Share All sharing options for: How a Waukegan truck stop became a gambling gold mine — the latest installment in ‘The Bad Bet’

The only truck stop in Waukegan sits on a lot so small a tractor-trailer would have a hard time pulling in to pump gas, let alone park for the night.

It’s nearly five miles from the nearest interstate and missing amenities truck drivers count on, like showers or a sitdown restaurant.

But what the Waukegan Thorntons lacks as a truck stop, it more than makes up for as a video gambling destination. Its five slot and poker machines bring in more than $100,000 a month. That makes it Waukegan’s most lucrative video gambling spot — and one of the most profitable in Illinois.

How Thorntons came to be a gambling gold mine results from a series of maneuvers over several years by a video slot and poker operator to squeeze money from a struggling city. And it offers a glimpse into how Illinois’ gambling expansion is playing out, particularly in communities desperate for its promised riches.

Waukegan once teemed with people and industry. Good jobs and affordable housing drew immigrants. But as with many Rust Belt cities, manufacturing’s decades-long decline bled resources from government, hammered small businesses and eroded the population, which has fallen 2.6% since 2010, to just shy of 87,000.

Since the early 1990s, city officials have lobbied the state for a casino, believing that would help pull Waukegan out of its financial doldrums. After repeated attempts failed, the city went all in after legislators legalized video gambling in 2009, quickly becoming one of the state’s top markets.

Then, in June, at the end of this year’s legislative session, Gov. J.B. Pritzker signed a massive gambling expansion law that calls for six new casinos, including one in Waukegan.

The city’s largest video gambling operator was ready. Long before lawmakers approved the new casino, the owners of Tap Room Gaming — led by former state Sen. Michael Bond, a Grayslake Democrat — had used campaign contributions to help elect city officials sympathetic to their interests, which include controlling the new casino and steering it to a site abutting land one of them bought, a ProPublica Illinois investigation has found.

Bond used his connections to try to get language in an earlier version of the bill that would have guaranteed Tap Room’s owners control of a Waukegan casino, according to people familiar with the writing of the gambling expansion law.

That failed. But Tap Room scored a victory when the video gambling industry beat back an attempt to tighten rules that would have barred the Waukegan Thorntons and dozens of other gas stations from running video slot and poker machines.

Now, city officials say they have received six bids to develop and operate a Waukegan casino — including one from Bond and Warner Gaming, a Las Vegas casino operator.

Pritzker and other state and local leaders say the latest gambling expansion will help fund borrowing for a $45 billion statewide Rebuild Illinois program. The Waukegan casino, they say, will create jobs for the city and shore up its underfunded police and fire pension funds.

But promises tied to a gambling windfall have come up short in the past. In 2009, lawmakers rushed through a similar bill legalizing video slot and poker machines, saying the industry would generate hundreds of millions of dollars a year to pay borrowing costs for a similar building campaign, Illinois Jobs Now!

A ProPublica Illinois/WBEZ Chicago investigation in January found it took nearly a decade to reach the state’s revenue projections, which accelerated Illinois’ financial tailspin and saddled the state with new, unfunded costs. In a follow-up story in February, ProPublica Illinois and WBEZ Chicago reported the state failed to meaningfully address the fallout of gambling addiction.

Under the new gambling law, Waukegan will get just 3.5% of casino revenue, leaving some officials skeptical about whether a casino will benefit the city, as many hope.

“Gambling takes money from people, mainly poor people, and gives it to government and corporations,” said Ald. Lynn Florian, a Democrat from Waukegan’s Eighth Ward on the Northwest Side who opposes a city casino. “And, in the case of the casino, our city will get just a fraction of that money.”

It started with March 2017 Waukegan mayor’s race

The tale of how Tap Room used video gambling money to tilt Waukegan politics begins in March 2017, during the homestretch of a mayoral race, when the campaign staff for Lisa May noticed large contributions pouring in from a political action committee called Video Gaming United.

Sam Cunningham, an insurance broker who won, becoming Waukegan’s first black mayor, got more than $40,000 from Video Gaming United in just weeks, accounting for roughly half his campaign funds, according to disclosure reports. Cunningham didn’t respond to requests for comment.

Video Gaming United was created by Bond, who started Tap Room with his aunt less than a year after leaving office in August 2011. Bond has hired the son of a Senate leader, Chicago Democrat Antonio “Tony” Muñoz, as well as Pete Couvall, vice chairman of the Lake County Democratic Party, a contract employee for Tap Room until he died in December, according to Illinois Gaming Board records.

Bond moved the political action committee’s money through the Waukegan Democratic Organization, a PAC controlled by Couvall and David Koss, a former campaign manager for state Sen. Terry Link’s 2010 race for lieutenant governor. Bond did not respond to requests for comment.

A relative newcomer to politics, May was blindsided by the Video Gaming United contributions. As an alderman, she had voted to bring slot and poker machines to Waukegan in 2012. But she also raised concerns about how ubiquitous the machines had become in Waukegan and had expressed skepticism during the mayor’s race about a casino in the city, noting that the city-owned Fountain Square site, favored by most casino proponents, would not benefit the Waukegan school district because it’s outside its boundaries. She favored focusing on revitalizing downtown and the lakefront.

“I wasn’t a hard, 100% no against the casino,” May said. “But someone had to prove to me that this was going to benefit the city of Waukegan.”

Mailers started arriving soon afterward. Funded by Bond’s PAC, they portrayed May as a Republican, with her picture alongside those of President Donald Trump and then-Gov. Bruce Rauner. In the waning days of a tight race and in a Democratic stronghold like Waukegan that has a history of low voter turnout, the attacks troubled May.

They were also false. May ran as an independent, hoping to become the first woman to be mayor in Waukegan. She supported closing a coal-burning power plant on the lakefront, her campaign staff was composed of Sierra Club operatives, and she said her stance on immigrant rights attracted volunteers who were undocumented.

“I’m more of a progressive than anything,” said May, whose father was an immigrant from Slovenia. “It was shocking the first time you come home and see the flyers, or when your mother calls you and says, ‘I just got this mailer with you and Donald Trump on it.’ ”

Despite the infusions of last-minute cash and misleading flyers, May came up just 303 votes short out of 9,115 cast in April 2017. She’s hesitant to blame her loss on Video Gaming United. As an independent, she had no party behind her, which meant she had to build a campaign infrastructure from scratch.

But she understood for the first time that video gambling interests had become a major player in Waukegan elections.

Andrew Hochberg, a Tap Room partner, and the next piece

Four months after the mayoral election, in August 2017, the next piece fell into place. A Skokie real estate company, Next Fountain Square, bought two tracts of vacant land for $975,000 next to a site called Fountain Square, which had been vacant for 14 years.

The city had purchased Fountain Square in 2003 as part of a failed bid to land the state’s 10th casino license, which went to Des Plaines and Rivers Casino.

The founder of Next Fountain Square is Andrew Hochberg, Tap Room’s third partner. Before starting Next Realty, Hochberg worked for his father’s company, Sportmart. He dabbled in politics, putting nearly $1 million into his Republican primary race for the U.S. House in 2000. He lost to Mark Kirk, who won the general election and later became a senator.

After Hochberg joined Tap Room in 2014, the company got a series of loans from private lenders that allowed it to buy out rivals, according to gaming board records and interviews. Before the acquisitions, Tap Room was a small player in the booming video gambling industry. Between 2014 and 2015, its annual revenue grew from less than $1 million to more than $6 million. By 2018, its revenues hit $24 million.

Tap Room is now Illinois’ seventh-largest video gambling operator, providing slot and poker machines to nearly 300 locations, according to an analysis of gaming board data.

Hochberg did not respond to interview requests. In a written response, Michael Millar, Hochberg’s spokesman, said Hochberg’s efforts to operate the casino are independent of his stake in Tap Room. Millar said it would be wrong to connect the purchase of the Fountain Square property to Tap Room’s political contributions, noting, “The adjacent city-owned land has been considered a logical casino site for many years.”

One of Tap Room’s owners now controlled land next to where everyone expected the casino would be built, and the company had provided crucial support to help Cunningham become mayor. With last November’s election delivering a pro-gambling governor, only a handful Waukegan council members still were questioning how much a casino would benefit the city.

A quick move before moratorium took effect

After her defeat for mayor, May, finishing her term as alderman, was surprised that Cunningham kept her as chair of the judiciary committee, regulating video gambling in Waukegan.

May set out to rein in the industry. She had seen how video gambling money could be used in local elections and heard from constituents who believed the town was oversaturated with slot and poker machines — more than 260 across 54 locations.

“I honestly don’t think I was that vocal about video gambling before the election, not even during. It wasn’t the hot topic,” May said. “But then all the money comes in, I lose and have to go back to being an alderman. So now, yeah, I’m totally zoned into it.”

In November 2017, May helped pass a six-month moratorium on new video gambling locations and began working on new rules limiting the number of video gambling locations and giving the council more oversight.

The following February, the council barred new gaming licenses within 1,500 feet of an existing location, increased the distance they have to be from a church or school from 100 feet to 400 feet and made liquor and video gambling licenses subject to council approval, rather than an administrative matter for the clerk’s office.

Three days before the moratorium took effect, a Thorntons gas station applied for a video gambling license. Tap Room was listed as the gambling operator at the site, at Green Bay Road and Grand Avenue.

Within three years, the site would become Waukegan’s most prolific video gambling location and Tap Room’s biggest moneymaker — and be a windfall for Hochberg’s Waukegan Petrosites LLC, which bought three parcels at that corner for $2.135 million in September 2015.

Hochberg leased one piece of land to Thorntons, giving the Kentucky gasoline and convenience-store chain the right to build a gas station. After it was built, Thorntons bought the property in December 2016 for $4.124 million. Seven months later, Thorntons agreed to pay Hochberg’s company $1,000 a month to lease the other two parcels, grass-covered lots, then applied for a video gambling license with Tap Room as the operator.

Waukegan approved Thorntons’ gambling license in February 2018. Seven months later, the gaming board granted it a truck-stop license. That allowed Tap Room to run five video slot and poker machines, the legal limit at the time, which the vast majority of truck stops had.

As a truck stop, the operators can keep the machines going 24 hours a day. Three months after getting its gaming license from the state, Thorntons bought the vacant parcels that allowed it to qualify as a truck stop, paying Hochberg’s company $1 million.

Hochberg had more than doubled his real estate investment in three years. He also makes money from the video gambling machines inside the gas station. Until the expansion law raised taxes on video gambling, Tap Room and Thorntons each got 35% of revenues, with 25% going to the state. Waukegan’s cut: 5%.

“The transactions between Waukegan Petrosites LLC and Thorntons were made at arm’s length and involved no exchange of gaming revenues,” Hochberg spokesman Millar said.

Truck stops are the most lucrative video gambling locations in Illinois because they are the only ones that aren’t required to have a liquor license to pour alcohol. The 10 most profitable gambling locations in Illinois are truck stops. The Thorntons in Waukegan brings in more than $100,000 a month, ranking eighth in revenue of nearly 7,000 establishments, according to gaming board data.

Under the 2009 Video Gaming Act, a location like Thorntons had to pump at least 10,000 gallons of diesel a month to qualify for a truck-stop license and had to be on at least three acres, presumably so trucks could park.

The Waukegan Thorntons sits on 1.6 acres, leaving little room for a tractor-trailer to maneuver. But the Video Gaming Act is so vague that Thorntons was allowed to count the two grass-covered lots leased from Hochberg toward the three-acre requirement, according to gaming board and Waukegan records.

Thorntons did not respond to requests seeking comment.

The site narrowly escaped being shut down as legislators pushed through the gambling expansion. Only a last-minute change saved the lucrative Tap Room site and dozens of gas stations across the state.

For years, the gaming board has struggled with truck-stop licenses because companies use the poorly worded law to shoehorn gas stations into the designation. Under this year’s gambling expansion, the board sought to tighten the requirements.

To qualify as a truck stop, a location had to sell 50,000 gallons of fuel a month, include a diesel island for commercial vehicles and have designated parking. In exchange for tighter rules, a truck stop could have 10 video gambling machines. The new requirements would have disqualified Thorntons.

The proposed amendment was in the expansion bill that passed a House committee. But before it went to the House floor, the old truck-stop rules were put back into the bill, and a new category called “large truck stop” was created, with the tighter requirements. Only large truck stops could get 10 machines.

The bill passed the House on a Saturday evening before sailing through the Senate the following afternoon. Once the governor signed it into law, on June 28, video gambling at the Waukegan Thorntons was in the clear.

Rep. Bob Rita, D-Blue Island, introduced the amendment, which included multiple provisions besides the one for truck stops. A spokesman for Rita said Link and Sen. David Syverson, R-Rockford, were responsible for the truck-stop language. Syverson didn’t respond to requests for comment.

Link said the bill was changed because “it was so restrictive that 90% of the truck stops” would be barred from having video gambling machines.

Link also said the current rules are too loose, allowing gas stations like the Waukegan Thorntons to qualify.

“That’s no more of a truck stop than I am,” Link said. “I think this is something we will be addressing in the future.”

Tap Room, affiliates pour money into Waukegan council race

Council races in Waukegan don’t usually attract much attention — or money — from outsiders. That changed this year, when Tap Room and its affiliates poured more than $200,000 into six races, according to campaign finance records.

Most of the money came through the Waukegan Voter Alliance, a political action committee created in January. WVA is run by Koss, the former Link campaign manager who is treasurer of the Waukegan Democratic Organization PAC, the conduit for Tap Room contributions to Cunningham during the 2017 race. Koss, who co-manages a media consulting group in Waukegan called Really Resourceful Group, declined to comment.

In addition to contributions directly tied to Tap Room, others came from Cunningham’s campaign and Effingham-based J&J Ventures, the second-largest video gambling operator in Illinois.

In aldermanic elections that typically raise less than $10,000, the WVA had built a war chest in weeks that allowed it to bankroll candidates for nearly every seat on Waukegan’s council.

WVA backed six of the nine Waukegan aldermen. It spent the most in the Ninth Ward — more than $77,000 in a failed effort to unseat Ann Taylor, who supported limits on video gambling and had been skeptical of a Waukegan casino. In races marked more by door-to-door canvassing than television commercials, WVA spent nearly $70,000 on TV ads for Taylor’s opponent, Annette Darden, according to state campaign records.

Taylor, who spent about $38,000, has filed a complaint with the Illinois Board of Elections, accusing Darden of failing to report in-kind contributions from WVA.

Darden and Taylor wouldn’t comment.

Even after Taylor handily won, Darden continued to get money from Tap Room-affiliated PACs. In April, another PAC appeared, the Small Business Coalition. It gave Darden more than $56,000. Founded by Jon Kozlowski, a Tap Room employee, lists its address on state records as a UPS Store a block from Fountain Square. Its only contributors are companies affiliated with Bond, including Tap Room Gaming, Tap Room Amusements and Bond’s public relations firm, State Street Public Affairs. Kozlowski did not respond to requests for comment.

Among other candidates the WVA supported was Roudell Kirkwood, who represents the Fourth Ward, including downtown. Gaming board records show Kirkwood owns a Chinese restaurant called Long Sing that has had video gambling since October 2017. Tap Room is the video gambling operator there, gaming board records show. Kirkwood did not respond to a request for comment.

Bond has defended the WVA, having told a reporter it was formed to “protect hundreds of small businesses who have been under attack by some members of the Waukegan city council.”

Tap Room’s contributions didn’t sit well with some officials.

“I don’t care what kind of company you are,” said Florian, who didn’t get money from gambling PACs. “Even if you’re selling bicycles, anyone who is that interested in spending that much money on our city council is a problem.”

In March, a so-called dark-money group called the Waukegan Jobs Coalition sprung up. Its address is the same UPS Store as the Small Business Coalition. Because it’s not required to file campaign disclosures, it’s unclear who funded it. State records show its manager, James Parks, was a longtime contract employee for Tap Room. Parks wouldn’t comment.

Within weeks of the group’s creation, TV commercials and mailers pushing for a casino at Fountain Square began appearing. Invoices for the TV time the Waukegan Jobs Coalition bought went to Koss’s Really Resourceful Group, according to billing records obtained by ProPublica Illinois.

Around the same time, Cunningham and council members who got contributions from Tap Room-funded groups started pushing to repeal some restrictions on video gambling. He also has testified at legislative hearings about gambling expansion, praising video gambling and lobbying for a casino in Waukegan.

WVA-backed candidates won four of the six seats up for election on the nine-member city council. Along with Cunningham, who breaks ties on council votes, Waukegan government now has five elected officials who got significant support from Tap Room. Site selection for the new casino is underway, and the council will have the final say over which companies’ pitches are sent to the gaming board for approval.

Some in Waukegan who have come to rely on video gambling worry about competition from a new casino.

“Of course, I am concerned,” said Quan Hui Chen, owner of Hunan Hibachi Buffet, a Chinese restaurant and Tap Room client across the street from Fountain Square. “The [video gambling] numbers will go down. And it pays the rent. But we can’t stop it.”

May has watched these developments with despair. She said her supporters have pressed her to run again in 2021 for mayor. But after her bruising mayoral run, she promised her husband she’d get out of politics. They’ve discussed leaving Waukegan.

“I’m heartbroken,” May said. “I tried really hard and for the right reasons. But all the money flowing in from out of town.”

Her voice trailed off as she wiped away tears.

“I raised my kids here,” she said, “in the same neighborhood I grew up in. I love this city.”

Jason Grotto reports for ProPublica Illinois.