*** UPDATE *** As far as I can tell, the Rauner campaign is right about the first point in its brief response…
[ *** End Of Update *** ]
The Quinn campaign is essentially double and triple counting the same shares of stock.
The SEC’s rules for determining “beneficial ownership” of stock state that a parent company is deemed to have “beneficial ownership” of any stock owned by subsidiaries. So GTCR Golder Rauner, LLC is considered to have “beneficial ownership” of the shares of stock held by its subsidiary, GTCR Partners VII, LP. GTCR Partners VII, LP, in turn, owns two other funds, and is deemed to have “beneficial ownership” of their shares.
GTCR Funds Owned 18.4 Percent Of HomeBanc As Of February 2006. (SEC Schedule 14A, HomeBanc Corp., 4/20/06)
HomeBanc Did Very Little Subprime Lending. “HomeBanc says the concerns about borrowers’ ability to repay, particularly subprime borrowers, hurt the entire industry. And though HomeBanc did little subprime lending — less than 1 percent of the roughly $5 billion in loans it made last year were in that segment — nervous lenders that HomeBanc relied on to fund loans started retrenching. Wall Street investors who purchased pools of loans through the mortgage-backed securities also retreated.” (Peralte C. Paul, “HOMEBANC: Lender Had Little Margin For Error,” Atlanta Journal Constitution, 8/12/07)
* If you saw the Bears game yesterday (and my condolences if you did), then you probably saw a new ad from Gov. Pat Quinn’s campaign. From a press release…
A new television ad released today highlights a Bruce Rauner company acquired in 2000 that gave its CEO a massive exit package even as its risky lending practices led it to bankruptcy in 2007.
At HomeBanc Mortgage, Rauner’s hand-picked CEO- a “superstar” still listed on the GTCRauner Web site- was given nearly $5 million. In contrast, the 1,100 laid-off employees were given $20 gift cards to the Publix supermarket, paid for through their own voluntary paycheck deductions.
HomeBanc is just one of at least 12 Rauner firms that declared bankruptcy under his failed leadership, while Rauner and his partners took the money and ran.
Another Rauner failure is TransHealthcare Inc., a chain of deadly nursing homes owned and operated by Rauner and his partners that is facing an ongoing trial in Florida bankruptcy court over more than $1 billion in judgments for 6 wrongful deaths. Rauner has said he wants to run state government like he ran his business.
* The ad…
“After billionaire Bruce Rauner took millions out of HomeBanc Mortgage, it went bankrupt. Eleven hundred employees lost their jobs. The CEO? He was given a five million dollar bonus to tide him over. The 1,100 employees who lost their jobs? They got a $20 gift card. That’s right, newspapers reported it. And while that may not say everything about Bruce Rauner, it says a lot.”
* The spot generated a furious push-back from the Rauner campaign…
FACT CHECK: PAT QUINN’S MOST DESPERATE FALSE ATTACK YET
“This is Pat Quinn’s most desperate false attack yet and a reminder that Quinn will do or say anything to distract voters from his plan to raise taxes on every Illinois family right after the election. Pat Quinn’s 67% income tax hike already cost us jobs and stole one week of pay from the average Illinois worker. Pat Quinn can’t tell the truth about Bruce and he also can’t wait to raise your taxes.” - Rauner spokesperson Mike Schrimpf
False Quinn Ad Script: “After billionaire Bruce Rauner took millions out of Homebanc Mortgage, it went bankrupt. 1,100 employees lost their jobs. The CEO? He was given a $5 million bonus to tide him over. The 1,100 employees who lost their jobs? They got a $20 gift card. That’s right, newspapers reported it. And while that may not say everything about Bruce Rauner, it says a lot.”
Fact Check Summary: Neither Bruce Rauner nor GTCR ever took millions out of HomeBanc Mortgage. HomeBanc went bankrupt in 2007; the last date a GTCR employee was on its board was 2004. HomeBanc was consistently rated as an excellent place to work and its CEO was terminated with a severance package months before the company went bankrupt. Regardless, neither Rauner nor GTCR had anything to do with HomeBac’s layoffs or employee severance pay.
“After billionaire Bruce Rauner took millions out of HomeBanc Mortgage, it went bankrupt.”
In 2000, GTCR Partnered With Patrick S. Flood To Establish HomeBanc Mortgage. “First Tennessee National Corporation (FTNC)(NYSE:FTN) announced today that its mortgage banking affiliate First Horizon Home Loan Corporation (FHHLC) signed and closed the sale of its HomeBanc Mortgage division to an investor group led by GTCR Golder Rauner LLC of Chicago and Patrick S. Flood, HomeBanc president.” (Press Release, “First Tennessee Sells HomeBanc Mortgage Division,” Press Release, 5/1/00)
GTCR And Flood Grew HomeBanc Into A Thriving Business, And Took The Company Public In 2004. “The parade of mortgage companies looking to become real estate investment trusts is growing. The latest entrant is HomeBanc Mortgage Corp. here. But unlike the predominantly subprime companies that announced they are converting or looking to convert, HomeBanc has more in common with New York Mortgage Corp., which is another privately held company that is going public by converting to a REIT. In a statement issued by HomeBanc, the new REIT will be called HomeBanc Corp., and the public offering of stock will take place in the late spring or early summer.” (Brad Finkelstein, “Retail Lender HomeBanc To Become REIT,” American Banker, 4/04)
GTCR Did Not Take “Millions Out Of HomeBanc”
From 2000 To 2004, HomeBanc Paid GTCR A $8,333 Monthly Management Fee - An Aggregate Total Of $425,000. “Prior to our initial public offering, GTCR was the majority owner of HBMC Holdings, and as part of its investment in HBMC, we agreed to pay a monthly management fee of $8,333 for management, advice and consulting, including attendance by GTCR representatives at our board meetings, and strategic, operating and financial advice to HBMC. We used approximately $425,000 of the net proceeds from our initial public offering to pay all outstanding accrued management consulting fees due to GTCR.” (SEC Form S-11, HomeBanc Corp, 1/7/05)
Following HomeBanc’s Public Offering, GTCR Was No Longer The Majority Shareholder And Ceased Receiving Management Fees. “As the result of our initial public offering and our related reorganization, GTCR no longer holds a majority interest of our organization, and we no longer accrue or pay any management fees to GTCR.” (SEC Form S-11, HomeBanc Corp, 1/7/05)
HomeBanc Went Bankrupt In 2007, Three Years After It Became A Publicly-Traded Company And Was Out Of GTCR’s Control
HomeBanc Filed For Chapter 11 Bankruptcy In August Of 2007. “Regional mortgage lender HomeBanc Corp has filed for bankruptcy protection, the latest casualty of a housing market that continues to weaken. The Atlanta-based company filed a Chapter 11 petition dated Thursday in U.S. Bankruptcy Court in Delaware. In the filing, the company checked off a box listing estimated assets and liabilities of more than $100 million each.” (”Mortgage Lender Homebanc Files For Chapter 11,” The Associated Press, 8/10/07)
GTCR Stopped Having Representation On HomeBanc’s Board In 2005
The Last Time GTCR Employees Appeared On HomeBanc’s Board Of Directors Was In HomeBanc’s 2004 Yearly SEC Report, Which Was Filed On March 31, 2005. ” (SEC Form 10-K, HomeBanc Corp, 3/31/05)
“1,100 employees lost their jobs. The CEO? He was given a $5 million bonus to tide him over. The 1,100 employees who lost their jobs? They got a $20 gift card.”
Homebanc’s CEO Was Not Given A $5 Million “Bonus” After HomeBanc’s Bankruptcy
Patrick Flood, HomeBanc’s Original CEO, Was Fired By The HomeBanc Board In January Of 2007 - Seven Months Before HomeBan’s Bankruptcy.”HomeBanc replaced its longtime CEO on Tuesday and said it is embarking on a turnaround plan that will restore profitability this year. The Atlanta-based real estate investment trust, like many other companies dependent on the mortgage business, has faced a challenging environment in the last two years. And like some of those companies, including NetBank, the Alpharetta-based Internet bank, HomeBanc is making some dramatic moves. Chief among them: the departure of Patrick S. Flood, who in many ways was the face of HomeBanc, serving as its chief executive and chairman since 2000. Flood had been with HomeBanc and its predecessor companies since 1985. He is being replaced with Kevin D. Race, who had been HomeBanc’s president, chief operating officer and chief financial officer.” (Peralte C. Paul, “HomeBanc Replaces CEO,”Atlanta Journal-Constitution, 1/17/07)
HomeBanc’s Board Gave Flood A $5 Million Severance Package. “Patrick S. Flood, the HomeBanc Corp. CEO who abruptly left his post last week, will receive an exit package valued at $4.98 million. The board of directors at the Atlanta-based mortgage company opted to replace Flood, HomeBanc’s founder and a fixture there since 1985, with Kevin D. Race, whom Flood brought into the company four years ago.” (Peralte C. Paul, “Exit Deal Totals $4.98 Million,” Atlanta Journal-Constitution, 1/23/07)
· GTCR Did Not Have Any Employees On HomeBanc’s Board Of Directors In 2007. (SEC Form 10-K, HomeBanc Corp, 3/31/05)
HomeBanc Filed For Chapter 11 Bankruptcy In August Of 2007 - Seven Months After Flood’s Ouster. “Regional mortgage lender HomeBanc Corp has filed for bankruptcy protection, the latest casualty of a housing market that continues to weaken. The Atlanta-based company filed a Chapter 11 petition dated Thursday in U.S. Bankruptcy Court in Delaware. In the filing, the company checked off a box listing estimated assets and liabilities of more than $100 million each.” (”Mortgage Lender Homebanc Files For Chapter 11,” The Associated Press, 8/10/07)
GTCR Had Nothing To Do With The HomeBanc Layoffs Or The Employee Severance Pay
GTCR Did Not Have Any Employees On HomeBanc’s Board Of Directors In 2007. (SEC Form 10-K, HomeBanc Corp, 3/31/05)
HomeBanc Was Consistently Regarded As An Excellent Place To Work
HomeBanc Was Consistently Named By Fortune Magazine As One Of The Best Companies To Work For In America. “Still, the unraveling of HomeBanc, consistently named by Fortune magazine as one of the best companies to work for in America, was dramatic in its speed.”(Peralte C. Paul, “HOMEBANC: Lender Had Little Margin For Error,” Atlanta Journal Constitution, 8/12/07)
HomeBanc Was Noted For Generous Employee Benefits, Including 20 Hours Of Paid Leave, In Addition To Normal Vacation Time, To Allow Employees To Participate In Family And Community Activities. “Flood, who took the new company’s reins, was hailed as a different kind of chief executive, garnering praise for a faith-based management style that put employees above everything else. ‘I focused on the real value in the organization, and that is the people,’ Flood said in an interview last week. Flood was with HomeBanc and its predecessor companies from 1985 to his firing in January. ‘My focus was always on investing in the people and instructing them to do their best work every day.’ For example, workers were given 20 hours of paid leave called “being there” time to attend their children’s school activities or to volunteer and participate in other family or community events.” (Peralte C. Paul, “HOMEBANC: Lender Had Little Margin For Error,” Atlanta Journal Constitution, 8/12/07)
* While they do make some valuable points, there are some holes in their push-back. From the Quinn campaign…
GTCRauner was in the driver’s seat. Team Rauner mentions an SEC filing - yet conveniently leaves out this SEC filing from more than a year after that point which shows GTCR funds owned 54.9% of the common stock as of the beginning of 2006 [HomeBanc, SEC form 14-A, filed 4/20/06]
Also interesting that they completely ignore what fueled the company’s growth and led to its collapse due to their leadership - risky subprime lending to people who couldn’t afford it. They lit the match and walked away
Also - since their newest “i’m not responsible for anything” excuse is that once they stopped receiving management fees, they weren’t “managing” it anymore– does that mean they finally admit to “managing” the nursing homes?
* More deets from the Quinnsters…
The Business of Bruce Rauner: Homebanc - “It was greed.”
CHICAGO-Bruce Rauner’s Homebanc, which was part of the nation’s lending bubble that burst, positioned itself as a business inspired by values. In fact, it fell victim to greed.
After giving Rauner’s handpicked CEO, Patrick Flood, a $4.98 million exit package, Homebanc went on to lay-off most of its 1,100 employees and, on their way out the door, gave them $20 gift cards for a local supermarket Publix as their severance. Flood is still listed on the GTCRauner Web page.
The company, operating mainly in the Southeast, preyed on people with lower incomes and offered subprime and “interest-only” loans, risky vehicles that yielded unsustainable profits. That became clear when Rauner’s firm filed for Chapter 11 bankruptcy in 2007, one of 12 Rauner bankruptcies to occur under his watch.
The firm’s CEO, who received the five million dollar gift out the door, had lobbied against predatory lending protections that would have forbidden many of the types of loans that took Homebanc into bankruptcy-and led to massive layoffs.
One of Bruce Rauner’s chief lieutenants, Edgar Jannotta, who currently is testifying in Florida at a trial of Rauner-controlled nursing home chains liable for wrongful deaths, also served on Homebanc’s board of directors as did Rauner.
“They would laugh at us and say the free market will take care of it.” - William Brennan, Atlanta Legal Aid Home Defense Program, who opposed Homebanc’s efforts to gut Georgia predatory lending protections.
“…Government pressure to lend to poor people didn’t cause lenders to make cold calls to hundreds of homeowners or to team up with home repair firms and persuade elderly property owners to refinance homes to patch up their roofs. It was greed.” [Atlanta Journal-Constitution Editorial Board, 10/3/2008]
Apr. 6, 2000: GTCRauner acquires Homebanc [GTCR.com, accessed 9/27/2014]
2002: Homebanc appoints a prominent minister to head its HR department at a time it embarked on a massive expansion. After the company folded, it was revealed that “Most of HomeBanc’s 450 loan officers had no prior experience in the business. Many were local church leaders or family members and friends referred by HomeBanc staff.” [PR Newswire, 4/4/2002] [Wall Street Journal, 8/13/2007]
2002: Georgia passes predatory lending protections. [Georgia Report, 4/22/2002]
January 2003: CEO Patrick Flood writes an op-ed criticizing the new law. [PR Newswire, 1/21/03]
May 2003: Under lobbying by Homebanc, Georgia guts the predatory lending law. [New York Times, 5/07/2003]
2004: GTCR takes Homebanc public. As majority owner, GTCR held 4.25 million shares after the IPO. [National Mortgage News, 05/02/04]
2004: Homebanc expands into risky loans at a period in which the traditional loan pool had been exhausted. These “nontraditional” loans, extended to low-credit customers, will be part of the germ seed for the Great Recession. [American Banker, 8/27/2004]
February 2006: GTCR funds own 54.9% of HomeBanc’s common stock. [HomeBanc, SEC form 14-A, filed 4/20/06]
September 2006: GTCR sells its remaining Homebanc stock. [Homebanc, SEC form 13-D, filed 9/5/2006]
Jan. 16, 2007: Flood is fired, and given a $4.98 million exit package. [Homebanc, SEC form 8-K, filed 1/12/2007]
Aug. 3, 2007: The New York Stock Exchange delists HomeBanc shares. [New York Stock Exchange press release, 8/3/2007]
Aug. 9, 2007: Homebanc files for chapter 11 bankruptcy. [Reuters, August 10, 2007]
Aug, 10, 2007: The firm’s 1,100 employees are laid off, and given well wishes and $20 gift cards from the Publix supermarket chain, funded from voluntary paycheck deductions. [Atlanta Journal Constitution, September 2, 2007] [Wall Street Journal, 8/13/2007]