BILOXI, Miss. -- Until it changed hands in 1996, the Palace Casino
here was run by a group of people intent on defrauding investors
and hiding their own identities and illegal profits by setting up
dummy companies, according to a federal indictment issued late last
year in Mississippi Southern District Court against one of the
alleged participants.
The five-count indictment charges Timothy McDonald of New
Orleans with conspiracy, fraud, money laundering and tax evasion.
The charges do not involve the current owners of the Palace, who
bought the casino in 1996.
The indictment makes numerous references to unindicted
co-conspirators, with McDonald the only one charged.
According to the conspiracy count, McDonald's purpose was to
enrich himself by inflating the value of the casino's stock and
generating hidden profits for Halmac Industries, a Louisiana
business entity he controlled. The profits would then be shared by
the defendant and another unindicted co-conspirator.
McDonald is accused of having been involved in at least five
shell companies, both foreign and domestic, in an alleged scheme to
get a Mississippi casino license and build the casino while hiding
the casino owners' identities and profits.
McDonald and another unindicted co-conspirator are alleged to
have fraudulently induced investors to put up $15 million,
exclusively for the construction of the Palace Casino. However,
some of the money was spent on projects outside Mississippi and
otherwise skimmed and misappropriated, the indictment states.
The indictment charges McDonald contracted with the Palace for
Halmac to refurbish the barges to be used to construct the casino,
then inflated the cost of the work by adding hidden profits when he
billed the Palace.
The profits were then funneled to an unindicted co-conspirator,
according to the indictment. The hidden profits included alleged
consulting costs that were skimmed from investor funds through
inflated invoices, the indictment states.
The shell companies named in the indictment along with Halmac
Industries are Butler Capital, a company formed in Panama that
operated in San Diego, with McDonald as vice president; Schooner
Lisbon Investments, based in Nassau, Bahamas, which owned half of
the casino's stock when McDonald bought it in 1993; Maritime
Resorts International, which was in the process of developing a
gaming casino in Biloxi during the period relevant to the
indictment, and Maritime Group Limited, doing business as the
Palace Casino, organized in 1991 by an unindicted co-conspirator to
construct and operate the casino.
Maritime Group Limited, the entity by which the gaming license
was to be obtained, was acquired by Maritime Resorts International,
which shared its San Diego business address with Butler Capital for
a period of two years, the indictment states. At one point,
Maritime Resorts International owned all Palace Casino's stock.
According to the indictment, McDonald conducted the scheme in
the U.S. because an unindicted co-conspirator has a criminal record
in Canada and had been banned from trading on the Alberta Stock
Exchange.
As part of the conspiracy, according to the indictment, the
gaming license application submitted in 1992 by a Palace
representative contained misrepresentations and omissions of
facts.
The Palace received its license in March 1994 and opened the
following month.