Hotel audit leads to criminal investigation

May 19, 2008 4:54:18 PM PDT
A state audit of financial records for a Springfield hotel has led Illinois State Treasurer Alexi Giannoulias to call for a criminal investigation. Giannoulias said the politically-connected owners of the President Abraham Lincoln Hotel in Springfield, Ill., diverted $2 million from a state loan for personal expenses. The state took control of the hotel in March because the owners owed $30 million on the loan.

According to Giannoulias, the audit has been turned over to federal and state authorities.

The original owner of the hotel, political insider William Cellini and his partners, received a $15 million state loan to launch the hotel. Under the terms of the deal, if the hotel showed no profit, the group did not have to make mortgage payments. In the last 10 years, Cellini and his partners made only two payments.

"He didn't rob Peter to pay Paul. He robbed the state to pay himself," said Alexi Giannoulias, Illinois State Treasurer.

Giannoulias said a forensic audit of the hotel suggests Cellini "cooked the books" so the hotel appeared unprofitable when it was not. He said the audit - which his office commissioned - shows that Cellini and partners "improperly diverted $2 million" from hotel operations by taking profits from the hotel's catering business; using hotel money to pay for personal tax preparations and buy Christmas gifts for Cellini's lobbying firm; and by using more than $700,000 in hotel revenue to fight lawsuits brought by the state.

"Simply put, the owner used the state's own money to fight the state," said State Treasurer Giannoulias.

Cellini's attorney Kathleen Vyborny said, "We're mystified by the treasurer's comments." She said the group followed the terms of the loan.

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

Vyborny said past audits verify nothing was done incorrectly.

However, the treasurer's office said the previous audits lacked the depth of their forensic effort, and while it does not directly accuse Cellini of criminal wrongdoing, Giannoulias has turned the audit's findings over to the FBI.

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.

"This is a classic example of the fox watching the henhouse," said Paul Miller, treasurer's general counsel.

"We believe there's enough there for them to begin an investigation, but then again that's why they're the FBI and we're the state treasurer's office," said Giannoulias.


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