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Report criticizes GOP power broker over hotel deal
Associated Press

Illinois Treasurer Alexi Giannoulias blames a sweetheart deal for letting the politically connected owners of a botched Springfield hotel deal capitalize on a multimillion-dollar state loan.

 

Associated Press file

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Published: 5/19/2008 3:33 PM | Updated: 5/19/2008 7:23 PM

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SPRINGFIELD -- Illinois Treasurer Alexi Giannoulias blamed a "sweetheart deal" Monday for letting the politically connected former owners of a capital city hotel take advantage of a multimillion-dollar state loan.

An independent audit commissioned by Giannoulias and released Monday alleged Republican power broker William Cellini and his business partners diverted roughly $2 million from the downtown Springfield hotel to use for personal expenses rather than paying back millions in state-backed loans.

"The hotel served as a money hole for Mr. Cellini's corporation, which went to great lengths to hide profits and manipulate revenues to avoid his financial obligation to the state," Giannoulias said.

Giannoulias also blamed "state power brokers" for enabling Cellini. They "cut him and his pals a sweetheart deal, gave him money and continually renegotiated terms on his loan that the average homeowner could only dream about," Giannoulias said.

State officials said they didn't find out about the financial discrepancies earlier because a provision in the loan stated hotel owners would do their own accounting. The hotel, once called the Renaissance, is now known as the President Abraham Lincoln Hotel and Conference Center.

Attorney Kathleen Vyborny, who represents Cellini on the hotel deal, disputes the financial irregularities outlined in the report and maintains the hotel group followed the terms of the loan.

"It's all false," she said.

Vyborny said the timing of the report is curious since the state agreed earlier this year to dismiss a decade-long court case against the group of investors.

"We're puzzled by the allegations of hidden expenditures since all of that information has been out there for years," Vyborny said.

The report doesn't accuse Cellini or his partners of criminal wrongdoing. But Giannoulias said he forwarded the information to state and federal prosecutors last week.

Cellini is a millionaire lobbyist-businessman known for working behind the scenes in state politics. He runs the Illinois Asphalt Pavement Association, a Springfield-based lobbying group, and is a major donor to political candidates.

Cellini's name has also come up often in a trial involving Gov. Rod Blagojevich fundraiser Antoin "Tony" Rezko for wielding an unusually powerful influence over the $40 billion fund that pays the pensions of retired downstate and suburban school teachers. Cellini has not been charged with any wrondgoing in the Rezko case.

Giannoulias commissioned the audit after beginning foreclosure proceedings against the hotel last year, gaining control of it in March. He plans to sell it and recover some of the nearly $30 million owed to the state.

The hotel was built in 1982 with $15.5 million in state loans. But the hotel's various owners have paid almost nothing on the loan.

The report said the owners used hotel funds to pay $722,000 in legal expenses, bought Christmas presents and gave money to the Illinois Asphalt Pavement Association within a 10-year period ending in 2006.

The audit said during that time, hotel managers lied on financial statements to show reduced profits and that accountants doubled tax deductions to hide money from the state. Cellini and his associates are accused of setting up his corporation to skim about $475,000 from the hotel's catering business.

Giannoulias said the state can't recoup the losses even if Cellini faces criminal charges because the hotel owners are not financially responsible if the money isn't paid back under the loan's unusual terms.

Giannoulias plans to make some renovations and sell the property to a buyer, possibly a national hotel chain, in the next few months at a public auction. It is unclear how much money the state will collect from the hotel sale.

The President Abraham Lincoln isn't the only hotel taken over by the state.

Giannoulias' office also took over ownership of a Holiday Inn in Collinsville, insisting there's evidence that site -- built with millions in unpaid state loans -- was a cash cow for its owners who claimed it couldn't make a profit.

A Chicago-based real-estate auction firm Giannoulias has hired to handle the sale is accepting bids on that 228-room site through Wednesday, then will make a formal presentation of the bids to Giannoulias next week.

Giannoulias said that auction should help taxpayers recoup some of the $32 million owed on the site.