Mayor Rick Filippi (search) was charged Wednesday with using inside knowledge to invest in real estate near the proposed site of a horse racing and casino complex.

State Attorney General Jerry Pappert said Filippi, 38, had invested money in a company formed to buy properties near a former paper plant at the same time he was leading confidential negotiations with developers seeking to turn the site into an $80 million gambling complex.

Filippi, a Democrat who was elected mayor in 2001, faced charges including criminal conspiracy, conflict of interest and accepting improper influence. If convicted, he would have to leave office and likely faces up to five years in prison.

Filippi was released on bond and made no comment to reporters. His next court appearance was scheduled for Dec. 17.

The mayor's attorney, Philip Friedman, said he was the victim of a shakedown by Greg Rubino, a real estate broker working for the gambling developers, MTR Gaming Group Inc (search).

"Mayor Rick Filippi stands between the taxpayers and these greedy people trying to take money from this city. It is outrageous," Friedman said.

Two of Filippi's business partners, Eric Purchase, Filippi's longtime friend and former campaign manager, and Rolf Patberg, faced similar charges.

Purchase also was released on bond.

"I think that when all the dust settles and all this clears out, we're going to find that it's clear that Mr. Purchase did not intend to anything wrong, nor that he did," said his attorney, Joseph Conti.

Patberg didn't immediately return calls and wasn't expected to turn himself in until at least Thursday.

The company Filippi invested in, Aiko Acquisition LLC (search), purchased the four properties near the former International Paper Co. mill site in 2003 for $164,950.

After the Erie Times-News reported his alleged ties to Aiko, Filippi in January denied those ties, but said his friends would sell the properties to avoid any appearance of wrongdoing. Erie County property records show all four properties were sold in March for $164,250, a $700 loss.

Rubino testified before a grand jury that he had the racetrack plans redrawn so the plans wouldn't require any of the land Aiko purchased.

MTR Gaming Group has since said it is favoring a different site for the horse track and casino.