Hilton settles casino bribery charges

Hilton subsidiaries Hilton Kansas City Corp. and Hilton Gaming Corp. reached the pretrial diversion agreement with federal prosecutors late Tuesday.

A federal grand jury had been investigating the allegations that in 1993, an employee of Hilton Gaming paid the head of the Kansas City Port Authority $225,000 to secure a prime downtown location for Hilton's new Flamingo Casino.

In the agreement, which effectively stopped the investigation, the two subsidiaries accepted responsibility for the employee's actions, but didn't admit guilt. They also agreed to pay the U.S. government $500,000 plus the $155,000 bill for the investigation and to continue requiring ethics training for their executives.

"Keep in mind that Hilton paid the money and they (the two subsidiaries) received the benefit," U.S. Attorney Steven Hill said. "I think it's a fair inference that they knew what was going on, and I think it's a fair inference that they intended these things to happen."

However, in the agreement, the government agreed that it couldn't produce any evidence that would prove knowledge of the bribe went beyond the employee who allegedly offered it.

"Hilton is pleased that this investigation is over with," Hilton attorney Jean Paul Bradshaw said Wednesday. He said the employee in question had left the company.

Immediately after Hill announced the settlement Wednesday, the Missouri Gaming Commission announced it would reopen its investigation into Hilton Kansas City, the company that runs the Flamingo Casino.

The commission investigated the alleged bribe in 1996 but closed the investigation after Hilton officials and the Port Authority chairman accused of accepting the bribe denied the accusations under oath.

The former Port Authority chairman, Elbert Anderson, has since been convicted of bribing a city councilwoman. He has been cooperating with federal investigators in the Hilton case and other Kansas City-area public corruption cases in hopes of getting a reduced sentence.

Hill said that while the government's case against Hilton was strong, prosecuting one of the country's largest hotel chains could amount to a death sentence for its casino operations as well as the jobs of thousands of Hilton employees who had no ties to the alleged bribe. Casino revenue accounts for about half of Hilton's overall earnings.

"If we were to be successful in prosecuting Hilton Gaming or Hilton Kansas City on felony criminal charges it would be all but assured that the gambling regulatory authorities in each state where Hilton has casinos would move quickly to terminate their licenses to operate," Hill said.

"In this case, the ends of justice are best met by means of this diversion and not by the criminal prosecution of Hilton," he said.

Hill noted that the diversion agreement will end up costing Hilton more than a court could legally impose under a criminal conviction.

Whether the agreement will have an effect on Hilton Gaming's casino licenses will be up to the local gambling commissions.

Hill said he would ask the judge overseeing the federal grand jury to release its evidence to the Missouri Gaming Commission for review. Federal law allows grand jury evidence to be released for law enforcement uses.

In the diversion agreement, Hilton Gaming and Hilton Kansas City acknowledged that the government has enough evidence to prove that in early 1993, an employee of Hilton Gaming met with Anderson, then chairman of the Port Authority, and thanked Anderson for his help in bringing the Flamingo Casino to Kansas City. The employee then asked Anderson what he wanted from Hilton in return.

Anderson asked for a $1 million grant, the first $225,000 of which would go to KC Perspectives, a company operated by an employee of Anderson's and with whom he was romantically involved, the diversion agreement said.

"Anderson understood that his vote had been "financially secured" by Hilton for future developments," the diversion agreement said.

After the employee, who has not been charged in connection with the allegations, left Hilton Gaming, company officials continued to honor the agreement with Anderson, unaware that it may have involved a bribe, Bradshaw said.

Anderson was not charged in connection with the alleged Hilton bribe. But he was convicted in 1997 of paying thousands of dollars in bribes to a former Kansas City councilwoman in exchange for city business.

Bradshaw said the only new evidence federal investigators had in the Hilton bribery allegations was Anderson's agreement to cooperate.

"In 1996, under sworn testimony, he (Anderson) said it wasn't bribery," Bradshaw said. "To our knowledge, he and another fellow who has a bone to pick with Hilton, are the only ones who have stood up and confirmed this allegation."

Bradshaw said the company expected the licensing commissions in the states where the company has casinos to look at the diversion agreement, but he said the company didn't expect to lose any of those licenses because of it.

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