SPRINGFIELD — About three months after filing for bankruptcy, representatives for Hawthorne Race Course are alleging they are losing out on state funding because a top official in Gov. JB Pritzker’s administration — with the influence of his brother, a lobbyist — has been steering money to a rival racetrack, according to court papers filed last week.
On Tuesday, lobbyist John Costello, the brother of Illinois Department of Agriculture Director Jerry Costello, called the allegations “defamatory” in a prepared statement.
The explosive accusations are the latest chapter in a saga in which Hawthorne, a 135-year-old institution in Stickney just outside Chicago, is trying to restructure its debt and save dozens of jobs while working to rescue the state’s dying horse racing industry. A lawyer for Hawthorne and its creditors is scheduled to appear Wednesday before a federal bankruptcy court judge to discuss the latest filing, as the racetrack operator seeks permission to acquire additional records in the case.
The May 20 filing states that Hawthorne, as one of Illinois’ oldest and largest horse racing facilities, is conducting a sale of its facility and that it has received a crucial source of operating funds through the state’s so-called Thoroughbred Fund, controlled by the agriculture department director. Hawthorne, which has historically received 55% to 60% of the fund’s money because it holds significantly more races than its lone competitor, Fairmount Park in downstate Collinsville, said that pattern has shifted since it filed for bankruptcy in February, the filing states.
In 2023, for instance, Hawthorne received $3,608,977 from the Thoroughbred Fund while Fairmount Park received $2,896,139, according to the filing. Funding is ultimately determined by the Illinois Department of Agriculture, or IDOA, and the Thoroughbred Board, both of which include Jerry Costello in decision-making roles, according to the filing.
The filing noted how in August of last year, IDOA and Hawthorne entered into a grant agreement in which the state awarded the racetrack more than $2.8 million in grants. But since Hawthorne’s February bankruptcy filing, the funding allocation pattern has shifted.
“Despite no material operational changes, Fairmount Park received disproportionately large allocations while (Hawthorne’s) share was significantly reduced,” the group wrote in the filing. “Approximately $300,000 remains undistributed.”
The filing alleged “troubling connections” between Jerry Costello’s control of the Thoroughbred Fund and his brother John’s role as a “recently retained” lobbyist for Fairmount Park’s horsemen’s group, the Illinois Horsemen’s Benevolent & Protective Association.
“The Debtors (Hawthorne) have not received their historically allocated share of the Thoroughbred Fund,” according to the filing. “(They) believe these adverse allocation decisions were made at the direction of Jerry Costello through the IDOA and the Thoroughbred Board, and were influenced by the lobbying efforts of John Costello.”
“While Fairmount Park’s operations have remained substantially unchanged, it has significantly intensified its lobbying efforts,” the filing alleged, also suggesting that Fairmount Park has “aggressively” promoted purse increases funded by IDOA supplements “while threatening to exclude horsemen” who race at Hawthorne.
In effort to recoup after years of financial strain, Hawthorne Race Course files for bankruptcy
A spokesperson for Jerry Costello declined to comment on the filing, citing the pending litigation.
In his statement, John Costello said he has “proudly represented the ILHBPA for over ten years,” which is about four years before his brother became Pritzker’s agriculture director.
“The state funds discussed in Hawthorne’s recent bankruptcy filing have followed the same allocation process each and every year,” John Costello said. “The allegations about me being ‘recently retained’ for some nefarious purpose are false and any suggestion of impropriety is defamatory. I will allow the court system to address these false pleadings and refrain from any further comment.”
Tim Carey, Hawthorne’s president and CEO, and Fairmount’s general manager, Vince Gabbert, each declined to comment on the May 20 court filing.
In mid-March, IDOA sent a letter to Hawthorne demanding bank statements, canceled checks and credit card statements. When Hawthorne was unable to fully respond, the department, a month later, sent Hawthorne a letter saying it was decreasing its Thoroughbred Fund allocation by $316,895 and terminating its grant agreement — actions Hawthorne said were made “without basis.” That money remains undistributed.
IDOA said in an April 17 letter to Hawthorne officials that it was terminating Hawthorne’s grant agreement for several reasons, including that Hawthorne “does not have a valid organization license for standard racing,” and that its business status at the time with the Illinois secretary of state was not in “good standing” — which also disqualifies it from prequalification status in the Grantee Portal.
The May 20 filing also alleged that Fairmount Park had sent texts to an external distribution list in early May announcing it was doubling a purse supplement for certain races from $10,000 to $20,000, and separately raising the bottom purse from $4,000 to $10,000, with a promise that “more increases across the board will come in the very near future.” A subsequent text took a pointed shot at struggling competitors: “Unlike other racetracks that are in serious, and possible fatal declines Fairmount Park is on a definite upward swing that will continue to improve!! Come race with us where the future is bright!!”
More Top Picks Best Kids Bikes
The filing also alleged that Fairmount had previously sent out a text warning that horses entered at another track would be prohibited from returning to Fairmount, an apparent effort to discourage participation in Hawthorne’s races.
As part of the bankruptcy case, lawyers for Hawthorne are seeking court permission to subpoena documents and schedule depositions related to Fairmount’s alleged efforts “to diminish (Hawthorne’s) operations,” as well as the roles of the Costello brothers and IDOA in redistributing Thoroughbred Fund money to Fairmount.
Hawthorne filing for Chapter 11 bankruptcy allowed it to continue racing while it works on a plan to repay debts. The filing cited more than 200 creditors owed more than $100 million, against assets of $100 million or less.
At the heart of the matter is Hawthorne’s failure to open a combination racetrack and casino, or “racino,” despite state lawmakers authorizing it to do so in 2019. Hawthorne officials repeatedly assured racing officials they were close to a racino deal, but it never materialized. Hawthorne had proposed building a new racino in the south suburbs, but state officials withdrew the land needed for the deal in 2019 after questions arose about its funding from video gaming business owner Rick Heidner, a former Republican candidate for governor who had business deals with a banking family with alleged prior mob ties.
But Hawthorne retains veto power over any other south suburban racino, thanks to state lawmakers. Harness horsemen now are hoping to get approval for a new harness racetrack in downstate Decatur.
Meanwhile, the Illinois House Executive Committee on Tuesday discussed legislation to ensure Hawthorne receives more state funding for its horse racing operations, including a one-time appropriation covering a three-year retroactive period when payments were not made.
State Rep. Bob Rita, a Democrat from Blue Island and the measure’s main House sponsor, noted that Hawthorne is now the only track in the country hosting both thoroughbred and harness racing — a burden it has absorbed following the closures of Maywood Park, Balmoral Park and Arlington International Racecourse, the latter of which was purchased by the Chicago Bears for $197 million and is being considered as the site of their new stadium.
“Hawthorne is now the only track in the nation hosting both thoroughbred and harness racing, effectively serving the sole engine and keeping the historical industry in northern Illinois,” Rita testified before the committee.
“Regarding the well-being of the workers who keep the horse racing industry running, this bill changes how we fund the nonprofits that provide health care, dental work, and social support to the people living and working behind the scenes at racetracks,” he said. “This changes the funding to make it equitable, reflecting the current operational realities of the industry.”
Carey, the president and CEO of Hawthorne, testified that, through bankruptcy court, his business has been able to make payroll that was past due.
“So as an entity, we now move forward, and this becomes that much more important to us in terms of this legislation so that we can continue the business on a going concern basis,” he said.
McCoppin reported from Chicago.