INDIANAPOLIS | A politically connected East Chicago developer embroiled in a feud for control of local casino cash was investigated but not charged by federal prosecutors, a lawyer for the firm argued Thursday.

Maggie Smith, an attorney for East Chicago Second Century, divulged the information to the Indiana Supreme Court in an attempt to blunt the state's attempt to pry open the development firm's books. If federal prosecutors haven't filed criminal charges, she reasoned, Second Century must not be doing anything wrong.

Smith said the federal inquiry was part of a broad corruption probe into the administration of eight-term former East Chicago Mayor Robert Pastrick. Second Century is run by Pastrick allies Thomas Cappas and Michael Pannos.

"The investigation began in 2003. It commenced with hundreds of hours of grand jury testimony, hundreds of thousands of documents reviewed and all of the other indictments were handed down." Smith said after Thursday's court hearing. "There's never been anything handed down against Second Century."

The state Supreme Court heard arguments Thursday in Indiana Attorney General Steve Carter's attempt to force a public accounting of Second Century finances. For more than three years now, the for-profit firm has refused to disclose how it spent millions in riverboat casino-funded economic development subsidies it reaped through a 1994 deal brokered by Pastrick.

A spokeswoman for U.S. Attorney David Capp in Hammond did not return a message seeking comment on Smith's claim.

Second Century argues that, as a private company, it's under no obligation to disclose what it has done with the roughly $2 million annual subsidy it received until the Indiana Gaming Commission terminated the agreement in 2006. That stance appeared to frustrate Chief Justice Randall Shepard.

"What I want to know is why your clients resist giving the people of East Chicago an accounting of how the money was spent?" Shepard asked.

Smith insinuated that the calls for transparency by Carter and East Chicago Mayor George Pabey are clouded by political motives and that the federal investigation she disclosed should be enough to allay fears the money was misspent.

"All actions over the many years have failed to find how the $16 million was spent," Carter said after Thursday's hearing. "The Indiana Supreme Court is the last hope the public will ever have of knowing where it went."