* The Tribune takes a long look at one of Bruce Rauner’s prized GTCR acquisitions, Lason, Inc…
A few months after praising its performance, Rauner resigned from its board of directors just as the company’s high-flying stock began to crater. Lason imploded amid allegations by investors and criminal investigators that top executives cooked the books to boost the company’s value.
Neither Rauner nor his partners at the venture firm GTCR were accused of any wrongdoing. The firm netted at least $32 million from its investment by selling almost all of its stock before the earnings scandal became public. However, records show, other investors and lenders lost about $285 million as a result of the systematic accounting fraud, and three top executives went to prison. […]
Prosecutors alleged that for most of that time — from approximately 1997 through early 2000 — Lason’s success was bolstered by bookkeeping sleight of hand. The maneuver, referred to around the office as “Tailwind,” was orchestrated primarily by William Rauwerdink, Lason’s executive vice president and chief financial officer.
Rauwerdink, who eventually became a company director as well, was hired by Rauner and fellow board members in 1996 just months after he was sanctioned and fined more than $200,000 by the SEC over insider trading allegations at his previous job. He neither admitted nor denied the allegations, Lason noted in an annual report to the SEC.
Messinger told federal investigators the Tailwind scheme counted on manipulating financial data from newly acquired companies to inflate Lason earnings, driving up the stock price while masking Lason’s real financial condition. But the scheme began to unravel as acquisitions slowed and it became difficult to meet Wall Street expectations with accounting tricks alone.
The solution of the Lason conspirators was to make up $13 million in anticipated revenues from work that wasn’t real, according to court records. To mislead investors and stock analysts, the false numbers were highlighted in a company press release distributed in late October 1999. The figures were also folded into an official report filed with the SEC on Nov. 15 that wrongly claimed operating income in the third quarter of 1999 had far exceeded the same period the year before. […]
[Peter J. Henning, an expert on securities fraud and white collar crime] said Lason might be recalled as “one of the worst accounting frauds ever” had it not been upstaged by similar scandals at much bigger companies — Enron and WorldCom. […]
Go read the whole thing.