Fears and lobbying in Collinsville
Illinois kingpin Gary Fears works in mysterious ways
By C.D. STELZER / firstname.lastname@example.org
Part one of a two-part series
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Nine Gateway Drive is far from K Street, the center of Washington’s influence-peddling industry. The address belongs to a now-vacant space in a strip mall located in Collinsville, Illinois, just east of St. Louis.
This small town, which bills itself as the horseradish capital of the world, seems an odd place for the Kingdom of Morocco to be doing business, but, according to a 2006 congressional lobbying report, the North African nation hired Collinsville-based Avatar Enterprises Inc. to help represent its interests in the United States.
Gary R. Fears, the 63-year-old owner of Avatar, now lives in Boca Raton, Florida, but his career is deeply rooted in Madison County politics, where he made his bones decades ago as a Downstate operative for then-Gov. Dan Walker. Since leaving public life, Fears has traded on his insider status and political connections to parlay a series of controversial deals into a byzantine financial empire.
The foundation of that empire began in the early 1980s, when Fears received millions from the state to build a hotel in Collinsville but eventually defaulted on the loan, leaving Illinois taxpayers in the lurch. A decade later, he circumvented regulators and made a fortune selling his family’s hidden ownership interest in Illinois’ first riverboat casino.
Since then, Fears has invested in Indian casinos and taken on exotic clients, among them an Internet gambling venture based in Gibraltar and Morocco’s government-owned phosphate industry. His hired guns include Republican and Democratic operatives with access to the highest levels of the federal government.
If that’s not enough to give one pause, Fears’ latest acquisition is a Soviet military aircraft that has been grounded for nearly a year because of litigation. As often is the case for Fears, the lawsuit is another high-stakes craps game in a world filled with risk.
Federal law enforcement agencies have investigated Fears’ activities in the past, and he has been a person of interest in criminal investigations in at least two states. Two of Fears’ business partners have met untimely deaths. Fears also has been the plaintiff or defendant in a raft of civil cases, and his international financial transactions spurred the IRS to go after him for back taxes.
But despite intense scrutiny by local, state and federal authorities, he has never been cited for a single criminal violation.
“I’ve got to be the most investigated guy in Southern Illinois,” Fears once told a reporter, “and I’ve never even been charged with illegal parking.”
Fears grew up in Venice, Illinois, one of six children of car salesman Floyd Fears and his wife, Edna. Sandwiched between the slaughterhouses of East St. Louis and the steel mills of Granite City, the town gained it name not for its grandeur but because the streets sometimes turned into canals after a heavy rain.
His 1964 senior class picture in The Venetian shows a pensive young man with a dark, wavy pompadour. The high school yearbook lists him as class treasurer, office helper, Booster Club member, cast member of the junior class play and supporter of the Red Cross. Schoolmates remember him as slightly overweight and having few friends.
Fears’ first marriage ended in divorce in October 1969; his ex-wife was awarded custody of their infant son.
In 1968, he campaigned for liberal U.S. Sen. Eugene McCarthy, a Minnesota Democrat whose anti-war candidacy prompted President Lyndon B. Johnson not to seek a second term.
Three years later, Fears stumped on behalf of another maverick Democrat, Dan Walker, who won the Illinois governorship despite fierce competition from Downstate rival Paul Simon and the powerful political machine of Chicago Mayor Richard Daley.
Under Walker, Fears acted as a fixer for the Illinois Department of Transportation, settling disputes that were delaying the completion of Downstate portions of the interstate highway system.
“It was a quagmire,” recalls retired St. Louis Post-Dispatch Illinois political correspondent Taylor Pensoneau. “The sticking points included minority hiring quotas and other hot-button issues. What was at stake was continued federal funding.” In his biography of Walker, Pensoneau describes Fears as “an imaginative hustler from Granite City who was adept at finding shortcuts through red tape.”
After Walker’s 1976 defeat, Fears quit his state job, but his political career wasn’t over. Within months he had vaulted onto the national stage, joining the Democratic Party’s national finance committee.
With the advent of the Reagan era, the “imaginative hustler” switched his street-savvy panache for the acumen of an investment broker, and pragmatism took precedence over partisan politics. In the future, Fears the entrepreneur would cross party lines whenever necessary. Politics and business were both means to an end, the two sides of the same coin of the realm.
“I personally don’t think it all that fascinating,” says Fears of his rise from obscurity. “I meet people all the time who came from tough economic backgrounds who improve themselves by hard work. It is what this country is based on.”
Fears’ dodgy deals date back to 1982, when he and partner B.C. Gitcho of Granite City received a $13.4 million state loan from Republican Gov. Jim Thompson’s administration to build what is now the Holiday Inn in Collinsville. When the hotel fell behind in its payments, then-Illinois Treasurer Pat Quinn (the state’s current governor and a Democrat) sought to hold the borrowers in default, but his efforts were blocked in court.
In 1995, newly elected Treasurer Judy Baar Topinka, a Republican, renegotiated the terms of the loan, but the state still ended up with the short end of the stick. Under the restructuring, the hotel was allowed to skip quarterly mortgage payments if it could show that it was operating at a loss. The loan and its accrued interest of more than $31 million were never repaid.
A final 2007 audit conducted for the state by an independent hotel management company concluded that Fears’ Collinsville Holiday Inn reported losses in 2005 and 2006 that “under normal, usual and customary reporting … would have resulted in a gain and thereby funds should have been due and payable to the state.…” Alleging serious misconduct, current Illinois Treasurer Alexi Giannoulias turned over 100,000 pages of documents to federal prosecutors in Chicago, but U.S. Attorney Patrick Fitzgerald has so far declined to take action.
“The entire project became a political football,” says Fears of the hotel deal. “It is long forgotten that I became a limited partner in the late ’80s. [I] had no operational role after that [and] no ongoing liability beyond what was supposed to be guarantees for a set amount.”
Republican powerbroker William Cellini, owner of a Springfield hotel (the Renaissance hotel, now the Abraham Lincoln Hotel & Conference Center), defaulted on his loan, too. The state of Illinois finally placed both hotels in receivership in 2007 and sold them at a loss. Cellini is now facing federal charges in Chicago for influence peddling in an unrelated case that resulted in the indictment and subsequent ouster of Gov. Rod Blagojevich.
Fears reserves judgment on Blagojevich but lauds Cellini as an honorable man. “I am proud to say he is a friend,” says Fears. “I will be stunned if he is found guilty.”
Frank cashes out
Fears is qualified to vouch for Cellini’s integrity because they have worked together before.
In 1990, Fears transferred his interest in Illinois’ first riverboat casino, the Alton Belle, to his son, Victor Fears, who then sold his shares to Cellini with an option to buy them back later. When Argosy Gaming Co., the owner of the boat, went public in 1994, Victor Fears bought back his option and then resold his interest for an estimated $4 million. The deal effectively allowed the Fearses to obscure their stake in the gambling company and later profit from it without having to undergo the routine background checks required by the state gaming board.
Belleville developer Frank E. O’Donnell Sr. was not as fortunate. O’Donnell, a heavily indebted partner of Fears’, was found dead in a room at the Quality Inn in Collinsville on Nov. 17, 1990. The coroner’s report states that Fears told investigators at the scene that O’Donnell had previously been hospitalized for chest pains and was in failing health. Forgoing an autopsy, the coroner ruled O’Donnell died of a heart attack. A month later Victor Fears collected on a $100,000 life insurance policy that his father had taken out on O’Donnell five years earlier.
An O’Donnell family feud over a separate life insurance policy, however, prompted an inquest and exhumation. Toxicology tests showed that O’Donnell had died of a drug overdose, not a heart attack. At the coroner’s inquest, a state police detective testified about clandestinely recorded conversations in which an informant was offered $10,000 to help someone kill himself. The Collinsville nightclub owner who allegedly made the offer on behalf of another party later pleaded guilty to federal charges of conspiring to distribute 13 pounds of cocaine. He contended that law enforcement authorities had pressured him to wrongly finger Fears.
“Frank [O’Donnell] and I were friends,” says Fears. “We developed a couple of strip shopping centers and fast food locations together, along with some condos in Hilton Head and Sarasota. Frank committed suicide after a long period of depression and tough economic events. There was a spate of publicity as a result of an anonymous call to the state police claiming knowledge of Frank being poisoned with curare, a Brazilian poison that simulates a heart attack. After much publicity, he was determined [to have] died of an overdose of sleeping pills.”
Around this time, Fears decided to pull up stakes and move to Florida.
“I always loved Florida,” says Fears. “It’s not that I hate Illinois. The best part of this country is the Midwest, the great wealth of the people and the values of the Midwest. I was 40 years old and I just thought it was silly to spend your whole life in one spot.”
Banking on Coconut Creek Casino
It didn’t take Fears long to hitch his wagon to the Sunshine State’s nascent Native American gambling industry. By early 1994, Gaming Management International, a Fears-backed company, was paying $30,000 a month in consulting fees to a frontman who had connections in the Seminole tribe.
In 1995, Fears briefly hired Stephen G. Weil, a convicted stock swindler, to work for GMI. Three years later, the feds busted Weil for laundering drug money, but by then Fears had long since dispensed with Weil’s services. Taking the personal approach, Fears befriended Seminole tribal chairman James E. Billie — also known as Chief Billie — a former alligator wrestler and country singer. As a gesture of goodwill, he loaned Billie a $670,000 Turbo Commander aircraft and also gave the tribe a parcel of land worth $1.7 million near the proposed Coconut Creek Casino site.
His generosity may have ingratiated him with the tribe, but Fears failed to receive the thumbs-up from the city of Coconut Creek after questions about his background surfaced. This temporary setback did not deter him, however. Working behind the scenes, Fears became the secret majority shareholder in a realigned partnership — Coconut Creek Gaming — that included son Victor and Florida developer Alan Ginsburg.
Under the arrangement, the partnership put up $19.6 million to build the casino in return for a 35 percent stake in its profits for the first 10 years of operation, which could have cost the Seminoles hundreds of millions of dollars. In 2003 the tribe ousted Chief Billie and quit paying Fears and the other developers. The partnership sued and the tribe countered by asking for a federal review, but not before a Fears-owned company, Coconut Chips, scored an $8 million promissory note through the contested contract.
The National Indian Gaming Commission voided the development agreement, ruling that it illegally placed ownership of the casino in the hands of the outside partnership. Under the law, only tribes themselves may own their casinos. In a letter to the Seminoles, Penny J. Coleman, acting general counsel of the NIGC, opined that the development contract allowed Coconut Creek Gaming “to collect a large amount of money, over a lengthy period of time, for doing nothing.”
Fears disagrees. “She’s taken a view that if you have a development agreement that exceeds certain parameters — and nobody knows what those parameters are — you are getting too big a share of the profits, which creates a proprietary interest in the casino,” he says. “It’s an aggressive stance by her. I personally think she’s overreaching. Maybe I’m wrong. The courts have never ruled on it.”
Fears’ development deals involving Indian casinos in California in the last decade were fraught with similar complexities and conflict and in at least one instance ended up in court, even though Fears at one point hired a former director of the Bureau of Indian Affairs to work for him. Despite the insider help, neither West Coast deal panned out.
“The biggest trouble with tribes is internal tribal politics,” Fears says.
Politics also stymied Fears’ proposed casino deal in China in the 1990s. When Gary Triano, his partner in that venture, died in a car bombing in Tucson in 1996, the crime had all the hallmarks of a mob hit. The FBI and detectives from the Pima County Sheriff’s Department questioned Fears and cleared him of any involvement. Last year Pima County prosecutors finally charged Triano’s ex-wife and her lover with the murder.
Fears has not been as fortunate in clearing up his tax problems. The IRS claims that he owes more than $300,000 in federal income tax, dating back to 2001. The case stems from a series of multimillion-dollar international currency transactions in late 2000 involving Deutsche Bank and companies owned by Fears. Negotiations on a settlement agreement have dragged on in U.S. tax court for years.
A 2009 court opinion on Fears’ tax case says that he “resided” in Illinois when the petition was filed. The discrepancy in his residency is duly footnoted in the court ruling. Fears says that he hasn’t visited Collinsville more than 10 times in the last decade. Nonetheless, after moving to Florida Fears continued to run his operations out of 9 Gateway Drive in Collinsville until 2008 while incorporating dozens of shell companies across the river in Missouri through his longtime attorney in suburban St. Louis.
Over the years his holdings have ranged from steakhouse franchises to an auto body repair shop, a sprawling empire that Fears now confesses may have become too diverse.
In the beginning, his corporate structure was less tangled. Fears originally set up Avatar Enterprises Inc., a Delaware corporation, as a management consulting company to represent the Southern Illinois Contractors Association, he says. Today, more than three decades later, Avatar has morphed into an international lobbying firm, acting as the registered foreign agent for the Moroccan government and PartyGaming, a Gibraltar-based online gambling company founded by expatriate Ruth Parasol, San Francisco-born heiress to a sex-industry fortune.
In 2007, Robert Kjellander, a former GOP national treasurer, was hired by Avatar to work on both the Moroccan and PartyGaming accounts, according to federal records. Fears made a discriminating choice in Kjellander. During the Bush administration, the Springfield-based lobbyist had access to the highest corridors of power through his close friend Karl Rove, then-White House deputy chief of staff.
A year earlier, the Bush administration had banned online gaming in the U.S., which cut significantly into the profits of PartyGaming and made it a target of prosecution. Congressional lobbying records indicate that PartyGaming paid Avatar more than $1.3 million in 2007 alone. Last year PartyGaming agreed to pay a $105 million penalty to the U.S. while continuing to lobby for a change in the law in Congress.
Kjellander and Fears’ efforts on behalf of the Moroccan government’s phosphate industry were far less lucrative but were more heavily shrouded in secrecy. Morocco is the world’s largest producer of phosphate, a key ingredient in fertilizer and an essential commodity to American agribusiness.
In 2006 and 2007, the Moroccan Office Chérifien des Phosphates, or OCP, paid Avatar a total of $80,000. But the payments were inexplicably routed through a front company, Flager Holdings Ltd., with a post office box in Providenciales, the capital city of the Turks and Caicos Islands, a British protectorate with lax financial regulations.
Reached by phone at his office in Springfield, Kjellander declined to comment. Fears says that Avatar’s involvement with the Moroccan agency was short in duration and limited in scope.
“Morocco owns OCP, which is a huge mining company,” Fears says. “They were looking to go public. They wanted a government-political analysis and some feelings on how the contracts they had in the States would be regarded. They also wanted some advice [on] who to talk to about going public. I don’t remember who they ended up hiring.”
Human rights, online poker and wildfire prevention
Avatar’s work for Morocco, however, went beyond lobbying on behalf of its government-owned phosphate industry. Avatar also hired attorney Steven C. Schwadron, a well-connected Democratic lobbyist in Washington, D.C. Schwadron’s job appears to have been linked to Moroccan efforts to counter an indigenous political movement advocating autonomy for the Western Sahara.
Control of the Western Sahara has been in dispute since Spain withdrew from the region in 1976. Since then, Morocco has occupied the territory. The Moroccan takeover spurred an uprising by the Polisario Front, an armed resistance group representing the native Sahrawi people. The United Nations has consistently favored autonomy for the Western Sahara, but the United States has backed Morocco’s occupation, in part because the kingdom is an ally in the so-called war on terror. A ceasefire has been in effect since 1991, but international efforts to resolve the conflict have failed. In the intervening time, an estimated 90,000 to 160,000 Sahrawis have fled across the border and are now living in Algerian refugee camps.
In 2008 and 2009, the autocratic Moroccan government funneled more than $250,000 to Avatar through Strategic Communications Group, according to the Department of Justice foreign agents registry. Avatar’s lobbying was part of a larger Moroccan public relations campaign unleashed to expose alleged human rights abuses and suspected misappropriation of foreign aid in Polisario-controlled refugee camps in Algeria.
The law firm where Schwadron works, Sher & Blackwell, received bundled payments from Morocco, by way of Avatar, totaling $35,000. The money opened the door to at least one congressman’s office. As recently as 2006, Schwadron had been the chief of staff for Democratic Rep. Bill Delahunt, chairman of the Subcommittee on International Organizations, Human Rights and Oversight. After Schwadron contacted his former boss, Delahunt wrote a letter to then-Secretary of State Condoleezza Rice, asking her to “undertake a thorough review of apparent human rights violations suffered by refugees in the Polisario camps in southern Algeria.”
However, critics of the Moroccan blitz, including Human Rights Watch, claim that Morocco orchestrated the PR campaign to divert attention from its own human rights violations and to derail the Polisario Front’s continuing push for Western Saharan sovereignty.
While working for Avatar, Schwadron also lobbied for its other foreign client, Gibraltar-based PartyGaming. In return, Avatar paid Schwadron’s law firm $20,000, according to a congressional lobbying report. The report indicates that the work was related to “congressional oversight and legislation regarding Internet gaming, including possible amendments to the Unlawful Internet Gambling Enforcement Act of 2006.” But the same filing lists another purpose for the lobbying: “Congressional oversight and legislation relating to wildfire prevention and suppression.”
Interestingly, more than $100,000 in Sher & Blackwell lobbying in 2008 and 2009 involved the same odd pairing of issues: online gambling and forest fire prevention. In all instances Schwadron is named as the contact, but the client is listed as “Alpha Neo (on behalf of Avatar Enterprises).” Alpha Neo is a Fears-controlled company.
Schwadron declined to comment, but his lobbying work on these widely disparate issues appears to be connected to a 94-ton Soviet Ilyushin IL-78 refueling tanker plane that Fears owns.
In October, Air Support Services — another Delaware-incorporated company owned by Fears — filed for Chapter 11 bankruptcy protection in federal court in St. Louis. Air Support’s only asset is the IL-78, which can be used as a midair refueling tanker or as a firefighting aircraft. The move temporarily kept a Texas creditor from seizing the plane for an unpaid debt. In mid-December, Fears reversed his legal strategy and had his bankruptcy attorney dismiss the case. But the bankruptcy filing offers additional information on Air Support’s creditors.
Headlands Limited of Gibraltar has a stake of more than $1 million in the aircraft. Moreover, the bankruptcy records list Headlands as being located in the same building in Gibraltar that Avatar lobbying client Russell De Leon uses as a mail drop. De Leon is the husband of Ruth Parasol, the founder of PartyGaming. In 2008, De Leon paid Avatar Enterprises more than $680,000 to promote a congressional overhaul of federal online gaming law.
In March, a ruling by a Michigan state court reaffirmed an earlier decision that awarded the plane to the Texas creditor who sued Fears for more than $70,000 in unpaid maintenance costs while the plane was mothballed for more than two years. Fears has not announced whether he will appeal the judgment, but one thing is sure: The giant aircraft, which Fears describes as “the world’s best firefighting airplane,” has so far been more of an albatross for him than a golden goose.
This story was supported by a grant from the Press Club of Metropolitan St. Louis.
Next: Under the Radar
East Side player Gary Fears is betting that his newly launched military aviation investment will score. Whether it will pay off is still up in the air.