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12/21/87 Ogden-Fairmount, Inc., v. the Illinois Racing Board

December 21, 1987

OGDEN-FAIRMOUNT, INC., APPELLEE

v.

THE ILLINOIS RACING BOARD, APPELLANT. -- JAMES R. HAYDEN, APPELLEE,

v.

THE ILLINOIS RACING BOARD ET AL., APPELLANTS



SUPREME COURT OF ILLINOIS

518 N.E.2d 120, 119 Ill. 2d 154, 115 Ill. Dec. 595 1987.IL.1886

No. 64327. -- Appeal from the Appellate Court for the Fifth District; heard in that court on appeal from the Circuit Court of Madison County, the Hon. Edward G. Ferguson, Judge, presiding. No. 64918. -- Appeal from the Appellate Court for the Fifth District; heard in that court on appeal from the Circuit Court of Madison County, the Hon. George Filcoff, Judge, presiding.

APPELLATE Judges:

JUSTICE SIMON delivered the opinion of the court.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SIMON

In the first of these two consolidated cases, cause No. 64327, the Illinois Racing Board (the Board) ordered Ogden-Fairmount, Inc. (Ogden-Fairmount), to return $2.1 million to the Race Track Improvement Fund (the Fund) and to pay a penalty of $105,000 for submitting false documents to the Board. Ogden-Fairmount sought judicial review of the order in the circuit court of Madison County, and that court vacated both the reimbursement order and the penalty and remanded the case for further proceedings before the Board. The circuit court ruled that the Board could only order payment of any actual monetary damages suffered by the Fund, not return of the $2.1 million, and that in assessing any penalty the Board must allow Ogden-Fairmount to present mitigating evidence. The appellate court affirmed the vacation of the reimbursement order and the penalty but vacated the remand to the Board, holding that both the reimbursement order and the penalty were improper. (147 Ill. App. 3d 789.) We allowed the Board's petition for leave to appeal (107 Ill. 2d R. 315(a)).

In the second consolidated case, cause No. 64918, the Board excluded James R. Hayden from all racetracks under the jurisdiction of the Board for 15 months for preparing false documents that were submitted to the Board by Ogden-Fairmount. Hayden sought judicial review of the Board's order in the circuit court of Madison County. The circuit court reversed the Board's order because it found that the findings and order of the Board were contrary to the manifest weight of the evidence and contrary to law. The appellate court affirmed (151 Ill. App. 3d 1167) by an unpublished order (107 Ill. 2d R. 23), and we allowed the Board's petition for leave to appeal (107 Ill. 2d R. 315(a)).

Since these cases arise out of the same set of facts, they have been consolidated for appeal. The Board now concedes that it had no authority to order Ogden-Fairmount to return $2.1 million to the Fund, and it is not appealing that portion of the decision. The only issue remaining in cause No. 64327 is whether the Board had the authority to fine Ogden-Fairmount $105,000. In cause No. 64918 the issue is whether it had the authority to exclude Hayden from Illinois racetracks for 15 months.

Ogden-Fairmount operates Fairmount Park, a racetrack in Collinsville, Illinois. It is an organization licensee within the meaning of section 3.11 of the Illinois Horse Racing Act of 1975 (the Horse Racing Act) (Ill. Rev. Stat. 1985, ch. 8, par. 37-3.11). Hayden was granted a license by the Board in 1984 as the owner of thoroughbred horses. He is also the president and owner of Hayden Construction Company in Belleville, Illinois. The Board, which is an appellant in both cases, is an administrative agency vested with the authority to enforce the provisions of the Horse Racing Act. The Southern Illinois Trotters Association, Inc. , an appellant in cause No. 64918, is an Illinois corporation with jurisdiction over horse racing tracks in southern Illinois, including Fairmount Park.

One of the Board's duties is administration of the Race Track Improvement Fund. (Ill. Rev. Stat. 1985, ch. 8, par. 37-32.) The Board is mandated to use the Fund "to aid tracks in improving their facilities" (Ill. Rev. Stat. 1985, ch. 8, par. 37-32(c)), and money from the Fund may be distributed for the cost of erecting, acquiring or improving seating stands, buildings or other structures, for purchasing or restoring equipment and for the payment of the cost of amortization of debt. (Ill. Rev. Stat. 1985, ch. 8, par. 37-32(d).) Each organization licensee is required to deposit one-half of the total breakage from all noncharitable racing meetings with the State Treasurer in an account established for that organization licensee. (Ill. Rev. Stat. 1985, ch. 8, pars. 37-28(g), 37-32(b).) "Breakage" is defined as "the odd cents by which the amount payable on each dollar wagered exceeds a multiple of 10." (Ill. Rev. Stat. 1985, ch. 8, par. 37-3.02.) The Illinois Racing Board Annual Report explains "breakage" and the basic operation of the Fund as follows:

"Race track wagers are paid in multiples of 10. If, for example, the odds reflect that each winning dollar wager is worth $3.19, the patron receives only $3.10. The nine cents are defined as breakage. One half of the breakage is revenue to the state and the other half is deposited in an account of the organization licensee which operates the race track where the wager is placed. The odd cents on the dollar accumulate rapidly and over $4 million is distributed annually for capital improvement at all Illinois race tracks from the Race Track Improvement Fund." Illinois Racing Board Annual Reports, 1980, 1981, 1982, 1983.

Section 32(e) of the Horse Racing Act states that the Board "shall promulgate procedural rules and regulations governing information required, deadlines for filing, and types of application forms to be observed by the tracks seeking monies from the Fund." (Ill. Rev. Stat. 1985, ch. 8, par. 37-32(e).) The regulations enacted by the Board pursuant to section 32(e) require the licensee to submit two forms when seeking money from the Fund for a project. The first form is the application, in which the organization licensee describes a project and seeks Board approval for it. (See 11 Ill. Adm. Code 404.10(b) (1986).) Part of the prescribed form is a certification by the submitting officers or employees of the organization licensee that the information in the application is true and correct. The Board uses the application to determine whether a proposed project comes within the purview of the statute creating the Fund. The second form is a request for payment, which is submitted after the project is approved and completed. The request must include the contractor's statement of services furnished, the amount to be paid to the licensee and evidence of payment to the contractor. (11 Ill. Adm. Code 404.20 (1986).) Upon order of the Board, the State Treasurer may then reimburse the licensee from the balance in the Fund credited to that licensee.

On September 6, 1979, the Board met and adopted a "sense of the board Resolution" that any organization licensee must provide at least three competitive bids with each application seeking approval of expenditures from the Fund.

From 1980 to 1984, Ogden-Fairmount submitted 19 applications for project approval that purported to contain three competitive bids. Each of the applications contained a notarized certification that all of the information contained in the application was true and correct. The information was not true and correct, however, because two of the bids in each application were spurious ones; they were not legitimate attempts to procure the contract. Instead of obtaining three legitimate bids for each project, Robert Graham, an officer of Ogden-Fairmount and the general manager of Fairmount Park, and his two successors, John Weaver and Roger Smith, negotiated contracts with Hayden to complete the projects. Hayden then obtained spurious bids that were in amounts higher than his own; these bids were from contractors or companies which he or members of his family or his friends controlled. Ogden-Fairmount submitted ...


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