Busted Flush
Michael Freedman
NEW YORK -
Jack A. Abramoff, one of Washington D.C.'s most powerful lobbyists, was indicted yesterday for an alleged $23 million fraud, along with one-time business partner, Adam R. Kidan. It's not the first time the two have been in the spotlight: In 2000, the two men paid $147.5 million to buy SunCruz Casino, an offshore gaming business, but quickly ran into trouble amid lawsuits and the brutal assassination of former SunCruz owner Konstantinos "Gus" Boulis.
SunCruz was a minnow in a sea of big fish such as Harrah's Entertainment (nyse: HET - news - people ) and MGM Grand and Mirage Resorts--which combined that year to produce MGM Mirage (nyse: MGG - news - people ). But under Boulis' ownership it was profitable on sales of $80 million and had carved itself a niche in the flashy business by ferrying customers three miles from the Florida shore into international waters and letting them gamble. Still, Boulis faced myriad regulatory issues through the years, and he made good use of a slew of high-powered lobbyists, including Preston Gates, Abramoff's employer at the time.
Abramoff has been widely considered to be one of the top Washington, D.C. lobbyists, with particularly close relations with Tom DeLay, the Republican congressman from Texas. He told Forbes he first heard about SunCruz through his work at Preston Gates, but in an extremely high-profile move he left to work with Greenberg Traurig, where he represented a slew of Indian casinos as well as the Northern Mariana Islands, a U.S. commonwealth in the Pacific.
In September 2000, Abramoff joined forces with Adam Kidan, a one-time lawyer and entrepreneur with a colorful past, to buy and expand the SunCruz. The two men had met years earlier as students in Washington, D.C. The deal, which included 11 boats in Florida and South Carolina, called for the buyers to put in $23 million of their own cash, get $60 million from a unit of Wells Fargo (nyse: WFC - news - people ), and Citadel Equity Fund, and cover the balance with promissory notes to the sellers.
As co-owner, Kidan enjoyed the high life. He took a $500,000 salary, leased a turboprop airline for $30,000 a month and traveled the world.
But the deal was quickly mired in violence and controversy. Boulis allegedly threatened to kill Kidan, jumping over a desk and throwing punches; Kidan filed a restraining order. And in February 2001, Boulis was murdered at the age of 51 in a hail of gunfire in Fort Lauderdale, Fla. (See: "Going For Broke.")
Shortly after the murder, both Abramoff and Kidan told Forbes they were out of the country when it happened. They said they had made themselves available to the police for questioning through lawyers. Yet as of yesterday, Fort Lauderdale police say Abramoff has eluded them. Though police said he is not a suspect, he is "definitely someone of interest" in the still ongoing investigation of Boulis' murder.
In an exclusive interview with Forbes at Abramoff's Greenberg Traurig office shortly after the murder, Abramoff and Kidan said the violence would have no effect on the business plan, which included exploiting Abramoff's skills and contacts to develop SunCruz. They announced plans to bring a 150-foot casino boat to the Northern Mariana Islands, represented by Abramoff and his firm. They said they had signed agreements to manage casinos for American Indians in North Carolina, California and Oklahoma. They also said they were currently in the application process for a casino license in Europe, and had been a guest of the government in China, where they toured four cities.
Yet their efforts were thwarted when Boulis' estate filed a suit alleging Kidan wrote bad checks and stole company cash. The suit claimed that in the weeks before Boulis' death Kidan wrote three $10,000 checks to Anthony Moscatiello, a man once indicted for racketeering along with a brother of gangster John Gotti. (The case ended in mistrial.) Adding to the intrigue was Kidan's past: His mother was murdered in the doorway of her Staten Island home in an apparent robbery attempt. Chris Paciello, a Miami night club owner and a reputed associate of the Bonanno crime family, later pleaded guilty to the murder.
A U.S. magistrate judge found that Kidan and Abramoff (who was not a party to the action) had induced Wells Fargo to come up with its financing by certifying they had already paid the $23 million in cash. In fact, Kidan testified, he had never made payment. The judge also ruled that SunCruz failed to make promised repayments on $67.5 million still owed to the previous owners.
The indictment, returned by a U.S. federal grand jury in Fort Lauderdale yesterday, alleges Abramoff and Kidan gave phony evidence of the $23 million wire transfer. In addition, the indictment alleges, both men provided in the loan application financial statements false information about their respective assets and liabilities.
If Abramoff and Kidan are convicted of the six counts in the indictment, they could each face up to 30 years in jail. And Abramoff, meanwhile, reportedly faces a slew of other, apparently unrelated investigations related to his lobbying efforts. Their lawyers, who did not return phone calls, deny the charges, according to press reports.
SunCruz ultimately went through a bankruptcy reorganization and is now operating under new management.
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