City Alleges Secret Document, Final Cash Grab In Coliseum Case | WGLT

City Alleges Secret Document, Final Cash Grab In Coliseum Case

Apr 20, 2018

A new court filing accuses the former Coliseum manager of using a secret internal document to run a multiyear fraud scheme and tricking the City of Bloomington into one last cash grab in the final weeks of his contract.

The new allegations were made Thursday in a 42-page court filing from the City of Bloomington’s lawyers. While technically part of a separate civil lawsuit, the filing reveals previously undisclosed information about the complex criminal case against former Coliseum manager John Butler and his co-defendants.

One episode that stands out took place in March 2016, just as the city’s management agreement with Butler was about to expire. Days after Butler walked away from negotiations on a new agreement, he allegedly told the city the Coliseum had a big cashflow problem—a $247,843 shortfall. Without the money the Coliseum wouldn’t be able to pay utilities and payroll, Butler allegedly told the city.

The city gave him the money. The city says Butler then deposited $152,877 of that money in his personal bank account—in a series of three transactions—and only paid a small portion of a $113,000 utility bill. Weeks later, Butler’s city contract expired and the newly hired VenuWorks took over management of the city-owned arena.

Butler pleaded not guilty to the 44 criminal charges against him, claiming it’s a civil dispute and not criminal. He claims the city owes him money—not the other way around. His attorneys did not immediately return a request for comment Friday.

Butler and four co-defendants were indicted in September, capping a 16-month Illinois State Police investigation that began in 2016 after VenuWorks noticed alleged financial discrepancies and alerted the city. For years before that, auditors repeatedly warned city leaders their contract with Butler was riddled with ambiguity and needed to be reworked. Several issues that were flagged are now part of the criminal case.

The Coliseum is now called Grossinger Motors Arena. It's managed by VenuWorks.
Credit Carleigh Gray / WGLT

Thursday's filing by the city is a 14-count countersuit against Butler and his companies, alleging breach of contract, civil conspiracy, fraud, and breach of fiduciary duty.

"Although the city originally intended to allow the criminal cases to be prosecuted in full before determining whether additional civil remedies should be pursued, in light of the civil litigation initiated by CIAM, the city is now opting to begin pursuit of civil claims against John Butler, CIAM and BMI," city spokesperson Nora Dukowitz said in an email.

"Many of these claims are closely related to the criminal allegations and these claims may be pursued concurrently under the law," Dukowitz said. "The filing of the counterclaim allows yet another important avenue of redress to be sought regarding the alleged improprieties."

INSIDE THE ALLEGED SCHEME

Butler was accused of running a multiyear scheme to steal hundreds of thousands of dollars from the city. Thursday’s filing reveals new details about how the scheme allegedly worked.

Central Illinois Arena Management (CIAM), which Butler owned, was required to pay the city between a 32 and 42 percent commission on food and beverage sales at the arena. The city would get a smaller cut (15 percent) for suite and catering sales.

CIAM “deliberately misclassified sales as suite and catering sales instead of (regular) food and beverage sales to pay a lower commission on such sales,” the city claims.

To keep track of the scheme, “CIAM maintained an internal document that was used to calculate commissions that would deprive the City of properly earned commissions and distribute them instead to CIAM” and BMI, the Coliseum’s food-and-beverage company also owned by Butler, according to the city.

“The city was not shown nor did it have knowledge of this internal document and calculation method until after the management agreement expired,” the city claims.

CIAM and BMI used a point-of-sale system called Micros to track sales within the arena. The city alleges that CIAM and BMI claimed proprietary rights over the data stored through the Micros system and objected to disclosing it to the city.

“CIAM was working with BMI to alter concession sales data to pay the city a lower commission,” the city claims.

Butler is also accused of using money from the city’s Coliseum fund—meant for operating expenses—to pay his own attorneys over $100,000 from 2015-2016, including during the contract renegotiation period. If true, that would mean the city was unknowingly paying a lawyer to negotiate against itself.

CLEANING EQUIPMENT

A similar example involves cleaning equipment at the arena.

In 2011 the city reimbursed Butler’s food-and-beverage company, BMI, after it bought a bunch of cleaning equipment. But BMI “rented” the city-paid-for cleaning equipment to CIAM. Both companies were owned by Butler.

“CIAM would then bill the city as an operating expense for renting this cleaning equipment, even though the city had already paid for the equipment in full. Effectively, CIAM billed the city to rent its own equipment," the city now claims.

The city also accuses Butler and his management team of personally benefiting from the agreements they struck with advertisers and suite holders. CIAM negotiated a contract with a local car dealership that provided the arena’s then-general manager, Bart Rogers, with a vehicle instead of cash that could’ve gone into the Coliseum fund.

“CIAM breached its fiduciary duty when it entered into contracts or agreements with advertisers and suite holders for the personal benefit of its principals and employees, as well as the Peoria Rivermen,” the city alleges. Butler and Rogers were also minority co-owners of the Rivermen, a pro hockey team in the SPHL.

The criminal charges against Rogers were recently dismissed, although prosecutors could move to re-indict him. Before that, he pleaded not guilty.

The civil lawsuit is set for a hearing July 13 in McLean County court.

The Coliseum is now called Grossinger Motors Arena. It’s still run by VenuWorks.

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