Gaming investor paid fine under ban later ruled unconstitutional by Pa. Supreme Court

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Commonwealth Court has refused to grant a refund of the $100,000 Peter DePaul paid to the state under a consent agreement after he was accused of violating the ban on political contributions by gaming licensees -- despite the fact that the state Supreme Court has since deemed the ban unconstitutional.

The en banc court unanimously ruled in an unreported opinion to uphold an order of the state Board of Finance and Revenue, denying Mr. DePaul's request for a refund on the grounds that the board lacked jurisdiction.

Mr. DePaul is now part of a Philadelphia investment group that wants to build a racetrack and casino in Lawrence County, called Valley View Downs.

Writing for the court, Judge Patricia A. McCullough said the $100,000 that Mr. DePaul paid to the state was willingly tendered pursuant to a consent agreement, and was not a fine or a penalty because the agreement specifically stated that he did not admit to violating any laws.

Therefore, Judge McCullough said, the Supreme Court's invalidation of the ban on political contributions by gaming licensees does not retroactively entitle Mr. DePaul to a refund.

"We further conclude that public policy concerns weigh in favor of upholding agreements that were based on valid law at the time they were entered," the judge said.

Judge McCullough was joined by President Judge Dan Pellegrini and Judges Bernard L. McGinley, Renee Cohn Jubelirer, Robert Simpson, Mary Hannah Leavitt and Anne E. Covey.

In DePaul v. Commonwealth, Philadelphia Entertainment and Development Partners (PEDP in court documents) applied to the state Gaming Control Board for a slot machine license in Philadelphia in December 2005. Mr. DePaul was an investor in that group, which tried, but failed, to build Foxwoods casino in downtown Philadelphia.

At the same time, Mr. DePaul made 21 political contributions totaling $31,745 to a number of political candidates during the first four months of 2006, while his application was still pending.

Judge McCullough said Mr. DePaul mistakenly thought that only applicants who had been granted a license were banned from making political contributions under the state's new gaming act, and was unaware that the ban also extended to those who owned stakes in license applicants.

In May 2006, after learning that the ban applied to him, Mr. DePaul contacted the candidates and received his contributions back, according to Judge McCullough. Mr. DePaul also informed the gaming board.

On Dec. 4, 2006, Mr. DePaul, PEDP and the gaming board's Bureau of Investigations and Enforcement entered into a consent agreement under which Mr. DePaul agreed to pay $100,000 to the state but did not admit to breaking the law.

Less than a year later, in November 2007, Mr. DePaul filed a petition with the Supreme Court, challenging the constitutionality of the political ban provision that applied to casino applicants, and on April 30, 2009, the justices ruled to overturn the ban.

Two weeks later, he requested that the Gaming Control Board refund his $100,000, but the board responded that it had no authority to refund money that had already been deposited into the state's general fund.

Mr. DePaul then petitioned the Board of Finance and Revenue for a refund, but the finance board turned him down too.

On appeal, Mr. DePaul argued that the consent agreement was intended to settle his violation of a law that has since been overturned, therefore entitling him to a refund. The state, however, contended that Mr. DePaul's argument was a collateral attack on the consent agreement that hinges on the mistaken premise that his payment was a punitive fine, rather than a settlement.

Judge McCullough agreed with the state's argument.

Mr. DePaul's attorney, Theodore J. Chylack of Sprague & Sprague in Philadelphia, said he and his client plan to file exceptions to the ruling.

A spokesman for the state Office of Attorney General declined to comment, and a spokesman for the gaming board said the board is no longer involved in the matter.

legalnews

Zack Needles: zneedles@alm.com or 215-557-2493. To read more articles like this, visit www.thelegalintelligencer.com.


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