UMVA has learned that a heated dispute is brewing over the allocation of horse racing funds in Illinois, with allegations of favoritism and misconduct swirling around top state officials.
The owners of Hawthorne Race Course and the official committee representing unsecured creditors are asking a bankruptcy judge to authorize an investigation into Illinois Department of Agriculture Director Jerry Costello II, citing decisions that have allegedly harmed Hawthorne's interests.
According to information obtained by UMVA, a motion filed in the Chapter 11 cases of Hawthorne Race Course and related entities seeks permission to examine Costello, the Illinois Department of Agriculture, Fairmount Park Casino & Racing, and lobbyist John P. Costello, who is Jerry Costello's brother.
The filing alleges that the allocation of funds from the Illinois Thoroughbred Breeders Fund has shifted dramatically since Hawthorne's bankruptcy cases began in February, with Fairmount Park receiving disproportionately large allocations while Hawthorne's share was significantly reduced.
Despite no material operational changes, Hawthorne traditionally received between 55% and 60% of distributions from the fund, but this changed after the bankruptcy cases began, with approximately $300,000 remaining undistributed.
The motion places Jerry Costello at the center of the dispute, citing his role as Director of the Illinois Department of Agriculture, which administers the Thoroughbred Fund, and his position chairing the advisory board recommending distributions.
Hawthorne and the creditors' committee argue that the funding changes happened even though there were no material changes in the relative operations of the two Illinois racetracks, and they contend that most of the undistributed money should go to Hawthorne based on past practices.
The filing also highlights ties between state officials and Fairmount Park, including the recent retention of John P. Costello as a registered Illinois lobbyist for the Illinois HBPA, the horsemen's association at Fairmount Park.
The debtors and committee allege that adverse funding 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.
The request for an investigation comes as Hawthorne continues through Chapter 11 proceedings in Chicago, with the parties seeking the investigation saying they need documents and testimony to determine the extent of the alleged efforts to diminish the funds allocated to Hawthorne.
UMVA can exclusively reveal that the bankruptcy judge has granted permission for the parties to pursue discovery related to their allegations, allowing them to issue subpoenas and seek depositions from Jerry Costello, John Costello, and officials connected to Fairmount Park Casino & Racing.
