Former South Pittsburg mayor headed to jail: Gambling got 'out of hand,' says Mike Killian

Former South Pittsburg mayor headed to jail: Gambling got 'out of hand,' says Mike Killian

January 10th, 2014 by Todd South in Local Regional News

Mike Killian, former mayor of South Pittsburg, Tenn., makes his way into federal court Thursday to be sentenced on a federal gambling charge to which he pleaded guilty. Investigators estimate he made more than $800,000 while operating video poker, illegal sports betting and a lottery in the Marion County town.

Photo by Dan Henry/Times Free Press.

The Richard City Market in South Pittsburg, Tenn., which was raided by federal agents last year during a gambling investigation of former Mayor Mike Killian, is seen Wednesday, Jan. 8, 2014.

Photo by Doug Strickland/Times Free Press.

Former South Pittsburg Mayor Mike Killian admits he was wrong to run a 25-year-long gambling operation but claims that others run similar enterprises and that he was targeted because of his political position and a prominent relative.

During his federal sentencing hearing Thursday, Killian, 56, publicly apologized to his family and South Pittsburg residents, saying that his gambling operation got "out of hand."

"I especially did wrong to engage in that while I was holding public office," he said. "And one or the other should have stopped."

But Killian also told U.S. District Judge Curtis Collier, "I just don't want Your Honor to think that me and Mr. [Robert] Cole are alone in this," he said. "I'm not the only one who had poker machines in the county. It's just not true."

The Lotto Mart in South Pittsburg, Tenn., which was raided by federal agents last year during a gambling investigation of former Mayor Mike Killian, is seen Wednesday, Jan. 8, 2014.

Photo by Doug Strickland/Times Free Press.

Mike Killian speculated that information about his gambling side businesses was likely discovered as officials researched his brother Bill Killian's background upon his nomination to be the U.S. attorney for the Eastern District of Tennessee.

Bill Killian became the U.S. attorney in 2010. Mike Killian said he learned that he had been investigated for two years before agents raided three Marion County businesses in January 2013 and seized a dozen video gaming machines and $38,475 cash from multiple locations.

Only one of the businesses was his -- the Lotto Mart at 519 E. 12th St. in South Pittsburg.

There have been no allegations, testimony or evidence connecting the U.S. attorney to any of Mike Killian's gambling businesses. Mike Killian said that he and his brother had not spoken since the raid and they were "not that close."

The Eastern District office recused itself from any dealings with the case. It has been handled by the U.S. Department of Justice Public Integrity Section, which investigates public corruption.

The Li'l Store in Sequatchie, Tenn., which was raided by federal agents last year during a gambling investigation of former South Pittsburg Mayor Mike Killian, is seen Wednesday, Jan. 8, 2014.

Photo by Doug Strickland/Times Free Press.

The two-term Marion County commissioner and two-term South Pittsburg mayor said that many questions federal prosecutors asked him, "were right out of the mouths of my political opponents."

On Thursday he was sentenced to six months in federal prison followed by one year of house arrest after pleading guilty in September to a single count of running an illegal gambling operation. He also faces a $30,000 fine. He was allowed to report to prison on July 11, after the July Fourth holiday.

Mike Killian operates a fireworks business in Marion County. He served as mayor from 2005 until 2012. But prosecutors found no evidence that he used his office to further his gambling businesses.

He admitted in court documents to running an "outlaw lottery" operation from 1988 until 2012, a sports betting operation since 2002 and video gaming machines since 2004. He also acknowledged starting an offshore, online betting website in late 2012.

Prosecutors estimate that Mike Killian made at least $400,000 from the lottery, sports betting and gaming machines during the time period.

Court documents state that the sports betting took in between $8 million and $12 million in wagers over its decade of operation.

But the former mayor disputes those numbers, saying he willingly shared information with investigators, who extrapolated estimated dollar amounts from his admissions.

He said he had not been contacted by the Internal Revenue Service regarding taxes on the gambling profits.

Mike Killian's attorney, Lee Davis, argued that his client should receive probation and that since there were no ties between the gambling and his position as mayor, he shouldn't be punished any more than others facing the same charge.

Photo by Laura McNutt/Times Free Press.

Davis pointed to statistics showing that there had been only a handful of similar gambling charges in the Eastern District and in state court and nearly all resulted in terms of probation, not prison.

Federal prosecutor Mark Angehr argued that Mike Killian should be sentenced in range of one year to 18 months set out in the charge.

"The brazenness of this long-running illegal, criminal business is shocking," Angehr told the judge.

Collier sided with Davis and ruled that Killian would be sentenced below the range and that his status as a former public official would not be considered for his sentencing.

Davis continued to argue for probation. Angehr asked for incarceration. Collier ended up in the middle, part prison time, part probation.

Co-defendant Robert Barry Cole, 53, was also sentenced Thursday. He will serve three months in prison and six months on house arrest.

Cole took sports bets and left envelopes of cash at Killian's Lotto Mart.

Cole's attorney, Mike Little, said in court that much of the sports betting was on football in the community.

But Mike Killian clarified and said after the hearing that he never took bets on high school games.

Mike Killian said after the hearing that he will remove his name from the incorporation papers of the Lotto Mart but that the business would continue to operate and sell legal lottery tickets. He said he had spoken with Tennessee Lottery officials who told him the business could continue to operate.

Rules posted on the Tennessee Education Lottery's website say that the organization may revoke a lottery permit if the retailer has an employee who is "convicted of a criminal offense involving gambling."

Contact staff writer Todd South at tsouth@timesfreepress.com or 423-757-6347. Follow him on Twitter @tsouthCTFP.