A federal judge has granted a request from Hawthorne Race Course to investigate its allegations that the Illinois Department of Agriculture and its director improperly diverted state funds from the bankrupt track.
U.S. Bankruptcy Judge Timothy Barnes ruled Wednesday that Hawthorne may issue subpoenas for documents and seek depositions from the agency and Director Jerry Costello II; his brother, lobbyist John Costello; and Fairmount Park Casino & Racing.
In a court filing last week, Hawthorne alleged that Costello and the department had cut its funding by about $317,000 while increasing funding to its rival, Fairmount. Jerry Costello, who was appointed by Gov. JB Pritzker, and the Department of Agriculture, declined to comment.
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John Costello said the allegations were false and “defamatory,” and would be addressed in court.
The controversy arises as Hawthorne is in the midst of bankruptcy proceedings and while the horse-racing industry is barely surviving. The track, located in near west suburban Stickney, filed for Chapter 11 bankruptcy in February, seeking to delay and reduce its payments for more than $100 million owed to more than 200 banks, vendors, horse owners and other creditors.
The track is for sale in bankruptcy court. Offers are due by the end of June, with a winning bidder expected to be chosen in July.
Horse owners and other race track officials who are among the unsecured creditors hope that the facility will continue to be operated as a race track, with the addition of a casino, for a combined “racino.”
Hawthorne President and General Manager Tim Carey previously told the court he had gotten an offer of $107 million for the track last year, but the property would be more valuable with a racino. The site could also be sold to real estate developers who would tear the track down.
In 2019, state lawmakers had given Hawthorne authority to open a racino at its current location, plus another site in the south suburbs, with veto power over any competitor’s attempt to open a racino in that area.
Hawthorne proposed racinos at both sites, but both plans fell through. Since the closing of Arlington International Racecourse in Arlington Heights in 2021 — where the Chicago Bears now are proposing to build a new stadium — Hawthorne has been the only horse track in the Chicago area.
After the track started bouncing checks to horse owners, the Illinois Racing Board temporarily suspended the track’s harness racing license in January. The bankruptcy filing in February delayed the start of the thoroughbred season from March until April.
Typically, the Department of Agriculture helps fund both Hawthorne and Fairmount through grants from its Thoroughbred Fund, which receives money from thoroughbred betting and is meant to encourage the breeding industry in Illinois by rewarding Illinois-bred horses.
In 2023, Hawthorne received $3,608,977 from the Thoroughbred Fund while Fairmount Park received $2,896,139, based in part on Hawthorne holding more races, according to the filing.
But following the bankruptcy, IDOA sent a letter to Hawthorne demanding bank statements, canceled checks and credit card statements. When Hawthorne was unable to fully respond, the department said, it notified Hawthorne 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.
The filing alleged “troubling connections” between Jerry Costello’s control of the Thoroughbred Fund and influence from his brother John as a lobbyist for Fairmount Park’s horsemen’s group, the Illinois Horsemen’s Benevolent & Protective Association.
In its court filing, Hawthorne stated that Fairmount, located in Collinsville, near St. Louis, had sent texts in May announcing it was doubling its purse payouts to top-finishing horses, with more increases to come.
The filing also alleged that Fairmount 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.
Hawthorne and the Department of Agriculture did not respond to requests for comment.