Chicago Horse-Racing Track Bets It Can Beat Multimillion-Dollar Judg...

Lawyers who recently put the Balmoral Racing Club outside Chicago into bankruptcy are preparing to fight the $82 million penalty that hit the horse-racing operation over an alleged bribery scheme involving disgraced ex-Illinois Gov. Rod Blagojevich.

Balmoral Racing Club lawyers plan to appeal the judgment from a lawsuit filed by the state’s four largest riverboat casinos, which accused the racetrack’s owners of illegally promising to contribute money to Mr. Blagojevich’s campaign if he renewed a 3% tax on the riverboat casinos.

That deal was captured on wiretaps during the Federal Bureau of Investigation’s five-year investigation into public corruption in Illinois, according to the federal lawsuit that the riverboat casinos filed in 2009. The lawsuit said that Mr. Blagojevich’s campaign committee got $125,000 in donations from Balmoral Racing-related entities and was scheduled to take in another $100,000 around the time that he was arrested in late 2008 on federal corruption charges. (In 2012, he began serving a 14-year prison sentence.)

After a weeklong trial in December, a jury decided in favor of the riverboat casinos, leading to the multimillion-dollar judgment.

The racetrack’s Chapter 11 filing on Dec. 24 prevented the riverboats from trying to collect money on the judgment. In earlier court papers, Balmoral Racing Club’s lawyers called the allegations of extortion “nonsense.”

Money from the riverboat tax, which was created in 2006, has flowed to horsemen and horse-racing track improvements to help make up for the financial hardship that hit Illinois’s horse-racing industry after riverboat gambling was legalized in the 1990s.

“The proliferation of river boat gambling casinos, video lottery terminals and ‘racinos’… in most other states has seriously impaired the ability of Maywood [Park racetrack], Balmoral and all of the other tracks to operate profitably,” said Chief Financial Officer Randall Olech in documents filed in U.S. Bankruptcy Court in Chicago.

Built in 1925 as Lincoln Fields, Balmoral Racing’s harness horse racing facility has a one-mile track, seats for about 10,000 people and stables for more than 1,000 horses. (In harness horse racing, a horse pulls a two-wheeled cart called a “sulky” and a driver. Think Charlton Heston in Ben Hur’s chariot racing scene.)

Balmoral Racing Club’s operations were projected to take in $13.2 million in revenue last year, mostly from wagering, according to court papers.

Racetrack officials also put the Maywood Park racetrack, located in Chicago’s Melrose Park suburb, into bankruptcy. Maywood Park’s half-mile track has hosted harness races for 68 seasons in a row, which is the longest streak in state history, Mr. Olech said in court papers.

Races at both tracks are also broadcast to about 3,000 outside locations, including at offtrack betting parlors. Together, the racetracks employ about 240 people.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech