Treasurer recoups $5.65 million from Lincoln Hotel policy
Bond payment brings state closer to ending hotel saga

May 6, 2009

Illinois State Treasurer Alexi Giannoulias will collect nearly $5.7 million from an insurance policy on the Abraham Lincoln Hotel and Conference Center in Springfield, taking another significant step toward ending a soured political sweetheart deal.

The Treasurer’s Office initiated a claim last year with CNA insurance company to collect on the hotel’s surety bond, which the original hotel owners were required to purchase to collateralize a portion of the state’s loan to build the property.

After positive discussions with the Treasurer’s Office, CNA – whose only role in the transaction had been serving as holder of the surety bond that guaranteed a payment if the borrowers defaulted on the mortgage – will pay the state $5.65 million under the bond to satisfy the claim. The treasurer collected more on the surety bond than the previous administration was willing to recoup by selling the hotel for $3.7 million in 1995.

“Our goal from the start has been to recover as much money as possible,” Giannoulias said. “This represents a small amount of the total that these political insiders fleeced taxpayers for but we felt the surety bond was a significant asset, and it was critical that we collect on it.”

The state will likely use a portion of this money to reinvest in the hotel to make some renovations and repairs resulting from the previous owners’ neglect. This will increase the selling price of the hotel in an effort to recoup more money for taxpayers.

Since the Treasurer’s office gained title of the property, it has invested a portion of profits to replace the mattresses and linens, which had not been replaced since the hotel was built. Money has also been used to make much-needed repairs and renovations to the hotel’s restaurant.

The Abraham Lincoln Hotel in downtown Springfield was built in 1985 with $15.5 million in state loans, but the then owners quickly fell behind on making payments, paying back less than $150,000 since 1997.  A receiver was appointed by a Sangamon County Court judge to manage the property in March 2007.

In May 2008, Giannoulias turned over the findings of an independent audit to the FBI suggesting that former owners of the Abraham Lincoln Hotel diverted $2 million for personal expenses rather than pay back the state-backed loan. They allegedly skimmed money from a catering contract and concealed cash owed to the state. Those funds were used to pay personal tax analysis expenses, purchase Christmas gifts and pay for lobbyist fees.