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Vaping firms, casino company have surprising ties

August 31, 2016

Centaur Gaming isn’t a licensed player in the e-liquid industry that produces the “juice” used in electronic cigarettes in Indiana.

But Centaur, which owns the state’s two racinos, is connected to half of the e-liquid companies that have been licensed under a controversial law that is now being probed by the FBI.

Three of the six firms initially authorized by the state Alcohol and Tobacco Commission to manufacture e-liquids to sell in Indiana have owners who either work for Centaur or were shareholders in the company before it filed for bankruptcy protection in 2010.

Two of the firms are new to the industry and one contracts with another company to actually manufacture e-liquids.

In addition, one of Centaur’s lobbyists did work for a company that was pushing for the law, which essentially put a single private security company in charge of deciding who could make the e-liquid sold in Indiana. And the head of that security company said he consulted a Centaur official about the law, which led to a dramatic shrinking of the vaping industry.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, voted for the latest iteration of the law, which passed earlier this year, but says now he’s surprised by the vaping industry connections with the gambling company. He said he didn’t know Centaur was “anywhere within three miles of this” and that the law “needs to be examined.”

“Whether that has any fire as well as smoke, I don’t know,” Kenley said. “Somebody ought to take the time to go through it."

Industry connections

Indianapolis-based Centaur owns Hoosier Park Racing & Casino in Anderson, Indiana Grand racetrack and casino in Shelbyville and three off-track betting facilities in Indianapolis, Clarksville and New Haven.

It has aggressively lobbied the General Assembly over the years—first to authorize the track-based casinos and then to let them have live dealers in addition to electronic table games.

The 23-year-old company denies any involvement in the vaping industry, which includes the manufacture and sale of e-cigarettes and the liquids users add to them.

Its president, Lafayette native Rod Ratcliff, did not return a message seeking comment. But Kurt Wilson, the company’s executive vice president, said he’s “not aware of Centaur benefiting from this in any way.”

“I can’t say that anyone that we have been associated with has benefited or not,” he said. “Centaur is not involved in the vape business."

Still, there are connections.

James Purucker, who represents Centaur through his firm John Frick & Associates, also represented a much more obscure client—Indiana Vapor Co., a major force behind the vaping law. Indiana Vapor never became licensed as it originally planned but its principal, Zak Laikin, now manages an industry group that represents licensees.

Around the time Indiana Vapor Co. was seeking a license, Purucker was hosting fundraisers for lawmakers at Centaur’s off-track betting facility in downtown Indianapolis. The events generated questions because the gaming company can’t provide direct contributions to campaigns—or even indirect contributions such as food or room rentals.

Purucker said he paid for the events personally, but some 20 lawmakers failed to include that information in their campaign finance reports, according to The Indianapolis Star. Among them was state Sen. Ron Alting of Lafayette, who told The Star he didn’t remember who paid for his fundraiser.

Alting was the sponsor of a 2016 revision to the e-liquids law. That law included unusually strict rules for the companies that can provide security for e-liquid manufacturers—so strict that only one firm, Lafayette-based Mulhaupt’s, even qualified. That gave Mulhaupt’s the ability to control which companies could apply for a license.

Alting, who has not replied to IBJ’s repeated requests for comment about the vaping legislation, has previously denied wrongdoing in crafting the law and has said he was not trying to specifically benefit Mulhaupt’s, which is based in his hometown and owned by a high school classmate.

Several e-liquids firms doing business in Indiana before the regulatory changes sued to try to stop the law from taking effect. In one of the hearings, Mulhaupt’s President Doug Mulhaupt was asked with whom he discussed the original legislation as it wended its way through the General Assembly in 2015.

Mulhaupt said he talked to attorneys, friends and family members but actually named just one person: Kurt Wilson, the Centaur executive vice president.

Wilson, who lives in Lafayette, said he and Mulhaupt “talk all the time” and have known each other for decades. He declined to tell IBJ what the two discussed regarding the e-liquid law.

“I really don’t feel at liberty to talk about private conversations I have with him about business matters,” Wilson said.

The licensees

The licensed manufacturers with direct ties to former Centaur shareholders are VapeINg LLC in Lafayette, Cloudtown LLC in Ohio and DNM Ventures LLC of Florida.

Neither VapeINg nor Cloudtown appeared to be producing e-liquids at the time they applied for a license. DNM Ventures testified in court that it had contracted with an existing e-liquid company to produce juice.

VapeINg LLC is owned by D. Randall Blank, according to documents the company submitted along with its application to the ATC. He’s also a former Centaur shareholder. In 2007, the Indiana Gaming Commission authorized Centaur to issue 3,531 shares of stock to Blank as part of a wider stock issue worth around $741,000, according to a 2007 issue of Indiana Gaming Insight, a newsletter that tracks the industry.

Reached by phone, Blank said he did not have any conversations with Centaur about his decision to get involved in the e-liquid business. He said he sold his Centaur shares long ago.

“I hold a restaurant liquor license with ATC,” Blank said. “They had a big banner up in January [stating] they were taking applications for e-liquid. I thought I’d give it a try."

Cloudtown LLC is owned by David Lorey, according to documents filed with the ATC. Lorey also owned 4 percent of Centaur in 1999, according to a gaming commission document granting the consolidation of Centaur’s ownership interest with other firms. Lorey did not reply to IBJ’s requests for comment.

DNM Ventures is 75-percent-owned by Darroll P. French and 25-percent owned by Denise Nicole Murray, according to documents the firm submitted to the ATC. Murray is also the direct mail coordinator at the Winner’s Circle, the downtown Indianapolis OTB, according to her licensure record at the Indiana Gaming Commission, which lists her place of employment as Centaur-owned Hoosier Park.

In addition, Murray was endorsed for the skill of “strategic planning” on LinkedIn by Centaur’s chief operating officer, Jim Brown.

Murray did not reply to IBJ’s repeated requests for comment. French could not be reached.

Skeptical reactions

While the relationships may raise questions about Centaur’s interest in the vaping industry, there’s nothing illegal about former gambling company owners—or current employees—getting into the e-liquids business.

Still, opponents of the law say they are skeptical of Centaur’s connections to the manufacturers and the legislation they already dislike.

“This thing was not well planned out from the very beginning—or maybe it was well-planned out,” said State Sen. Phil Boots, R-Crawfordsville. “I’m not happy with the way the whole thing transpired."

House Minority Leader Scott Pelath, D-Michigan City, did not address the Centaur connection directly. But he criticized the “arrogant sloppiness” of the law and said it “began as a reasonable effort to regulate nicotine and ended as a special interest boondoggle that no one can explain, let alone defend.”

Both House Speaker Brian Bosma and Senate President Pro Tem David Long declined to comment to IBJ about the vaping industry’s connections to Centaur. Long’s spokesman, Skip Brown, said the Senate leader “isn’t going to comment on details about the lobbying effort for the bill that he’s not familiar with.”

 “However, he reaffirms his commitment to correcting any unintended consequences from the bill that appear to have created an un-level playing field in Indiana’s vaping industry,” Brown told IBJ.

Two lawmakers and one industry representative say they were interviewed by the FBI about the legislative process and whether anyone illegally benefited from its passage. But an FBI spokeswoman would not confirm an investigation.

Also in business

The three other manufactures initially approved by the ATC appeared to be already established in the e-liquid business at the time of their applications.

DB Vapes LLC is doing business as Sugar Creek Bottling Co., which started in 2013 and is based in Indianapolis.

Vapor Bank LLC is manufacturing e-liquids in Evansville.

Licensed E-liquid Manufacturing LLC is run by the owner of an established Fort Wayne vape shop.

There is a seventh company that has also been authorized to sell in Indiana. A federal judge’s preliminary injunction ruling in one of the cases challenging the law required the ATC to issue a license to Florida-based GoodCat LLC after the law had taken effect, even though it didn't meet the law's requirements. The ruling applied only to GoodCat.

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