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Governor's $13-Million Debt Sparked Arrests in Alabama

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Cross Posted at Legal Schnauzer

Gov. Bob Riley's desire to avoid paying a $13-million debt helped trigger Monday's bingo-related arrests in Alabama, according to a report from a Washington, D.C.-based investigative journalist.

Riley attempted to unlawfully pay the political debt with public funds, Wayne Madsen reports. But when that failed, the governor pushed U.S. attorney Leura Canary to pursue an indictment against his creditor, gambling magnate Milton McGregor.

McGregor was among 11 individuals that federal authorities arrested on Monday for alleged corruption connected to electronic-bingo measures in the Alabama Legislature. The real reason for the arrests, Madsen reports, is that Riley did not want to pay back McGregor's share of a $15-million political slush fund that had been built for an anticipated 2006 gubernatorial campaign against Democrat Don Siegelman.

Riley's plan to give a $13-million, no-bid computer-services contract to a Virginia-based company called Paragon Source was designed to help pay off McGregor, Madsen reports. But that plan was abandoned when a legislative review committee objected to the contract.

At that point, Riley pushed Canary, a long-time ally, to develop a plan for indicting McGregor. As so often seems to happen in Alabama, the whole seedy affair started over Republican efforts to beat Don Siegelman. From the Wayne Madsen Report (WMR):

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Alabama sources report to WMR that Riley was intent on seeing McGregor indicted and jailed in order to welsh on a $13 million debt he owed to McGregor for a political slush fund set up for Riley's 2006 re-election campaign against the favored Democratic candidate, Siegelman. Siegelman's indictment before the election took the former governor out of the race but Riley had already had at his disposal some $15 million in a slush fund, $13 million of which was contributed by McGregor. McGregor was lured into the financial deal when he was told it was for an investment in a lucrative contract to provide machines for the Russian State Lottery. The pass-through company that was bidding for the supposed Russian State Lottery contract was Paragon Gaming, Inc., an entity that was involved in four Indian casinos in Canada and which also had a relationship with the Circus Circus casino in Las Vegas.

As we have reported previously, Homewood attorney Rob Riley (Bob Riley's son) and Birmingham businessman William Cobb "Chip" Hazelrig have been major figures with Paragon Gaming, which is led by Robert Sigler of Tuscaloosa. Reports WMR:

The principals involved in the Paragon Gaming deal with Russia included a member of Riley's immediate family and the family member's best friend who both operated out of an office in Oxford, Alabama. WMR's sources report that the Paragon Gaming "deal" with Russia also involved Dan Gans, the Chief of Staff to Governor-elect and then-Representative Riley, who was also a senior adviser to Riley's 2002 gubernatorial campaign against Siegelman, won by Riley amid charges of election fraud. Gans was also a lobbyist with the Abramoff scandal-plagued Alexander Strategies Group founded by former GOP House Majority Leader Tom DeLay's one-time chief of staff Ed Buckham. In addition, Michael Scanlon, Riley's former congressional press secretary and Capitol Campaign Strategies lobbyist partner of Abramoff who was convicted in the Abramoff scandal, was also reportedly involved in the Russian lottery contract.

However, there never was any Russian State Lottery contract and our sources report it was merely a cover for the creation of Riley's 2006 slush fund to finance his re-election campaign against Siegelman. Bill Canary was Riley's campaign manager in 2006. In 2007, when McGregor asked people close to Riley where his $13 million had gone, he was told "The KGB is looking for it." The KGB had not existed in Russia since the fall of the Soviet Union in 1991. The claim that the money had been stolen by Russia was false.

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McGregor, understandably, was not happy about being bilked out of $13 million. That's when Bob Riley came up with the Paragon Source scheme:

Eventually, Riley attempted to make good on his $13 million debt to McGregor when a female friend of Riley's created a firm called Paragon Corporation, which had no employees, listed a cell phone as corporate contact, and essentially operated out of the trunk of Riley's friend's car. Paragon Corporation, according to our sources, was to receive a $13 million contract from Riley that was to be quietly transferred over to Paragon Gaming and back into McGregor's accounts. However, a leak about Paragon Corporation caused the conspirators in the money laundering operation to abandon the deal and McGregor ended up short of his $13 million investment.

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I live in Birmingham, Alabama, and work in higher education. I became interested in justice-related issues after experiencing gross judicial corruption in Alabama state courts. This corruption has a strong political component. The corrupt judges are (more...)

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If Obama wants to narrow the enthusiasm gap among ... by Mari Eliza on Tuesday, Oct 12, 2010 at 4:18:55 AM
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