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Orlando gambles on Chicago money



As city officials and principals in Orlando Partners scrambled over the past week to nail down the final details of the Naval Training Center deal, all lingering questions concerned the financial player on the Orlando Partners' team, the Penguin Group.

Those questions answered, on Monday, Mayor Glenda Hood signed the contracts with Orlando Partners removing any doubt that the consortium of companies including the Penguin Group would be responsible for transforming the 1,100-acre naval base into a neo-traditional neighborhood on the city's northeast side.

The Penguin Group, a 50-percent partner in the venture and the money behind the Orlando Partners' team, first appeared as a major player just two weeks before the May 11 vote vote by Orlando City Council, as Orlando Partners filed its final financial package with the city. Questions about the Penguin Group caused a deadlock on the citizen advisory board charged with picking the Naval Training Center developer and prompted the council to add a provision for a special meeting, if Orlando Partners failed to meet Monday's deadline for answering lingering questions about the Penguin Group and its role in financing Orlando Partners' plan.

City officials quickly learned the Penguin Group is part of the business empire of the Pritzkers, a Chicago family ranked among the wealthiest in the country. But even as Hood, who headed the state's anti-casino campaign in 1994, was sealing the deal, few were aware of the extent of the Pritzker's casino holdings or the family's colorful past.

In the 1970s, the Pritzkers were drawn into one of the biggest offshore banking probes in history involving Castle Bank and Trust in the Bahamas, in which the Pritzkers had deposited money. In the 1980s, the Pritzkers bailed out Dallas-based Braniff Airlines, then walked away with $400 million in tax breaks after selling its interests before the airline crashed financially. And in the 1990s, the Pritzkers were embroiled in a legal battle with Donald Trump over the Grand Hyatt in New York City.

The family also was involved in a legal fight with Playboy Enterprises over the only Atlantic City casino that has failed -- one of more than 20 gambling houses in which the Pritzkers' companies have held or continue to hold ownership stakes. Before its demise, the Atlantis hotel-casino was operated through a license granted to a partnership including Playboy and a company controlled by the Pritzkers despite reports by casino regulators that, in financing the building of hotels and casinos, Jay Pritzker had used millions in loans from International Brotherhood of Teamster pension funds that were targeted by federal investigators due to accusations of mismanagement and organized-crime connections.

"I wasn't aware of that," says District 4 Commissioner Bill Bagley, who represents the residents and businesses anxiously awaiting the project. "I just heard the Pritzker family and the Hyatt Hotels family."

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The Pritzker family fortune was formed by Nicholas Pritzker, who emigrated from Russia to Chicago in 1881 and started a law firm in 1902. One son, Abram, diversified the business into real estate and manufacturing in the 1930s. The Pritzkers' holdings are vast and everchanging, but include the Hyatt chain, Royal Caribbean Cruises and the Marmon Group, the family's industrial empire. In 1994, the Pritzkers sold Ticketmaster to Microsoft cofounder Paul Allen. A third generation of Pritzkers is now active in the business, including Penny Pritzker, a well-connected Democratic Party fund-raiser who runs the family's luxury retirement centers. J.B. Pritzker, a family heir, recently spent $900,000 on an unsuccessful bid for an Illinois congressional bid. "It's a very deep pocket with diverse interests," says Orlando financial director Mickey Miller.

Currently the family real estate development arm, the Penguin Group, is financing the development of 12,000 homes and apartments -- 7,800 of which already have been built. About 4,300 of these are located in Jacksonville, Tampa/St. Petersburg and Broward County. In April, the Pritzkers put up for sale a158-acre tract in Broward County near the Sawgrass Expressway -- among the last developable land available in Broward County. The Carlisle, a housing development in MetroWest in southwest Orlando, is a Penguin Group project.

The terms of the Naval Training Center deal call for the Penguin Group to pledge $10 million in cash, as well as a $5 million loan, to secure the deal. The Penguin Group also has agreed to purchase 1,000 multifamily units in the development and is expected to invest another $5 million on demolition and other environmental and infrastructure work required before building can begin.

All these commitments are spelled out in contracts prepared by the city -- which will purchase the property from the U.S. Navy and quickly resell it to Orlando Partners. But contracts are broken -- even by people with as much money as the Pritzkers.

In 1985, the Pritzker-controlled Elsinore Corp., owner of the Atlantis Casino-Hotel, disclosed it might not meet interest payments to creditors, including Playboy Enterprises, from which Elsinore had purchased Playboy's stake in the Atlantic City casino. Eventually Elsinore filed for bankruptcy protection from its creditors and the casino closed in 1989.

And in 1993, the Pritzkers tangled with another well-known casino operator, Donald Trump, over control of the Grand Hyatt in New York City. In a lawsuit, Trump claimed the Pritzkers, through their companies, "have systematically looted tens of millions of dollars from the Grand Hyatt through theft, fraud, waste and mismanagement," then pressed auditors to look the other way. The family denied the allegations, and the suit was settled in 1995.

In 1994 Mayor Glenda Hood, as president of No Casinos Inc., led the successful charge against the proposal to legalize casino gambling. "Which part of the word "no" don't they understand?" she asked in 1995 after pro-casino forces moved toward a second ballot initiative.

But on May 11, Hood -- who could not be reached for comment on the Pritzkers -- confidently assured City Council, "One day we will look back and say, ‘We had a piece of that decision... That it was the right decision we made.'" A week later, she made it official, signing the contracts with Orlando ;Partners.

Apparently, while gambling is taboo, gambling money is not.

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