eventually becomes a racetrack is another matter. They do have other properties up there as well."
MTR, a stockholder-owned company, operates Mountaineer Race Track and Gaming Resort in Chester, W.Va., and has other gambling holdings in Ohio and Nevada. In addition to building the Erie complex, Arneault has announced his intent to partner with the Penguins to seek a state license for a stand-alone slots casino in Pittsburgh.
Erie officials had been trying since last year to buy the International Paper property in hopes of redeveloping it. MTR eventually bought it directly from the company for $2 million. MTR also owns a site outside the city. MTR's Pettit would not say which site the company now favors for a racetrack and casino.
MTR at one point preferred the former paper company site near Lake Erie, Harley said.
Under suspicion
The case comes just one week before the state's seven-member Gaming Control Board is scheduled to hold its inaugural meeting in Harrisburg to begin the process of establishing slots gambling in Pennsylvania. The board, appointed by Gov. Ed Rendell and legislative leaders, will approve and regulate slots gambling at 14 sites, including The Meadows in Washington County and other horse tracks.
"It has been the track record wherever this kind of gambling has started that there are problems. ... It's no surprise that Pennsylvania is not immune to suspicion of wrongdoing," said Dave Atkinson, aide to Senate President Pro Tempore Robert Jubelirer, R-Altoona, who opposed the slots legislation passed in July.
Greg Rubino, an Erie real estate broker working for Presque Isle Downs, said Filippi repeatedly and falsely led him to believe that the city had an exclusive deal to buy the 200-acre site from International Paper, so Rubino dealt with city officials until he learned of the Aiko land deals in late 2003.
Rubino said when he discovered Filippi's ties to the other parcels, he had an architect redraw the racetrack plans so they wouldn't require any of the land Aiko bought, the grand jury found.
Also charged yesterday were attorneys Rolf Patberg, 38, of Murrysville, Westmoreland County, who is Filippi's law partner, and Eric Purchase, 38, of Erie, Filippi's longtime friend and former campaign manager, Pappert said. Filippi, 38, is a graduate of Duquesne University's School of Law.
Paper trail
Paperwork forming Aiko was filed March 7, 2002, by Richard Tarantine, of O'Hara, an attorney in the building housing Patberg's office, according to grand jury documents. The company's corporate records listed Tarantine's home address and named Patberg and Purchase as members who each had invested $15,000 in the company.
Pappert said subpoenaed e-mails and bank records showed that neither Patberg nor Purchase contributed that much to the company. Instead, each invested an initial $5,000, as did Filippi, two other attorneys and the mayor's former chief of staff. Eventually, nearly all of the partners invested $9,500 each. Filippi invested $8,000, records show.
The two other attorneys, Sean Carmody and Terry Ging, were not charged yesterday. They didn't immediately return calls. It wasn't immediately clear whether they are cooperating with investigators.
None of the defendants could be reached.
Filippi, mayor of the state's fourth-largest city since 2001, would have to leave office if convicted. For now, he's free to serve his term, which runs through next year, Harley said.
Filippi's spokeswoman, Tina Mengine, said "he has no plans of stepping down." Filippi made no comment before or after he was released on unsecured bond by District Justice Thomas Robie.
Filippi's attorney Philip Friedman said Filippi is a victim of a shakedown by Rubino and MTR.
"Mayor Rick Filippi stands between the taxpayers and these greedy people trying to take money from this city. It is outrageous," Friedman said.
On the losing end
That's not how the grand jury saw it.
Aiko bought the four neighboring properties in 2003 for $164,950 with money collected from Filippi and the other investors, records show. Initial plans for the racetrack project indicated that it could not go forward without at least one of the properties.
After the Erie Times-News reported his alleged ties to Aiko, Filippi in January denied a relationship, but said his friends would sell the properties to avoid any appearance of wrongdoing. Erie County property records show all four properties were sold in March for $164,250, a $700 loss, to Robert and Petrina Lloyd, of Murrysville.
Harley said it doesn't matter whether Filippi and his partners made or lost money on the land deals. The law prohibits public officials from using confidential information obtained through their offices to speculate on property or from using their official position to further projects that could benefit them directly.
Both Purchase and Patberg have said that the deals were not the result of inside information and that the mayor had done nothing wrong.
The International Paper plant was once a major employer in the city of 104,000 residents. The pulp and paper mill, which operated for 100 years, was closed in May 2002.
Racing for land
A timeline of the major events in the land deal scandal involving Erie Mayor Richard Filippi:
Oct. 16, 2001: International Paper Co. announces it will shut down its Erie paper plant by mid-2002.
Nov. 6, 2001: Filippi is elected to a four-year term as mayor. Running on a pro-business platform, Filippi makes redeveloping the International Paper site a priority.
December 2001: Presque Isle Downs Inc. contacts Erie development officials about possibly building a racetrack and casino on the former IP site.
March 7, 2002: Aiko Acquisitions is formed. Paperwork lists Filippi's law partner, Rolf Patberg, and former campaign manager, Eric Purchase, as principals. In reality, Patberg, Purchase, Filippi and three others have a stake, state investigators said.
March 28, 2002: Greg Rubino, a commercial real estate broker working for Presque Isle Downs, writes Filippi a letter urging him to keep the developer's interest in the plant site confidential. Talks between Filippi and Rubino continue through much of 2003.
April 25, 2003: Aiko makes first purchase, paying $87,500 for rental property at 1427 East Lake Road, next to the paper plant property.
May 17, 2002: International Paper plant shuts down.
Nov. 5, 2003: Aiko buys the last of four neighboring properties, an abandoned gas station, for $32,500.
Jan. 30, 2004: Filippi denies ties to Aiko after media reports accuse him of conflict of interest. But Filippi announces his friends have agreed to immediately sell all four properties to avoid any appearance of wrongdoing.
March 4, 2004: All four properties are sold for $164,250 to Robert and Petrina Lloyd, of Murrysville, according to Erie County records.
Source: Grand jury presentment
Erie land deal players
Three were charged in the Erie land deal grand jury investigation:
Richard Filippi
Residence: Erie
Age: 38
Occupation: Mayor, lawyer (graduate of Duquesne University School of Law)
Charges: Criminal conspiracy, and one count each of conflict of interest; accepting improper influence; and speculating or wagering on official action. Two counts each of financial interest statement violations and unsworn falsification to authorities.
Possible penalty: The most serious charges Filippi faces are felonies carrying up to five years in prison. He also could be removed from office if convicted.
Rolf Patberg
Residence: Murrysville, Westmoreland County
Age: 38
Occupation: Filippi's law partner
Eric Purchase
Residence: Erie
Age: 38
Occupation: Filippi's former campaign manager; attorney
Patberg and Purchase face one count each of criminal conspiracy; conflict of interest; seeking improper influence; and speculating or wagering on official action. Because both are attorneys, they could face disciplinary charges and sanctions up to disbarment by the state Supreme Court.
Source: Pennsylvania Attorney General
Staff writer Sandra Tolliver and The Associated Press contributed to this report.
