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* WCIA’s Mark Maxwell…
A New York hedge fund and the CEO of a well-funded conservative think tank are suing the state of Illinois to cancel $14.3 billion in bond debt, arguing that it’s unconstitutional for state lawmakers to borrow money to pay down “unspecified” old bills.
In 2017, in a maneuver to escape the state’s historic budget impasse and to avoid from plunging into junk bond status, Illinois issued $6 billion in bonds and used the cash infusion to pay down late bills that were accruing late payment interest penalties at a rate of 12 percent. The interest on those bonds is scheduled to cost Illinois taxpayers 5 percent interest. […]
Comptroller Susana Mendoza, a Democrat whose office pays the state’s bills, defended the 2017 bond sale as “a great deal for taxpayers,” and criticized the plaintiffs for “essentially trying to bankrupt the state” in order “to make a killing off of killing the state’s finances.”
* John Tillman’s response…
“It is shameful that Comptroller Mendoza is lying to the public about my role in this lawsuit. I have nothing to gain financially from this lawsuit. I do not now, nor have I ever owned any Illinois debt or related securities.
“As I’ve made clear repeatedly, my motivation is to prevent the state of Illinois from bankrupting its citizens by taking on excessive debt, including that which is unconstitutional.
“Comptroller Mendoza is skirting the real issue: The state broke the law. That hurts everyone. Politicians continue to borrow money and drive the state deeper into debt, and they hit people with higher taxes year after year. Illinois’ failing credit rating has been long in the making. This is the result of decades worth of fiscal mismanagement enabled by issuances of unconstitutional debt, as I point out in my complaint. Someone has to do something. That’s why I sued: in an attempt to stop the madness.
“Comptroller Mendoza’s office is desperately trying to trick Illinoisans into thinking this immoral and unconstitutional borrowing is for their own good. She is confused as to both this lawsuit and the finances of the state. If successful, my lawsuit would take billions of dollars in debt off the balance sheet of the state of Illinois. It would improve the state’s financial position, not drive it into financial ruin.
“It’s obvious to every Illinoisan that you shouldn’t take out a home equity loan to pay off your credit card bill. The Illinois Constitution wisely includes protections against this kind of reckless behavior. This is why I am suing the state.”
Setting aside his odd claim that the lawsuit would “improve the state’s financial position,” and the very shaky legal foundation of his suit which we’ve discussed several times already, did Mendoza actually claim that Tillman would reap personal financial rewards from the legal action?
* Maxwell helpfully sent me the Mendoza interview transcript which you can read by clicking here. She didn’t explicitly say Tillman would profit, but she did imply it. For instance…
I kept saying [in 2017], I think there’s people who are connected to Governor Rauner who stand to make a killing off of killing the state’s finances.
This lawsuit just goes to show that exactly what I was saying was right.
The fact that you would have John Tillman, who pretends to be fiscally responsible, who leads this organization called the Illinois Policy Institute — which you’d like to believe is supposed to be a non-partisan organization or a think tank that provides good recommendations and fiscal policies to the stat — their director, John Tillman, whose entire administration almost went to work for the Rauner administration right after they had that massive purge of their employees, so they were essentially running the state during the time that bond deal finally got done.
But…
It turns out that this guy in this hedge fund stands to make… a ton of money off of the states fiscal collapse.
Yet…
MM: I have not yet asked Mr. Tillman about his suit. We hope to do that. We hope to speak with him about it. But if you take him or his allies in good faith about their intentions, they say that they want to re-train the state from its propensity to borrow money in the bond market, and restrain spending. That’s their argument.
SM: It’s 100% nonsense.
MM: How do you know that?
SM: Their only argument here is that the state should go bankrupt. And why? It’s because they stand to make a ton of money in the process.
posted by Rich Miller
Tuesday, Sep 17, 19 @ 10:11 am
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Did Tillman post a sworn statement with his claim?
Comment by Annonin' Tuesday, Sep 17, 19 @ 10:16 am
“Their” is plural, and the other party to the suit represents multiple investors. Unless Tillman can show Mendoza specifically linked him to profiting from Illinois being “bankrupt” he hasn’t proven his contention.
Comment by Anyone Remember Tuesday, Sep 17, 19 @ 10:16 am
=== “It’s obvious to every Illinoisan that you shouldn’t take out a home equity loan to pay off your credit card bill.===
If my home equity loan carries a 5% annual interest rate, while my credit cards carry, say, 12%, it strikes me that refinancing the debt would be a good idea for a homeowner.
Comment by anon2 Tuesday, Sep 17, 19 @ 10:23 am
I think Tillman is being truthful.
He doesn’t have a financial stake in this lawsuit.
It’s his owners who do.
Comment by Honeybear Tuesday, Sep 17, 19 @ 10:25 am
When asked a question about Tillman she responds with the plural “their” and not the singular “his”. It’s pretty clear she means the plaintiffs.
Comment by The Captain Tuesday, Sep 17, 19 @ 10:27 am
Tillman pounding the table that he won’t profit is only as phony as the IPI “not” being a driving principle in the Raunerite ILGOP with Schneider and Shaw.
Tillman wants to hurt Illinois, and make some cash too.
Tillman’s a grifter. It’s his thing.
Comment by Oswego Willy Tuesday, Sep 17, 19 @ 10:27 am
Should we trust a guy who heads and organization and related entities that routinely puts out false and misleading information? Unless it’s sworn testimony in a deposition, affidavit or court proceeding, no.
Also, whether or not he directly owns Illinois debt, and he claims he does not, he could still have a compensation agreement with the hedge fund that pays him a percent of its gains or a flat fee.
Comment by Moe Berg Tuesday, Sep 17, 19 @ 10:28 am
“Making a profit on this lawsuit is just an unintentional side effect. So obviously, i would never accept the profit.” Said no one ever.
Comment by Bruce (no not him) Tuesday, Sep 17, 19 @ 10:28 am
Tillman’s co-plaintiff admitted in open court they have a profit motive and their attorney told the judge not to be “distracted” by that. The judge responded, “That’s distracting as all get-out.”
Here’s what the Comptroller said: “…So HIS PALS can make a ton of money in exchange for the state’s demise…”
“…So that their wealthy FRIENDS can go off and have another 10 houses…”
She never said Tillman had credit swaps himself like Warlander does. ProPublica did a good enough job explaining how Tillman uses all his inter-locking “non-profits” to make money for himself. https://www.propublica.org/article/illinois-policy-institute-john-tillman-transactions
Remember, that 2017 refinancing the Comptroller championed saved state taxpayers $4-$6 billion and helped businesses across the state. It hurt the profit margins of firms like Warlander.
Comment by Abdon Tuesday, Sep 17, 19 @ 10:49 am
Honeybear @ 10:25 for the win.
Comment by Northsider Tuesday, Sep 17, 19 @ 10:52 am
==my motivation is to prevent the state of Illinois from bankrupting its citizens by taking on excessive debt==
Someone tell John to come down off the cross, we could use the wood.
Comment by Jocko Tuesday, Sep 17, 19 @ 11:10 am
So he’s being all altruistic to save us from ourselves? Nope, not buying into that argument.
Comment by Skeptic Tuesday, Sep 17, 19 @ 11:27 am
Credit Default Swaps aren’t technically debt. Credit Default Swaps are more of an insurance policy. And you don’t need to own the underlying bond to own the credit default swap. So Tillman could own Credit Default Swaps and claim he does not own Illinois debt. Or Tillman could have an interest in Warlander which would profit from this lawsuit. I won’t believe Tillman until he fully discloses all of his financial interests.
Comment by A Jack Tuesday, Sep 17, 19 @ 11:33 am
== If my home equity loan carries a 5% annual interest rate, while my credit cards carry, say, 12%, it strikes me that refinancing the debt would be a good idea for a homeowner. ==
It depends. There would clearly be finsncial savings, but you would be trading unsecured debt back by only your promise to pay for secured debt where you could potentially lose your house if you don’t pay. Some people might think that is a bad deal …
Comment by RNUG Tuesday, Sep 17, 19 @ 11:50 am
I believe Tillman, and even if I didn’t, it makes no difference. The claim is that the debt is unlawful. That’s the complaint except everyone just keeps defaulting to their opinions about the character and motivations of the one bringing the complaint. It’s intellectually lazy arguing. Imagine an this case we’re dropped and some Joe off the street brought the same argument to the courts? Let’s discuss the merits of the constitutionality argument, considering that’s what is truly relevant. Defaulting to character assassination makes me feel like many fear it’s not as meritless as you claim. Just my thoughts on the matter
Comment by Naperthrill Tuesday, Sep 17, 19 @ 12:25 pm
To answer this question fully, we’d need to have full transparency into IPI donors. According to the IRS, Mr. Tillman’s compensation did increase by $100,000 from 2016 to 2017. Sharing the 2018 forms and donors would help answer the question.
Comment by WH Mess Tuesday, Sep 17, 19 @ 12:28 pm
===Let’s discuss the merits of the constitutionality argument===
We have. Over and over. It has no merit.
Comment by Rich Miller Tuesday, Sep 17, 19 @ 12:29 pm
==Defaulting to character assassination ==
Thanks for chiming in, Mr. Tillman
Comment by Lester Holt’s Mustache Tuesday, Sep 17, 19 @ 12:30 pm
===…that’s what is truly relevant.===
Please see what the ILSC has said.
If you’d like to chime in on it thoughtfully and with merit that refutes their ruling, that would be fun.
I’d google posts Rich has some here on the subject, learning is fundamental.
Comment by Oswego Willy Tuesday, Sep 17, 19 @ 12:33 pm
Does Warlander give money to IPI? to ThinkFreely? The Illinois Opportunity Project?
Does Warlander have financial connections to Crowdskout?
Does tillman personally hold credit default swaps? Do ANY of the organizations he leads or controls hold swaps in their portfolios?
I would like answers — with receipts — to all of these questions please.
Comment by Soccermom Tuesday, Sep 17, 19 @ 12:34 pm
It’s a rich guy’s game, and we’re all getting played.
Comment by Hard Hat Tuesday, Sep 17, 19 @ 12:55 pm
Tilllman: “I am shocked, SHOCKED!, to find my co-plaintiff PROFITING from Illinois’ financial demise we filed this lawsuit together to achieve.”
IPI funders: “Here’s a bonus for depressing Illinois’ bond prices with your lawsuit so we can get a better deal on the bonds.”
Tillman: “Oh, thank you very much!”
Comment by Capt. Renault Tuesday, Sep 17, 19 @ 1:03 pm
Bringing Mendoza of all people into the debate whether he will profit off of this debacle is such a bad idea. So bad is this idea that I am now forced to contemplate whether or not the conservative Republican sham law suit conspiracy is a Democratic conspiracy. Friends, we now find ourselves wondering if John Tillman is in fact controlled by Speaker Madigan.
/snark (except the bad idea part…because it is. She we will win and look good doing it.)
Comment by Bertrum Cates Tuesday, Sep 17, 19 @ 1:40 pm
=SHOCKED!, to find my co-plaintiff PROFITING=
What so many of you seem to be conveniently forgetting here is that Warlander is LONG $25 million of general obligation bonds, different ones from those being challenged. Their bet there is obviously that winning the lawsuit would be good for those other bonds. Yet Mendoza and so many commenters here stick with their claim that the plaintiffs want to destroy the state’s overall credit and bankrupt the state. A little honesty, please.
Comment by driveby Tuesday, Sep 17, 19 @ 3:21 pm
Who cares if he’s personally profiting or not? Obviously that would matter on its own, but even if he isn’t, it’s undeniable that Tillman is in court fighting *with* Wall Street hedge funds *against* the state of Illinois. It’s clear as day whose side he’s on. It ain’t us.
Comment by Da Lobsta Tuesday, Sep 17, 19 @ 4:14 pm
“my motivation is to prevent the state of Illinois from bankrupting its citizens”
{Checking pockets for wallet, hands for rings and watch}
Comment by Huh? Tuesday, Sep 17, 19 @ 5:58 pm
Dear Illinois Republicans…apparently you haven’t learned your lesson about picking a fight with Susana Mendoza. You will lose, badly. And if you do pick a fight, make sure you can back up a flimsy claim.
Comment by Shytown Tuesday, Sep 17, 19 @ 9:26 pm
- Abdon -
Thanks for your comment. Appreciate that.
OW
Comment by Oswego Willy Tuesday, Sep 17, 19 @ 9:31 pm