Inside The Coliseum Grand Jury: 'Who In The City Would Agree To That?' | WGLT

Inside The Coliseum Grand Jury: 'Who In The City Would Agree To That?'

Jan 12, 2019

The prosecutor had just finished a long Q&A with his chief witness—the lead investigator in the Coliseum fraud case. Step by step, the Illinois State Police special agent alleged how the Coliseum’s managers skimmed and stole over $750,000 from the City of Bloomington.

Their audience on that Wednesday in September 2017 was a McLean County grand jury. The prosecutor, Adam Ghrist, hoped to win indictments against five of the Coliseum’s former managers. 

As soon as the investigator finished his testimony, Ghrist asked the grand jurors if they had any questions. One of the first ones came from a grand juror puzzled as to why the City of Bloomington couldn’t see into or control the so-called Coliseum Fund—the primary account where city money would move in and out to support building operations. Only the soon-to-be indicted managers had access to the account, the State Police investigator said. No one at the city did. 

“Who in the city would agree to that?” the grand juror asked. 

Ghrist replied: “I’m sorry?”

“Who in the city would agree to that?” the grand juror repeated. 

That exchange is one of several revealing moments in 58 pages of grand jury transcripts recently disclosed in court filings. 

The grand jury proceedings show new details about how State Police unraveled the alleged scheme at the Coliseum. They cross-checked invoices from vendors against Coliseum records; they used a search warrant to pull documents from a storage unit. It wasn’t really just one big scheme, Special Agent Dan Rossiter testified, but seven mini-schemes that piled up to over $750,000 in money stolen from the city.

Coliseum Charges - By The Numbers
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Ultimately, the grand jury did indict John Butler, Bart Rogers, Jay Laesch, Paul Grazar, and Kelly Klein on 111 criminal counts of fraud, theft, money laundering, and tax fraud. Laesch took a plea deal, but charges are pending against the others. All worked for Butler's Central Illinois Arena Management (CIAM) or a related concessions company, BMI.

The grand jury transcript was filed as an exhibit by Klein’s defense attorney, Joel Brown. Klein, CIAM’s former finance director, wants a judge to dismiss the 12 counts of theft and money laundering against her. Brown argues the original charges were too vague and that prosecutors used “opinion evidence” to convince a grand jury to indict. That motion to dismiss remains pending. 

THE FINAL DAYS

Early on, grand jurors heard about the final days of Butler’s management contract with the Coliseum, in early 2016. 

CIAM was negotiating with the City of Bloomington on a new contract. The original one was set to expire March 31, 2016.

Starting in February 2016, Klein told the city’s Finance Department that the Coliseum needed an urgent “infusion of money” totaling $247,000, Rossiter testified. Klein told the city that $113,000 in utilities was owed and that shutoff was imminent. She also told the city Butler was owed $191,000 in fees and commissions. 

Former Bloomington City Manager David Hales left for a new job in Joliet in November 2017, two months after the five Coliseum defendants were indicted.
Credit Michael Hill / WGLT

At first, the city said no to the $247,000, responding that only $56,000 would be required for immediate expenses, Rossiter testified. Then on March 9—two days after the city announced CIAM would not get a new contract—Butler met one-on-one with Bloomington City Manager David Hales to discuss the $247,000, he said.

The next day, the city approved the full $247,000 with Hales' signoff, Rossiter said. It went into the Coliseum Fund.

On March 11, instead of paying the utilities, $162,000 was moved out of that Coliseum Fund into CIAM’s corporate account, Rossiter testified. That same day, a $100,000 check from the CIAM account was written to Butler’s personal account. Days later, another $52,000 from the Coliseum was moved to Butler’s account. 

Butler’s $152,000 was the same amount that Butler told the city he was owed in unpaid commissions in the months before his exit, Rossiter said.

WITHOUT CITY CONSENT 

In that case, Butler asked for money from the city and received it. At other times, Rossiter told the grand jury that CIAM deliberately kept the city in the dark. 

Take the Coliseum Fund. It was the operating account used for building expenses like utilities. It was set up at CEFCU, Rossiter said. Only CIAM staff could access it, even though the city could and did regularly infuse money into the account. 

“The city did attempt to receive access to those accounts on multiple occasions which were denied by CIAM personnel,” Rossiter testified. 

The city’s lax oversight of Coliseum finances was previously known. GLT reported that city auditors warned that a lack of oversight could lead to “potential material misstatement of the financial statements” at the arena.

The city has largely declined comment since the indictments were unsealed. The city says it’s “taken affirmative steps to mitigate the reoccurrence of similar allegations.” The city now has access to the arena's QuickBooks, as well as a contract administrator on staff to spearhead contract compliance. The city-owned venue is now managed by VenuWorks

John Butler owned both Central Illinois Arena Management (CIAM) and a sister food-and-beverage company called BMI.
Credit David Proeber / The Pantagraph (Pool)

Another example of alleged deception was the mysterious “Kelly discount.” The original 2017 theft indictments referred to but did not explain the Kelly discount. 

Rossiter told the grand jury what it was. Butler, Klein, and Laesch reportedly told investigators that CIAM was owed $37,000 from the city, because CIAM had mistakenly paid invoices for which the Coliseum fund should’ve been billed. So to pay themselves back, they used the “Kelly discount” during 51 events between 2013 and 2015, holding back commissions owed to the city, Rossiter said. 

Using two sets of financial records, Klein allegedly applied the Kelly discount only to certain events that made more money, so the change would be harder to spot. According to Rossiter, Klein said she asked Butler why they don't just bill the city for what they're owed, "and he believed that this was a more appropriate way to pay themselves for the invoices that he believed he should not have paid."

In his questions, Ghrist called the Kelly discount “deceptive.” 

“And was the city ever consulted or made aware of this specialty accounting slot titled Kelly discount?” Ghrist asked the investigator. 

“No,” Rossiter replied. 

SKIMMING CASH

The grand jury transcripts also reveal new details about the alleged cash skimming that took another $14,005 from the city. 

There were several places around the Coliseum where customers could buy beer and food with cash—without the transaction being automatically tracked in the building’s point-of-sale system, called Micros. That cash was counted each night and stored in a vault. 

But between 2013 and 2016, around $102,571 in cash was taken from the vault, Rossiter testified. Investigators discovered that only after they found documents in a CIAM storage unit showing the original cash sheets didn’t match what was entered into Micros, Rossiter said. Because of this the city lost at least $14,005 in unpaid commissions, he said.

Separately, Butler authorized Laesch to remove $12,000 in cash from the vault to be used for $4,000 Christmas bonuses to three employees, Rossiter said.

Lisa Matheny, a special agent with the Illinois Department of Revenue's criminal investigation division, also testified to the grand jury about the cash skimming. She said sales taxes were never paid on that $102,571.

Matheny also testified that BMI improperly used tax-exempt status for some catering jobs tied to Coliseum events. Even though the building is owned by the tax-exempt City of Bloomington, BMI and those receiving the catering were private entities, Matheny said.

Altogether, the state missed out on $19,770 in unpaid taxes, she said.

Coliseum - Grand Jury Proce... by on Scribd

THIRD-PARTY SALES 

Authorities say the bulk of the theft happened through commissions—the city’s cut (between 15 and 32 percent) of every beer, hot dog, and pretzel sold at the Coliseum.

Third-party vendors, such as Papa Johns or Avanti’s, would occasionally sell food at the Coliseum too. But instead of including those sales when calculating how much in commissions the city was owed, they were excluded. Between 2008 and 2016, that cost the city $229,000 in commissions, Rossiter testified.

“Based on the language of the contract and industry standards, the third-party concessions, 100 percent of those sales would have been a commissionable sale owed to the city,” Rossiter said. 

Butler, Rogers, Klein, and Grazar have all pleaded not guilty. Two months after he was indicted, Butler sued the city, claiming he’s owed $67,175 in unpaid commissions. That civil case is still pending and is due back in court Feb. 1.

Butler’s attorney has argued authorities are trying to criminalize a business and contract dispute. The city says it’s “fighting for the taxpayers in civil and criminal court.”

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