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A federal lawsuit filed against Horseshoe Casino claims contracts for the construction of the casino were not sufficiently awarded to minority businesses, even though the project received federal housing funds earmarked for that purpose. (The Daily Record / Maximilian Franz)

Baltimore casino hit with RICO lawsuit

Minority business plaintiffs made similar claims against MGM National Harbor

Baltimore and the city’s Horseshoe casino accepted federal housing funds aimed at giving a leg up to minority businesses and low-income individuals but then failed to award contracts for a significant portion of the construction of the $400 million casino to disadvantaged businesses, according to a federal lawsuit.

The allegations in the complaint, which was filed Thursday by Celestial Concrete Inc., a Mitchellville-based minority business, the Maryland Business Clergy Partnership and an unnamed individual, are nearly identical to those in a lawsuit the same plaintiffs filed last year against MGM National Harbor over the ongoing construction of the $1.2 billion casino.

In the Horseshoe lawsuit, the plaintiffs allege that rather than providing contracting opportunities for minority businesses and training and employment for low- to moderate-income individuals — as required of recipients of funding from the U.S. Housing & Urban Development Department’s Section 3 program — the city, through housing commissioner Paul Graziano and CBAC Gaming LLC, which was licensed by the city to develop and operate Horseshoe Casino, fraudulently received the funds.

“As a result of Defendants’ improper practices, federal housing and employment programs … have been caused to pay false or fraudulent claims for reimbursement [of] minority business economic development opportunities and low-to-moderate income individuals’ employment and training opportunities that would not have been paid but for the Defendants’ illegal business practices,” according to the complaint, which was filed in U.S. District Court in Greenbelt.

The complaint was available in online court records Monday morning but the entire file was sealed later in the day.

Horseshoe Casino Baltimore “vehemently denies” the lawsuit’s claims, the company said in a statement Monday, adding it “takes great pride in the diverse vendor and supplier outreach initiatives” since the casino was in planning stages.

“On construction-related costs alone, the casino invested more than $76 million with area minority-owned businesses,” the company said.

Randy McRae, the attorney for the plaintiffs in both casino lawsuits, did not immediately respond to a request for further comment on Monday.

‘Defraud’ the community

The Horseshoe lawsuit alleges the defendants, which include primary contractor Whiting Turner Construction Inc., hired “sham bidder-entities” purporting to be disadvantaged businesses in order to appear to fulfill the requirements for HUD funding instead of awarding work to legitimate minority-owned businesses.

The lawsuit filed against MGM National Harbor and Prince George’s County last year made almost identical allegations involving the same alleged “sham” contractor, Bulldog Construction Inc.

According to both suits, Bulldog Construction falsely claimed disadvantaged business status and conspired with Schuster Construction Inc., another contractor, to “defraud the minority business community.” The contractors violated the Racketeer Influenced and Corrupt Organizations, or RICO, Act in the process, the lawsuits allege.

“Because Defendants obtained sizable ‘housing and community development’ funding and ‘minority business utilization’ credit for which they were not qualified, the U.S. Treasury has suffered $129 [million in] damages… and local MBEs have suffered, at most, $100 [million in] damages based on the casino construction project MBE goals,” the recent lawsuit states.

The lawsuit seeks $129 million in compensatory damages and $1 million in punitive damages on claims that the defendants engaged in civil conspiracy and obtained payment for false claims from the government, as well as $300,000 in compensatory damages and $100,000 in punitive damages on a claim of negligence.

The case is United States, ex rel. v. Paul Graziano, et al., 8:15-cv-04018-RWT.

About Lauren Kirkwood

Lauren Kirkwood covers the business of law beat at The Daily Record.