Kenny, who runs a construction company and is close to George W Bush, told the Sunday Tribune this weekend that his fine was "no big deal" and blamed one of his brothers, Gerard Kenny, for creating the problem. The offence was committed while the former ambassador was living in Ireland.

Gerard Kenny made an arrangement in 2003 that he would give his shares in the Casino Queen - a large boat casino in East St Louis, Missouri - to his five siblings should he ever have to repay them for any other losses. But casino laws in Illinois prevent casino owners from using their shares as collateral in this way without permission from the gaming board. As a result, each sibling has been fined. Together, the six Kennys own 20% of the casino.

Gerard Kenny, a developer who is currently working on the 72-storey Mandarin Oriental Tower - a $500m project in Chicago - was also found to be doing business with Leonard J Mercer Jr, an associate of the Philadelphia Scarfo crime family and a man whom the gaming board called "a convicted felon and known associate of organised crime". Kenny was ordered to give up his stake in the Casino Queen, a business in which the former ambassador has an unspecified number of shares.

The Scarfo family - the Philadelphia members of the US Cosa Nostra - made Atlantic City the second most popular gambling destination in America, second to Las Vegas. The family's boss, Nicodemo 'Little Nicky' Scarfo, is currently serving life in prison. Gerard Kenny was also found to be conducting business deals with two associates of Mercer - Frank Leo and Patrick Danan. The three men run Palladian Development, the firm developing the Mandarin Oriental Tower.

The Sunday Tribune contacted James Kenny at his business, Kenny Construction, on Friday evening. "I wasn't here when this stuff took place, " he said, adding that he was in Ireland at the time. The case was "about filing some papers and sorting out some stuff. . . these are all things that were going on and I wasn't even in the country at the time of the fines. It really has nothing to do with me."

Kenny let the blame rest with his brother Gerard.

"We have a brother who left the family business some years ago, " he said. "This is all his problem. It's not a big deal, it just made a darn article."

Last week the Illinois Gaming Board disagreed with this assessment. As well as fining the Kenny family, it gave Gerard Kenny 30 days to sell his 2.9% stake in Casino Queen.

A former St Louis resident and member of Casino Queen described the business as a "real ghetto. I mean, they bring buckets of chicken wings to your table. One night I was there, a guy was murdered in the parking lot. Their slogan was 'The Casino Queen - the loosest slots in town'."

James Kenny received an honorary doctorate in 'humane letters' from the American College in Dublin in 2005. He raised over $100,000 for George W Bush's presidential campaign and was replaced as ambassador to Ireland by Thomas Foley last November.