WASHINGTON PARK - The village government of this impoverished community had it tough already before a strip club beat back a five-digit license fee and two public workers walked off with more than $444,000.
Facing mounting debts owed to trash collectors, retirement funds and even one of its topless nightclubs, Washington Park has filed for bankruptcy protection for a second time this decade.
The move - rare among municipalities - is intended to provide a chance to reorganize. The Chapter 9 case, filed July 6 in U.S. Bankruptcy Court in East St. Louis, seeks legal protection from creditors while the village develops and negotiates a plan for adjusting its debts.
Washington Park made a similar filing in 2004 that was later dismissed.
The community of about 5,450 people along Interstate 64 at the eastern edge of East St. Louis filed papers showing assets of less than $50,000 and debt of more than $1 million.
The debt, driven in part by litigation against the village and the legal bills that resulted, became so unmanageable that its board adopted a resolution earlier this month saying its "best interest" was to declare bankruptcy.
"Every time I turn around, they're hitting us with suits," Mayor John Thornton said. "And on top of the lawyers, we got people stealing from us and the feds raiding."
Indeed, federal officials have raided the village hall for records from time to time. One of Thornton's predecessors as mayor, Sylvester Jackson, was sentenced in the mid-1990s to 37 months in federal prison for taking bribes of up to $2,000 a week to protect gambling.
In 2008, federal authorities seized 63 boxes of records from the village hall and later raided the home and business of a village police officer, although no charges have been filed in connection with it.
Dorothy Triplett, the village's former payroll clerk, pleaded guilty in March to charges of stealing nearly $144,000 in public money over two years, largely from the police and fire pension fund. And in May, Linda Connor, a former assistant to Thornton, admitted in federal court that she had embezzled more than $300,000 in village money.
At Triplett's sentencing hearing earlier this year, prosecutors spoke of another, unspecified investigation.
Insurance covered some of those losses, according to court documents. Washington Park still owes the Illinois Municipal Retirement Fund $26,346.50.
The mayor said revenue took a big hit in 2006 when a federal judge ruled its strip club licensing practices unconstitutional. Eric Joelner, owner of Fish Inc., won a court claim that the village unfairly denied him a license, and that the annual strip club license fee of $30,000 a year was an unconstitutional infringement of free speech.
"We were making $30,000 a year from each strip club license. Now we only charge $1,200 a license," Thornton said. "The judge was wrong when he did that."
Now, the village owes Joelner's club $80,000 for attorney fees.
The village says its two largest creditors are the Illinois Department of Employment Security, owed $448,793.29, and Johnny "Chico" Matt, a former village public safety director, owed $300,000.
Matt sued in 2004, alleging discrimination based on political affiliation, but court records show the case appeared to have been dismissed. Thornton was unable to explain the debt, and Matt could not be reached.
Thornton said the village also is crippled by the recession. "We have less money coming in, and we can't meet all of our obligations," he said. "Pretty soon, there's going to be layoffs."
Thornton would not say how many of the village's 20 employees would be laid off, or in what departments. He said the village is struggling to keep up services like police protection and trash collection.
"We've got police cars breaking down and we can't afford to keep them up," Thornton said. "We're trying our hardest."
Municipal bankruptcies are considered uncommon.
"It is certainly rare for any town to file for bankruptcy," said Larry Frang, executive director of the Illinois Municipal League.
The weak economy has brought forth a few others, Frang said. Most notably, Vallejo, Calif., a town of about 120,000 residents that sought bankruptcy protection last year amid soaring employee costs and declining revenue.
WASHINGTON PARK'S LARGEST CREDITORS
$448,793 - Illinois Department of Employment Security
$300,000 - Johnny "Chico" Matt, former public safety director
$174,363 - Police Pension Fund
$91,04 - Hinshaw and Culbertson, lawyers
$80,000 - Fish Inc., nightclub
$73,821 - St. Clair County auditor
$55,000 - Fraternal Order of Police
$53,449 - Aetna Insurance
Source: Bankruptcy filing