Judge: Insurer OK not to cover big losses for defendants accused in RICO case of trying to bribe Blago

By Dee Thompson | Nov 24, 2017

CHICAGO — An insurer has won the right to exclude coverage based on specific policy language mentioning a 2014 RICO claim over an alleged scheme by horse racing track owners to bribe jailed former Illinois Gov. Rod Blagojevich.

The case was filed in the U.S. District Court for the Northern District of Illinois in Chicago. The memorandum opinion and order upholding the coverage denial was issued by District Judge Amy J. St. Eve on Oct. 10. 

In July 2017, RSUI Indemnity Company was granted summary judgment against the defendants, William H. Johnston Jr., William H. Johnston III, Steven E. Anton, F. Phillip Langley, Lester H. McKeever and Stephen Swindal, who had been sued under the federal Racketeering Influenced Corrupt Organizations (RICO) Act.

The defendants then filed a motion for reconsideration, which has been denied. 

The case revolves around a previous case, Empress Casino Joliet Corporation et al v. Rod Blagojevich et al, which is referred to in the decision as "the Riverboat Matter." The Riverboat Matter involved a scheme to allegedly bribe Blagojevich.

“The plaintiffs in the Riverboat Matter alleged a RICO claim against the defendants due to bribes the racetracks paid and sought a constructive trust of funds the defendant racetracks received pursuant to the 2006 and 2008 Racing Act," St. Eve wrote in the decision. "After a trial, the jury awarded approximately $78 million in damages, and shortly thereafter, [the] defendants, who were liable for the damages in the Riverboat Matter, filed for bankruptcy protection.”

When the defendants sought coverage under a RSUI policy in order to pay off debts incurred as a result of the Riverboat Matter, the insurer filed suit, arguing that it was not obligated to insure them because the policy contained a "Specific Litigation Exclusion," which explicitly stated RSUI was not liable for any loss related to the Riverboat Matter. 

“The language in the exclusion provision plainly and unambiguously stated that [the] plaintiff was not liable for any claims arising out of or based upon, in whole or in part, the Riverboat Matter and that the claims in the underlying litigation, at least in part, arose from the Riverboat Matter," St. Eve wrote in the decision. "Specifically, the court found that [the] defendants’ fraudulent scheme to transfer assets, as alleged in the underlying litigation, was a 'direct effort to avoid paying the judgment in the Riverboat Matter and to shield and plunder the assets of their entities before creditors from the Riverboat Matter could reach them.'”

RSUI was represented by the firm of Walker Wilcox Matousek LLP, of Chicago.

Defendants were represented by Rathje & Woodward LLC, of Wheaton.

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Organizations in this Story

Rathje & Woodward LLC U.S. District Court for the Northern District of Illinois Walker Wilcox Matousek LLP

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