SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
“One of the worst accounting frauds ever”

Tuesday, Jan 21, 2014

* 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.

- Posted by Rich Miller        


31 Comments
  1. - William j Kelly - Tuesday, Jan 21, 14 @ 9:14 am:

    If anyone of us made 32million on a deal that turned out to be “the worst accounting fraud ever” I think we would be in a little trouble. Yet the Rahm’s and the Rauner’s are never to blame for anything. Good work if you can fraud, I mean find it!


  2. - truthteller - Tuesday, Jan 21, 14 @ 9:17 am:

    Rauner says he is going to run the state like a business. Like Lason? Like Enron?


  3. - MrJM - Tuesday, Jan 21, 14 @ 9:19 am:

    [Bruce Rauner’s firm] netted at least $32 million from its investment by selling almost all of its stock before the earnings scandal became public. *** 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.

    Buh… buh… but class warfare!!1!

    – MrJM


  4. - Chicago Cynic - Tuesday, Jan 21, 14 @ 9:24 am:

    Read the whole thing. It’s interesting, but not particularly politically useful. GTCR has a great record as an investor. With venture and private equity firms (particularly with venture), you have quite a few failures. This is noteworthy because of the fraud.

    Politically, it’s complicated and therefore difficult to explain. For opponents with limited resources, I would not waste the few paid resources I had on this. Rahm is way more powerful in the primary. If he gets to a general, I can see this coming back as part of PQ’s efforts to delegitimize Rauner. For now, expect radio silence.


  5. - LincolnLounger - Tuesday, Jan 21, 14 @ 9:31 am:

    Imagine what Pat Quinn and the DGA will do with 30-second spots like this in the general election.

    This guy is an albatross waiting to happen to drag all Republicans down in November. The demographics already are not kind to us — and we want to sign up for this and Oberweis as our standard-bearer?

    Idiotic.


  6. - Ghost - Tuesday, Jan 21, 14 @ 9:36 am:

    With the Feds crawling all over this, it appears they didn’t find anything on Rauner. Looks more like unlucky timing. Now if we put lason over the pension system…..

    On a side note, it seems like having a savvy investor leverage our retirement funds, or part of em, could get us much better returns. Basically this is what buffet does. Uses Berkshire money to do thing like loan Bank of America money at a high rate of return. Perhaps we don’t need to change retires retirement income, just get some non political hacks to run it instead if people pushing fees to Friends :)


  7. - ZC - Tuesday, Jan 21, 14 @ 9:40 am:

    The Feds never seem to find anything serious on guys like Rauner. That alone doesn’t say much. But agreed this would be tough to explain or use as an attack.


  8. - wordslinger - Tuesday, Jan 21, 14 @ 9:41 am:

    –”We spend a lot of time living with our companies on a week-to-week basis, understanding what’s going on, and being in the flow of information, so we can be helpful and knowledgeable about the operation,” Rauner said.–

    A hands-on guy.

    Now we know how you run the state like a business.

    Hire a crook to cook the books, rip off investors, then cash out before the scam falls apart.

    Maybe he can hire Stu Levine — again — on work release.


  9. - Chi - Tuesday, Jan 21, 14 @ 9:42 am:

    Ghost; without going into detail, it’s not that easy. Wish it was.


  10. - Anonymous - Tuesday, Jan 21, 14 @ 9:49 am:

    Chicago Cynic, suggestions such as “mums the word because it’s too complicated” and “Five Weeks! Five Weeks!” work only in the mainstream media, when they work at all.


  11. - Anonymous - Tuesday, Jan 21, 14 @ 9:50 am:

    BTW, the context for my last post was a Republican Primary.


  12. - Anonymous - Tuesday, Jan 21, 14 @ 9:53 am:

    lol AND I just realized that Rich may have alluded to that in his column. (Well done, Rich!)


  13. - 47th Ward - Tuesday, Jan 21, 14 @ 10:24 am:

    Everybody should calm down and relax. This is nothing. It’s not like this was the WORST accounting fraud ever. It’s just one of the worst ever. Big difference.

    And just because Rauner’s firm hired the alleged fraudster, then made a tidy profit by selling before the news broke, doesn’t mean anything. Nothing to see here folks. It’s too complicated for the rubes to understand anyway. This happens in business all the time, how is a guy like Rauner supposed to know what’s going on in all of the companies he owns?


  14. - Anonymous - Tuesday, Jan 21, 14 @ 10:39 am:

    If I’m interpreting this correctly, I’m also finding the suggestions to give it all a rest because Quinn will beat Rauner during the General interesting.

    Do people really believe that such logic works, or is this the result of a brainstorming session and now they’re tossing everything out there to see whether it sticks? Either way, it seems very flawed…if you think about it. Doesn’t it?


  15. - concern1 - Tuesday, Jan 21, 14 @ 10:55 am:

    I’m confused, is Rauner running for governor or top Cook?


  16. - Jimbo - Tuesday, Jan 21, 14 @ 11:35 am:

    Yeah, he’ll shake down Springfield alright.


  17. - Toure's Latte - Tuesday, Jan 21, 14 @ 11:44 am:

    In just one instance, Bruce Rauner took $32 million in pure profits and left thousands of people who trusted him $285 million poorer. Bruce Rauner says he’ll run Illinois the same way. We believe him. Vote for Pat Quinn.

    What’s so hard to convey there?


  18. - Anonymous - Tuesday, Jan 21, 14 @ 11:53 am:

    “…or top Cook?”

    Why? Is he hiding and is there already video of him escaping through a kitchen? ;)


  19. - Internet Zaibatsu - Tuesday, Jan 21, 14 @ 1:20 pm:

    I am surprised that we haven’t heard more about Rauner’s time as a director for divine Interventures (”Chicago’s Internet Zaibatsu”). For those of you who don’t remember, divine was a dot com holding company bringing together various clouted Chicago people from finance, government, and technology. While Rauner was a director on the company’s board, divine pushed to sell its watered stock to an increasingly skeptical public during the first half of 2000. In a highly unusual action, divine fired its original IPO underwriter, Credit Suisse First Boston, after CSFB showed reluctance towards divine’s IPO sales tactics. It got Robertson Stephens to do the deed and, after a couple of more delays, finally sold stock to the public in July 2000, valuing divine at an incredible $8.5 billion. Rauner’s stake of 550,000 shares was worth $8 million. After the IPO lockup expired in January 2001, Rauner announced his resignation from the board on February 2, 2001. That would have allowed him to sell his shares without having to disclose publicly. Two years later, divine filed for bankruptcy. Guess who tried to buy divine’s assets out of bankruptcy? GTCR, Rauner’s firm.


  20. - Arthur Andersen - Tuesday, Jan 21, 14 @ 1:56 pm:

    Internet, that’s a good story. The guy that ran divine (into the ground) Flip Filipowski (sp?) was quite a character.

    To the post, we have Hands-On Hammer And Shake sounding more like Sgt. Schultz about Stu Levine and Lason. AA is no political genius (Willy handles that stuff at the con$ulting Firm) but I think I could throw together a 30 second combo of Rauner quotes and Headlines about these two blowups that could ring some bells. Am I wrong?


  21. - circularfiringsquad - Tuesday, Jan 21, 14 @ 1:59 pm:

    The Lason honchos are out of the can
    Wondering if anyone is trying to track them down to ask them about FarmerBrucey?


  22. - Yellow Dog Democrat - Tuesday, Jan 21, 14 @ 2:32 pm:

    ZC :

    I am not sure this is difficult to message.

    It is essentially a Ponzi Scheme.

    Rauner’s GTRC put Ponzi in charge.

    Rauner’s company pocketed $32 million, while the rest of us lost hundreds of millions.

    Not that complicated.

    and as someone mentioned earlier in this thread, he has opened the door wide since he is running on his xredentials as a businessman and promising to run government the same way.

    Not a stand alone attack, but 15 seconds as part of a longer narrative.


  23. - walker - Tuesday, Jan 21, 14 @ 3:10 pm:

    “I’m outraged and embarrassed that people I hired would do such a thing!”

    (Working for Christie)


  24. - Anonymous - Tuesday, Jan 21, 14 @ 4:08 pm:

    (Working for Christie)

    Wow. Could Illinois possibly live up to that kind of behavior? Just how crazy do you yourself have to be not to recognize that level of crazy in someone else? Especially, someone you work with on a daily basis?


  25. - Arthur Andersen - Tuesday, Jan 21, 14 @ 4:50 pm:

    YDD, always good to hear from you. Thanks for putting my jumbled thoughts in order.


  26. - Arthur Andersen - Tuesday, Jan 21, 14 @ 4:53 pm:

    Anon 4:08

    (working for Christie)

    See Blagojevich, Rod.

    Very Truly Yours,

    AA


  27. - sal-says - Tuesday, Jan 21, 14 @ 5:03 pm:

    - 47th Ward - Tuesday, Jan 21, 14 @ 10:24 am:

    Everybody should calm down and relax….This happens in business all the time, how is a guy like Rauner supposed to know what’s going on in all of the companies he owns?

    Sorry…The bucks stops…Oh, maybe not.


  28. - Lincoln Lad - Tuesday, Jan 21, 14 @ 7:41 pm:

    Most attempts to defraud are complicated… And difficult to understand by the typical person. Because you don’t understand it while reading an article in the newspaper… Doesn’t make it any less significant. People lost huge sums of money…retirements were derailed… Families were ruined. I know - I worked there.


  29. - wordslinger - Tuesday, Jan 21, 14 @ 7:49 pm:

    Lincoln Lad, this one isn’t difficult.

    A known crook was hired to cook the books. The investors were lied to in service of the con. The scammers, who bought low, sold high to the marks before it all went south.

    The conmen took money off the table; the nebbies got hosed.

    Not difficult at all. It’s called the old pump-and-dump, and it’s as dependable as an 18-dollar watch if you’re willing to make a buck that way.


  30. - Jon Zahm - Tuesday, Jan 21, 14 @ 11:21 pm:

    Important story. We broke it in a 4 part series August 1-4 on www.norauner.com


  31. - Percival - Wednesday, Jan 22, 14 @ 1:25 am:

    Rauner is in trouble on this stuff. It is very easy for his opponent to exploit with sound bites (I can see the attack ads already.). The actual events are indeed hard to explain. But Rauner is the one who will have to do the explaining.


Sorry, comments for this post are now closed.


* Reader comments closed until Monday
* TrackBill update
* Caption contest!
* It's worse than we thought
* Question of the day
* Long-term debt is not short-term debt
* Today's quotable
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

          
        * Octagonal Androids, luxury smartwatches and SO MUCH MAIL | Pocketnow Weekly 124 (Hangout)
        * Should you use antivirus software on your Android?
        * Apple Watch functions, Nexus 9 changes, LG results & more – Pocketnow Daily
        * Desire 620 rumored to be HTC’s newest mid-level smartphone
        * Black Friday Online Sales Up 8.5% Over Last Year, 20% Of Sales Came From iOS
        * Moto X tempts you to get it with Moto Maker in new ad
        * LG G3 oversharpening fix arrives with a few kernel tweaks

        * Carphone Warehouse Starts Samsung Galaxy Note Edge Pre-orders, Set to Ship on December 12th
        * LG G Flex 2 Expected to Launch At CES 2015 in January (Rumor)
        * OnePlus One To Ship Without Cyanogenmod in India
        * Buy a Samsung 840 EVO SSD, Get Far Cry 4 for Free
        * This Ultra-Fast External Drive is Down to an All-Time Low Price
        * Prep for Cyber Monday with This Discounted eBay Gift Card
        * Sony Pictures Investigates North Korea Link In Hack Attack

        * White Sox in thick of Jeff Samardzija trade rumors
        * Speedy Campana invited to White Sox camp
        * White Sox can go short or long with free agent starter
        * Catching up with Tadahito Iguchi
        * White Sox ACE program helps send players to college
        * Additional 2005 fan-favorite players added to '15 SoxFest
        * White Sox introduce Adam LaRoche and their plans for him

        ...............


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        November 2014
        October 2014
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
        December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
        December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
        December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
        December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
        December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
        December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
        December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007
        December 2006
        November 2006
        October 2006
        September 2006
        August 2006
        July 2006
        June 2006
        May 2006
        April 2006
        March 2006
        February 2006
        January 2006
        December 2005
        April 2005
        March 2005
        February 2005
        January 2005
        December 2004
        November 2004
        October 2004

        Blog*Spot Archives
        November 2005
        October 2005
        September 2005
        August 2005
        July 2005
        June 2005
        May 2005

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Which Republican governors will run for preside.....
        * Emanuel to prevent Springfield from limiting Ch.....


        * Chicago police: 1 killed in shooting at Nordstrom
        * Driver hurt after car speeds into Lake Michigan
        * Baby born in stairwell in Chicago suburb
        * Video gambling's spread raising cash, eyebrows
        * Chicago council to vote on minimum wage
        * Idaho rockslide halts passenger, freight trains
        * Illinois man faces trial for stomping puppy
        * Ferguson protests continue in downtown Chicago
        * Protesters demonstrate outside Chicago Walmart
        * Illinois Route 66 gets electric charging stations

        * Attorney wants use medical marijuana earnings to fund education
        * Illinois attorney general files notice of appeal in pension case
        * Quinn grants clemency to 126 ahead of holiday
        * Illinois gives $4.5M food banks for modernization
        * State begins accepting fracking applications
        * Debt rating agencies weigh in on state pension ruling
        * Lisa Madigan to ask Illinois Supreme Court to consider pensions
        * Rauner tackles transition agenda
        * Attorney general warns of immigration scams
        * Altered Illinois minimum wage proposal: $10 starting in July

        * Chicago, Evanston parking garages hit by data breach
        * Emanuel to prevent Springfield from limiting Chicago minimum wage hike
        * Emanuel calls special council meeting to hike minimum wage
        * Black Friday live: Holiday shopping in full gear
        * Most BP oil spill claims handled correctly, McGladrey says


        * S. Side is best home for Obama museum
        * South Side is best home for Obama museum
        * Asking in Ferguson: Ain't I a man?
        * A visit to the Last House on the Block
        * City Council to meet next week to vote on minimum wage
        * A Democrat admits his party really blew it
        * How Illinois can charge ahead on education
        * Jesse L. Miller, former alderman, community activist in North Lawndale, dies at 72
        * ||| Jack Higgins’ perspective
        * Quinn grants pardons to 126, including one of Dixmoor Five


        * Gunman shoots woman, kills self in Nordstrom on Michigan Avenue
        * Boy killed, 2nd teen injured in double shooting on Southwest Side
        * Start of shopping 'marathon' looks promising, retailers say
        * Officials: Man drives SUV in reverse from LSD into Lake Michigan
        * Firefighters respond to fire at apartments, baby born in stairwell
        * Two men charged in Aurora shooting
        * Homer Glen bans 'vicious' dogs
        * Police and paramedics responding to crash on Lake Shore Drive
        * Deputy disciplined for reportedly pulling over bus to give son lunch


        * Listen to State Week - November 28, 2014
        * CPS tests causing more anxiety in teacher evaluations
        * LLCC Offers Variety Of Community Education Classes
        * Another Year Of "Messiah" For Springfield Choral Society
        * New Exhibit On Lincoln's "Undying Words"
        * Locals Organize For Vigil In Response To Ferguson
        * Illinois Hunters Kill 52,000 Deer Over The Weekend
        * Pension Ruling "Credit Negative," But No Ratings Change
        * Tim Landis: Foreclosure Sales, CIPS Icehouse and Heritage River Trail
        * Part Timers & Manufacturing in Illinois Feeling a Slow Economic Recovery


        * Polly Poskin: Cosby victims courageous to step forward
        * Dana Milbank: Bob McCulloch – the face of injustice
        * Attorney wants use medical marijuana earnings to fund education
        * Michael Carrigan: Illinois can’t afford another year without a raise
        * Esther Cepeda: How to really enjoy the holidays
        * E.J. Dionne: Thank a politician today
        * Our Opinion: Help combat hunger this holiday season
        * Eugene Robinson: On replacement, caution urged
        * George Will: Thanks, or something
        * Quote of the Day: Nov. 27, 2014


        * Illinois 62, Baylor 54
        * Hill emotional after championship
        * Fine-feathered friends
        * Paul Brown
        * Delbert 'Budge' Leneave
        * Aline Hunerkoch
        * Thomas Vaughn
        * Ralph Winterheimer
        * Irma Babb
        * Arthur 'Guy' Webster


        * NU, DePaul, Illinois women all off to fast starts
        * Boys basketball scoreboard: Friday's results
        * Girls basketball scoreboard: Friday's results
        * St. Charles man charged in fatal crash
        * Rice, Hill lead Illinois past Baylor 62-54

        * REP. DANNY K. DAVIS NOW SUPPORTS DR. WILLI...
        * Davis retains US Congress 7th seat with ea...
        * Danny Davis Defeats Robert Bumpers In Illi...
        * Rehab of Affordable Housing Building in Ol...
        * Rep. Danny Davis Hopes to Keep His Seat fo...
        * Congressman calls for removal of police co...
        * Congressmen Plan House Speech on Chicago's...
        * Sri Lanka's Downward Spiral - Foreign Policy
        * Others’ Opinion; Help prevent vets’ suicides
        * Davis To Obama: 'Do Everything In Your Pow...

        * Durbin to chair hearing on civil rights, F......

        * Governor-Elect Bruce Rauner Celebrates Tha......
        * Just say no to new Iran sanctions...

        * Local Shop Sells Custom Made Dibs Christmas Tree Ornament
        * City’s Winter Overnight Parking Ban Starts At 3 AM Monday
        * Shop Local On Saturday
        * Will pot replace numbers racket as source to fund public schools?
        * If only I could hit the delete button on white racism.
        * Glen Brown responds to John Dillon. Pension theft can never be legally or morally justified.
        * John Dillon: Denied with Prejudice.
        * Tweeting #FergusonInClass
        * The Plot to Burn New York City
        * The Sinking of the Greyhound


        * Governor Quinn Announces Investment to Help Regional Food Banks Better Serve Those in Need - Governor’s Investment Will Ensure Lower Cost and Higher Efficiency for Services Reaching Nearly 2 Million Illinois Residents
        * Governor Pat Quinn Takes Clemency Action
        * Governor Quinn Statement on Abner Mikva Receiving Nation’s Highest Civilian Honor
        * Department of Insurance Announces Multi-State Settlement with Symetra Life Insurance and Symetra National Life Insurance Company - Illinois will share part of a $1.2 million penalty against Symetra Life regarding Life Insurance policies
        * Avoid Foodborne Illness This Holiday Season




            Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller