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* The Tribune continues its coverage of the federal bankruptcy trial of a nursing home chain once partly owned by Bruce Rauner’s GTCR…
[Edgar Jannotta], who was both a partner at GTCR and a director of Trans Healthcare, also testified about communications concerning Trans Healthcare he had in 2004 and 2005 with other GTCR partners on an investment committee that included Rauner, now the Republican candidate for Illinois governor. Rauner is not a defendant in the Florida lawsuit, though GTCR and Jannotta are defendants. Rauner and Jannotta have both retired from the equity firm.
In those exchanges, Jannotta warned the investment committee that Trans Healthcare’s finances were so shaky it might have to file for bankruptcy protection. Instead, Trans Healthcare was sold in a pair of complicated transactions that plaintiffs’ attorneys say cleaved off the chain’s liabilities into a new firm that effectively had no assets. […]
In his testimony, Jannotta acknowledged that the sale of Trans Healthcare that GTCR took part in did not contemplate any eventual damage award payments to the estates of nursing home residents. He said that was because new companies created in the transaction were to handle any claims. GTCR was not involved with those new companies, which bore variations of the name Fundamental.
“Part of the consideration of the sale was … the Fundamental entities were taking responsibility for those liabilities,” Jannotta testified in the deposition.
* Meanwhile, Kurt Erickson has a piece today about how at least a dozen former Rauner companies have declared bankruptcy. One example…
Another company owned by GTCR, Graceway Pharmaceuticals, also butted heads with federal regulators over one of its key products— a medicine designed to treat skin cancer.
The company was unsuccessful in keeping its patent on Aldara, allowing cheaper generic versions to hit the market. Although cancer patients had access to less expensive options, that meant the company’s revenue plummeted from $320 million to $52 million.
“The loss of exclusivity with respect to Aldara, and the resulting decrease in net sales, is the primary factor that has led” to the bankruptcy, noted Gregory C. Jones, Graceway’s executive vice president of strategic development.
As the company was heading into bankruptcy in 2010, GTCR took $9 million in cash out of the company. The company later was forced to pay more than $6 million of that money back.
Kinda blatant, no?
*** UPDATE 1 *** The Rauner campaign disputes the story…
Rich -
Unsurprisingly, the facts on Graceway are not as presented by the Freedom PAC folks. The $9 million distribution was a TAX distribution, which was required under Graceway’s Limited Liability Company Agreement. The investment into Graceway was structured in a way that had taxable earnings flow through the holding company. The tax distributions are then remitted to state and federal governments. Notably, Graceway did not make any discretionary distributions in 2010.
Simply put, the tax distributions would have gone directly into the U.S. treasury.
The $9 Million Distribution From Graceway In 2010 Was A Tax Distribution, To Pay Income Taxes On The Company’s Earnings. “The 2010 tax distribution totaling $9,127,166.00 was made on March 18, 2010. The Debtors made no further distributions to the Members following this distribution.” (“DEBTORS’ MOTION FOR AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A SETTLEMENT AGREEMENT WITH GTCR,” In re: GRACEWAY PHARMACEUTICALS, LLC, United States Bankruptcy Court For The District Of Delaware, Case No. 11-13036 (PJW), 2/14/12, p.4)
· Graceway Did Not Make Any Discretionary Distributions In 2010. (“DEBTORS’ MOTION FOR AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A SETTLEMENT AGREEMENT WITH GTCR,” In re: GRACEWAY PHARMACEUTICALS, LLC, United States Bankruptcy Court For The District Of Delaware, Case No. 11-13036 (PJW), 2/14/12, p.4)
*** UPDATE 2 *** Illinois Freedom PAC…
Rich,
The Rauner campaign’s statement was highly misleading. The fact that it was a tax distribution does not change a thing. It just means that GTCR obtained $9 million from an insolvent company to pay their own tax liabilities on their investment in Graceway before creditors could state their claims to the money. This is why a judge ordered them to pay back $6 million of the money they took from the company, including $4.5 million to first lien creditors. It was still a greedy and heartless maneuver because Graceway was cutting jobs and slashing benefits.
It’s telling that the Rauner camp did not deny that GTCR
· Acted to protect its own profits over the interests of cancer patients,
· Cut 130 jobs
· Slashed employees’ health care and retirement benefits, and
· Took $9 million from a failing company, most of it which it was forced to repay.
* The full oppo report by the union-backed Illinois Freedom PAC…
THE SAME MONTH GTCR-OWNED GRACEWAY PHARMA LAID OFF 40% OF ITS WORKFORCE AND CUT BENEFITS, GTCR PAID ITSELF $9 MILLION AND WAS FORCED TO PAY BACK $6 MILLION OF THAT DURING BANKRUPTCY
GTCR founded Graceway Pharmaceuticals in 2006, committing $200 million to develop the company. In 2010, Graceway’s sales started to plummet, and the company laid off 40% of its workforce and cut benefits including vision care and 401k matching for its remaining employees. The same month that these moves were announced, GTCR gave itself a $9.1 million distribution from the company. Shortly after, Graceway began defaulting on its debts and went into bankruptcy. During the bankruptcy proceedings, GTCR was ordered to pay back $6 million of the 2010 distribution it received from Graceway, because the company was already insolvent when the payment was made.
GTCR FOUNDED GRACEWAY PHARMACEUTICALS IN 2006
GTCR Founded Graceway Pharmaceuticals In 2006. “Founded in 2006 by King Pharmaceuticals Inc. chief executive Jefferson J. Gregory and private equity firm GTCR Golder Rauner LLC, Graceway focuses on acquiring branded prescription products and licensing products. The company specializes in dermatology, respiratory and women’s health products. [Daily Deal, 9/29/11]
2006: GTCR Said It Would Commit $200 Million To Develop Graceway. “In 2006 the firm said it would commit up to $200 million to develop Graceway. GTCR did not respond to a call for comment.” [Daily Deal, 9/29/11]
July 2011: GTCR Remained The Sole Sponsor Of Graceway Pharmaceuticals. “Graceway brought in Lazard as of at least April to help look at its options. GTCR remains the sole sponsor of the business.” [Daily Deal, 7/12/11]
December 2011: Graceway Pharmaceuticals Sold To Medicis Pharmaceutical Group For $455 Million. “Graceway will fund its plan with the proceeds from the $455 million sale of its assets to Medicis Pharmaceutical Corp., which closed Dec. [The Deal Pipeline, 4/12/12]
GRACEWAY LAID OFF 40% OF ITS WORKFORCE AND CUT BENEFITS DUE TO LACK OF SALES
March 2010: Graceway Laid Off 130 Of Its 323 Employees. “In federal court filings Tuesday, Graceway revealed that it will lay off 130 of its 323 employees, and that it is ‘taking drastic steps to avoid bankruptcy.’” [Bristol Herald Courier, 3/25/10]
March 2010: Graceway “Lopped Off 60% Of Its Payroll; Cancelled Matching Contributions To Its 401K Program; And Eliminated Subsidies For Vision Coverage And Dependent Life Insurance.” “Bellamy confirmed Tuesday that Graceway was dismissing about 40 percent of its employees, but refused to provide any further details about how many people and what positions were affected. Those details were spelled out in court filings later Tuesday: Graceway has lopped off 60 percent of its payroll; cancelled matching contributions to its 401k program; and eliminated subsidies for vision coverage and dependent life insurance.” [Bristol Herald Courier, 3/25/10]
March 2010: Graceway Senior VP Of Human Resources: “Graceway’s Entire Workforce Is Distracted, Unsettled And In Poor Spirits.” “In a declaration supporting Graceway’s bid for an injunction against Nycomed, a senior executive painted a grim picture of the workplace environment. “Graceway’s entire workforce is distracted, unsettled, and in poor spirits,” according to the declaration by John William Musick, senior vice president for human resources. “Their work performance and productivity has suffered dramatically. Rather than devoting their time to researching and developing new products or marketing and selling existing products, they are worrying about keeping their jobs and beginning to look for new jobs.” [Bristol Herald Courier, 3/25/10]
Graceway Pharmaceuticals Laid Off 40% Of Its Workforce. “In May 2010, Graceway laid off 40% of its workforce.” [Daily Deal, 9/29/11]
THE SAME MONTH AS THE ANNOUNCED LAYOFFS AND BENEFIT CUTS, GTCR PAID ITSELF $9.1 MILLION FROM GRACEWAY
March 2010: Graceway Made A $9.1 Million Distribution To GTCR “When The Company Was Already Insolvent.” “In March 2010, Graceway Holdings made a $9.1 million distribution that the debtors say was made when the company was already insolvent, according to the motion. Graceway said that because of this, the funds could be subject to potential avoidance or recovery actions under the Bankruptcy Code. GTCR disputed this, according to the motion.” [Law360, 2/14/12]
GRACEWAY REPEATEDLY DEFAULTED ON ITS DEBT AND S&P CUT ITS BOND RATING
Graceway Owed Over $430 Million In First-Lien Debt And Defaulted On The Debt In 2010. “Further injuring the drug company was the large amount of first-lien, second-lien and mezzanine debt issued on May 3, 2007. As of Wednesday, Graceway owed $430.7 million to first-lien lenders led by Bank of America NA, $330 million to second-lien lenders and $81.4 million to mezzanine lenders. Graceway also owes about $30 million to unsecured trade creditors. The first-lien notes include a $650 million term loan due May 3, 2012, as well as a $30 million revolver, $10 million swing line loan and up to $10 million in letters of credit. Graceway defaulted on the first-lien debt in 2010 but cured the default through an Oct. 15, 2010, agreement.” [Daily Deal, 9/29/11]
Standard & Poors Downgraded Graceway’s Credit Rating To SD From B- After Graceway Defaulted On Second Lien Debt On August 31, 2010. “In September 2010, Standard & Poor’s rating service lowered Graceway’s corporate credit rating to SD from B- after the business failed to make an Aug. 31, 2010, interest payment on the second-lien term loan.” [Daily Deal, 9/29/11]
2011: GRACEWAY PHARMACEUTICALS FILED FOR BANKRUPTCY LISTING UP TO $1 BILLION IN DEBT
September 2011: Graceway Filed For Bankruptcy. “Graceway filed the bankruptcy proceedings Sept. 29 in U.S. Bankruptcy Court in Wilmington, Del. In the bankruptcy court documents, Graceway listed an estimated $1 billion in debt and some $500 million in assets.” [Bristol Herald Courier, 10/19/11]
In Its Bankruptcy Petition, Graceway Listed Assets Of $100-$500 Million And Debt Of Between $500 Million To One Billion Dollars. “In its petition, Graceway listed assets of $100 million to $500 million and liabilities of $500 million to $1 billion. It wasn’t clear how much GTCR has invested in the company to date.” [Daily Deal, 9/29/11]
GTCR WAS ORDERED TO PAY BACK $6 MILLION OF THE $9 MILLION IT TOOK FROM THE COMPANY IN 2010
GTCR Was Ordered To Pay $6 Million To Graceway’s Debtors Because Of Allegations GTCR Recouped $9.1 Million In Distributions From Graceway In 2010. “The new disclosure statement and plan outline a settlement with Graceway equity sponsor GTCR Golder Rauner LLC. Under the settlement, filed Feb. 14, the Chicago private equity firm would pay $4.5 million to the first-lien lenders and $1.5 million to the debtor’s estate. The settlement stems from allegations that members of GTCR had recouped about $9.1 million from distributions from Graceway in 2010.” [The Deal Pipeline, 4/12/12]
posted by Rich Miller
Thursday, Sep 25, 14 @ 11:05 am
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Based on what we’ve seen here in Illinois government, this sounds like Rauner is supremely qualified to be a governor.
Comment by VanillaMan Thursday, Sep 25, 14 @ 11:11 am
No surprise here. Of course GTCR was warned. That’s why they released some chaff, and dove the other way. The question is whether they successfully escaped.
Comment by walker Thursday, Sep 25, 14 @ 11:12 am
1) Take control of an entity,
2) Strip it of its value,
3) Abandon the husk,
4) Leave the obligations to someone else,
5) Repeat.
Exactly the sort of behavior that a state should look for in a governor.
– MrJM
Comment by MrJM Thursday, Sep 25, 14 @ 11:13 am
Yeah, Rauner’s business made him rich, but I would not be able to sleep well at night knowing what I did to the companies and their people.
Comment by Peoria guy Thursday, Sep 25, 14 @ 11:18 am
Taking “I’ve been successful at everything I’ve ever done” to a whole new level.
Comment by Ducky LaMoore Thursday, Sep 25, 14 @ 11:18 am
“I have been successful at everything I have ever done…”
I guess clearing $3.1 million of the $9 million they took from this dying company (after paying back the other $6 million by court order) would qualify as one of his “successes” . For his bank account anyway…
Comment by Roadiepig Thursday, Sep 25, 14 @ 11:19 am
At this point, I can’t hold my nose any longer. I may have to leave this race blank.
Comment by John A Logan Thursday, Sep 25, 14 @ 11:20 am
The antidote to this obvious mismanagement is for Rauner to finally, finally point out some — or at least one — business success.
I suspect Rauner himself considers these skitchy acquisitions and payouts “successes” — but if he does, I’d like to hear him say it.
He won’t debate, we know nothing specific of his plans, but the least he could do is give everybody a sense of what he considers a “success.”
To most folks — myself included — these are flat-out failures — and is exactly why Rauner is *not* qualified to govern. The amorality — if not outright immorality — in these kinds of business deals is staggering. It may be what Rauner did, but it’s incredibly, incredibly icky.
Are these successes, Rauner?
Comment by Frenchie Mendoza Thursday, Sep 25, 14 @ 11:21 am
“I’ve been successful at everything I’ve ever done”
Then own this mess.
Comment by Wensicia Thursday, Sep 25, 14 @ 11:24 am
Lewis G Atsaves, would you put your loved ones in a rauner home? Please respond y or n. Keep it simple for you partner.
Comment by William j Kelly Thursday, Sep 25, 14 @ 11:29 am
One of his other “successes” was a marginal home security company that they bought, reorganized (shedding 1,000 jobs in the process) and then sold for $100+ million profit. So, yeah it’s a success to *them*, but what about the 1,000 people left out in the cold? (Yes I understand that the company may well have gone completely under and then everybody would be out too, so I concede in that there is success.)
Comment by Skeptic Thursday, Sep 25, 14 @ 11:31 am
I’m trying to stay out of the prison/nursing home discussions as much as I can. There’s no good explanation or defense of bad things happening. One caveat I’ll throw in from personal experience in Charitable work I’ve been involved in; lack of payment and exceedingly slow payment of bills by this state is likely to have eliminated more nursing homes and nursing home beds than what these lawsuits are speaking to.
The people who work in these tough jobs at these places are mostly miracle workers. I’m doing my best to reserve any criticism for one of the hardest jobs there is. A few bad apples; absolutely. But far more angels. No one expected the end of life to cost what it does. The realization is now more and more apparent, privately and publicly. When these places don’t get paid in any reasonable amount of time, everything and everyone suffers.
Comment by A guy... Thursday, Sep 25, 14 @ 11:32 am
Just another day unlocking value. Perhaps Count von Carharrt is more appropriate than baron.
Rauner donned his Carharrt and aired his first spots for governor in June 2013 (that was an awful hot summer to be wearing Carharrt all the time).
I think its pretty clear now why we haven’t seen any Bruce the Business Builder spots in more than a year.
And run the state like a business? No mystery how he rolls there, either.
Comment by wordslinger Thursday, Sep 25, 14 @ 11:34 am
—
… exceedingly slow payment of bills by this state is likely to have eliminated more nursing homes and nursing home beds than what these lawsuits are speaking to.
—
Data?
Comment by Frenchie Mendoza Thursday, Sep 25, 14 @ 11:35 am
With Graceway: This is entirely GTCR and Rauner. No ambiguity here.
Hmm.
They took a big financial risk that the courts would find in their favor on a long-shot legal proposition, and then when they lost, they walked away from their obligations.
Pensions anyone?
Comment by walker Thursday, Sep 25, 14 @ 11:36 am
VM, you may be right. He’ll sell all state assets and give the profits to his rich buddies and convince Indiana to annex the scraps.
Comment by Norseman Thursday, Sep 25, 14 @ 11:36 am
This is a great issue for Quinn to capitalize on the uneducated electorate. This is what venture capitalists do. They buy up failing businesses and either flip them and sell them, or crash them and sell off the pieces for a profit.
By the way, it is exactly what Quinn did to justify closing of Tamms. Rather than filling it and funding it, he dropped the number of inmates which pushed the per inmate cost far to high to justify, so he could scuttle the prison and divert resources elsewhere and avoid lawsuits.
Undercapitalize the facility, make it fail, syphon assets, dump liabilities. Both Quinn and Rauner have used the same basic scheme.
Comment by the Patriot Thursday, Sep 25, 14 @ 11:36 am
“exceedingly slow payment of bills by this state” But at least some of the deaths occurred in Florida…
Comment by Skeptic Thursday, Sep 25, 14 @ 11:37 am
–The antidote to this obvious mismanagement is for Rauner to finally, finally point out some — or at least one — business success.–
I wouldn’t presume that it was mismanagement. I assume things went according to plan.
Comment by wordslinger Thursday, Sep 25, 14 @ 11:38 am
herbert hoover ran on the same mantra as rauner and we all know how the economy performed under his tutelage…
Comment by bored now Thursday, Sep 25, 14 @ 11:40 am
A Guy, what are you talking about? Do you think Rauner was scrubbing floors at the homes trying to make ends meet until the Medicaid and Medicare came in?
Did you see the bit where they tried to skim $9 million in cash when they knew they were already insolvent?
Comment by wordslinger Thursday, Sep 25, 14 @ 11:42 am
There is the very important issue of how our tax dollars are spent. Rauner has repeatedly said that government employees are overpaid. It is only fair to examine how he and/or his companies used our tax dollars.
Perhaps in this legal mess we can get some kind of estimate as to how much Medicare and Medicaid money was spent in the nursing homes and long-term care homes, and perhaps more importantly, how much that benefited taxpayers (and of course the residents of those homes).
Comment by Grandson of Man Thursday, Sep 25, 14 @ 11:45 am
A guy, that’s sweet.
You could always simply decline to comment on the nursing home stories, but I find it curious that you still find a way to weigh-in nonetheless. And it always appears as if you’re trying to change the subject, either back to prisons or to how difficult it is to care for the sick and elderly.
Yes, the state is slow paying its bills. But unlike GTCR’s nursing homes that were plundered into bankruptcy, Illinois’ nursing homes eventually always get paid. With interest.
Isn’t that the exact opposite business model that Bruce Rauner’s firm had going?
Comment by 47th Ward Thursday, Sep 25, 14 @ 11:45 am
Another $500,000 into the Illinois Freedom PAC yesterday. I think we’ll be hearing a lot about this over the next few weeks.
Comment by Snucka Thursday, Sep 25, 14 @ 11:45 am
An unexamined aspect of all these companies laden with debt and dumped into bankruptcy is that GTCR could write off the interest payments to reduce its tax liability. Schemes and scams six ways from Sunday, and whichever way the die lands, Rauner wins, the rest of us lose.
Comment by Reality Check Thursday, Sep 25, 14 @ 11:46 am
—
I assume things went according to plan.
—
Yes — that’s probably true. Success here is obviously a “positive expected value” after the business is gone and the legal battles are over. If you’re EV+, you’ve succeeded. If you’re EV-, you’ve failed.
It’s straight out of poker: if you successfully calculate the pot odds and implied odds — all the stuff that good poker players eventually internalize — you only put money in the pot when the play is EV+.
That’s what this is — and probably how Rauner “Carhatt Guy” could explain it to dumb folks like myself. It’s like a game of poker. You only put money in the pot when you know the expectation is positive. It’s discipline!
Comment by Frenchie Mendoza Thursday, Sep 25, 14 @ 11:48 am
This goes beyond vulture capitalism. Vultures feed off of rotting carcasses, but don’t usually kill the critter themselves. This is velociraptor level capitalism.
Comment by Aldyth Thursday, Sep 25, 14 @ 11:48 am
“Rauner is not a defendant in the Florida lawsuit”
So why is it a campaign issue?
Comment by Phil King Thursday, Sep 25, 14 @ 11:49 am
Your honor, for our next witness, the Defense would like to call Sgt. Schultz to the stand…
Comment by Larry the Cable Guy Thursday, Sep 25, 14 @ 11:51 am
In fairness to Rauner, when you target under performing companies or divisions of companies for investment, some will not work out. That is different than stripping the company out and making off with profits derived from selling off the pieces and emptying accounts (I think this used to be called corporate raiding?). Sounds like GTCR did a fair amount of the latter successfully, at least as it applies to the GTCR bottom line. That is a tough sell to Joe Lunchbox who may have lost a job in the economic crash through a similar process.
Comment by JS Mill Thursday, Sep 25, 14 @ 11:51 am
To the Post,
Remember how Bruce Rauner speaks to success;
It is centered around “return and value”
There may have been successes, but it seems that the failures aren’t failures, but calculated, and calculated for maximizing the ROI.
Bruce Rauner lacks honesty, integrity, ethics and morals in his business life. If it comes down to the dollars made, versus the ethics of the move, Rauner chooses the money.
And but appears he chooses the money in all these instances.
Supporting Rauner comes down to;
I know Bruce Rauner lacked honest and integrity, Bruce lacks ethics and morals. I am either willfully ignoring it because voting against my better self is acceptable, or I am a lemming, blissfully ignoring the facts of how Rauner lives his life, and how his complete lack of the workings of government mean very little to me.
Bruce Rauner might be, indeed, as bad as advertised.
Comment by Oswego Willy Thursday, Sep 25, 14 @ 11:52 am
Others have said it before: the only thing left to do is vote for the Lt. Gov. canditate of your choosing.
Comment by girllawyer Thursday, Sep 25, 14 @ 11:54 am
=== 47th Ward - Thursday, Sep 25, 14 @ 11:45 am:
Yes, the state is slow paying its bills. But unlike GTCR’s nursing homes that were plundered into bankruptcy, Illinois’ nursing homes eventually always get paid. With interest.===
No, not always 47. I’m not trying to change the conversation or engage too deeply on this one. Said what I said. Nothing more to add.
Comment by A guy... Thursday, Sep 25, 14 @ 11:55 am
If this isn’t a red warning flag about Bruce Rauner, what would such a warning flag look like?
– MrJM
Comment by MrJM Thursday, Sep 25, 14 @ 11:55 am
- nursing homes eventually always get paid. With interest. -
Which is why Rauner bought them in the first place. Siphon as much guaranteed Medicaid money as possible, then dump and run when you can’t keep going.
It takes a special kind of person to play that way with the elderly, Bruce doesn’t seem to have any remorse.
Comment by Anonymous Thursday, Sep 25, 14 @ 11:56 am
- No, not always 47. -
Yes, always. Unlike Rauner’s companies there are no mechanisms like bankruptcy for the state to avoid paying obligations.
Get a clue.
Comment by Anonymous Thursday, Sep 25, 14 @ 11:58 am
Frenchie, the success of the businesses is irrelevant to increasing returns to the funds that own them and their investors.
Here’s a short little case study on the private equity game:
–You may recall a front-page New York Times story from last October about Simmons Bedding Company. The 133-year-old Wisconsin firm was entering Chapter 11 bankruptcy, having been bought and sold by private-equity companies four times since 1986. The private-equity owners sucked out capital from a perfectly viable operating company and loaded it up with debt so that they could extract more money; when it collapsed under the weight, they took it into bankruptcy. Altogether, the private-equity owners made an estimated $750 million in profits, while the company’s debt went from $164 million in 1991 to more than $1.3 billion in 2009. In the bankruptcy, bondholders alone will lose some $575 million, and more than a thousand workers have already lost their jobs. –
Newt and Rick Perry call that “vampire capitalism.”
The Mafia calls it a bustout.
Rauner calls a dozen bankruptcies by companies he’s owned “being successful and everything I’ve done.” And for him, they were successful.
http://prospect.org/article/private-equity-time-bomb
Comment by wordslinger Thursday, Sep 25, 14 @ 11:59 am
- John A Logan -, good on you. Well said.
- A Guy… -,
Make your case as to why you continually spend the time here defending Rauner, as well as your weekends, your personal time and reputation for..,
===I’m trying to stay out of the prison/nursing home discussions as much as I can. There’s no good explanation or defense of bad things happening.===
I am curious. You read these stories, you type that statement, what is your argument to stay?
Comment by Oswego Willy Thursday, Sep 25, 14 @ 12:02 pm
One Rauner investment I had either forgotten or never heard about from the Erickson piece was his company that overcharged taxpayers in providing telephone service to the hearing and speech impaired.
Between his profits from that govt program, his government pension business, and Medicaid profiteering via nursing homes, I’m starting to imagine Rauner got his wealth by basing his venture capital strategies on that “Free Money” book pitched by Matt Lesko, that guy with the glasses in the Riddler suit jacket.
Comment by hisgirlfriday Thursday, Sep 25, 14 @ 12:06 pm
Rauner spokesman Mike Schrimpf said Rauner, who reported $53 million in income in 2012, has had more successes than failures as an investor.
No, Mike. He was successful at everything he ever did. He said so himself. But maybe we can’t believe everything he says, huh?
Comment by Anonymous Thursday, Sep 25, 14 @ 12:08 pm
Looks like Mr BIzWiz never made a mistake — misspoke.
Wait til they get to predatory subprime lender HomeBanc who folded before the Bush Wall Street crash. Now Mitt will need to admit more fumbles.
Comment by circularfiringsquad Thursday, Sep 25, 14 @ 12:10 pm
“I have been successful at everything…” - Bruce Rauner, salesman
A humble candidate, successful in life and business, and understanding the white hot spotlight would have made this point;
“I have won more than I lost, I tried and succeededore than I failed, but I have tasted grapes of wine made with both results.”
Maybe not…wine…but you get the idea, lol
Bruce Rauner, for me, is the first candidate I can remember that speaks in such absolutes at such a rate of his discussions, I have felt, that bring on his Crew, the challenges aren’t they stories, but Rauner’s own language matching the correct way to manage a campaign.
That extreme language, that “successful at everything”…
…that is battle the Rauner Crew is battling, much more than the negative stories on their own.
The extreme hubris language will be the biggest failure, much more than the record(s) on their own.
Comment by Oswego Willy Thursday, Sep 25, 14 @ 12:20 pm
And lest we forget the old motivational adage: “If you never fail at anything, you’re not trying hard enough.”
Comment by Skeptic Thursday, Sep 25, 14 @ 12:22 pm
There but by the grace of the skim of the self made men would be Rauner, homeless in his van. Destined for the mansion in the Spring Patch. Wow.
Comment by vole Thursday, Sep 25, 14 @ 12:23 pm
VM, Norseman & Word,
I probably have my tin foil hat on too tight this morning and may regret posting this, but I think you’re getting close to the secret Illinois takeover plan.
What I would expect Rauner to do is try to outsource everything possible. The outsourcer will offer to hire the current State employees at their current salary but it will be a bait and switch deal where a few months later the employees get offered a choice of the door or a new incentive pay plan that will cut their salary by 35%. At the same time, sell off all the State owned assets needed to do the out-sourced job(s) at bargain basement prices or with some deferred payment plan that leaves the State holding the bag when the companies fail.
The first year’s outsourcing price would be a loss-leader priced way below the current cost but once the asset sale and employee transfer was complete, the contract cost would skyrocket. We could end up with what would truly be a bankrupted state (no assets except a reduced income stream) and high cost annual obligations to continue the programs. At that point, there really would be a fiscal emergency that might get the ISC to approve “police power” action to negate all the debt … but I would bet it would be selectively requested to just negate the pension debt, not anything owed to Rauner’s partners in the bust-out scheme.
And the best part of it, IF Rauner can avoid blatantly illegal / unconstitutional actions, is he will have sovereign immunity from any lawsuits!
Time to go take some meds and try to forget about all this …
Comment by RNUG Thursday, Sep 25, 14 @ 12:29 pm
Yes, is means is; but bankruptcy doesn’t mean failure. Just another way to churn a profit
Comment by truthteller Thursday, Sep 25, 14 @ 12:30 pm
–In his testimony, Jannotta acknowledged that the sale of Trans Healthcare that GTCR took part in did not contemplate any eventual damage award payments to the estates of nursing home residents. He said that was because new companies created in the transaction were to handle any claims. GTCR was not involved with those new companies, which bore variations of the name Fundamental.–
Isn’t that a sweet deal? You can just walk away from your liabilities and lay them off on a “new company” with no assets that you tricked some sick old man to putting his name to.
Maybe we should all give it a try: if you have any debts or obligations, try creating a “new you” to lay them off on, like a hologram or an avatar, and just walk away.
It is great to be a corporation in the United States in 2014. More rights, fewer responsiblities, and, if you play your cards right, no accountability.
Comment by wordslinger Thursday, Sep 25, 14 @ 12:33 pm
The Chicago Tribune has been reporting this nursing home bankruptcy trial for several days. It may be building up to a Tribune endorsement for Quinn or no endorsement at all for governor.
Comment by Anonymous Thursday, Sep 25, 14 @ 12:33 pm
Anonymous, sometimes I wonder if the editorial board actually reads its own paper. Either way, there’s no connection between the two. Move along.
Comment by Rich Miller Thursday, Sep 25, 14 @ 12:36 pm
This is a very sad, sad story. Rauner is becoming an example of a complete waste of an Ivy League education. There are much better and more efficient ways to become a bust out specialist. He should have just walked down the street and joined Paulie’s crew. I guess he’d have to get his hands dirty if he did that, however. This is not the guy we need in the Governor’s mansion setting an example for our children on how to make cash at the expense of pretty much everything else.
Comment by Jeepster Thursday, Sep 25, 14 @ 12:36 pm
– The $9 million distribution was a TAX distribution, which was required under Graceway’s Limited Liability Company Agreement.–
So why were you ordered to return $6 million in cash to the company?
If you didn’t have the cash, how did you pay it back? Did you claw it back from the government, lol?
Seems the explanation is a wee bit incomplete?
Comment by wordslinger Thursday, Sep 25, 14 @ 12:37 pm
But he will be a WARRIOR for our children…
Comment by LizPhairTax Thursday, Sep 25, 14 @ 12:43 pm
Anonymous 12:33 - no endorsement would be the most intellectually honest course for the Tribune, but Bruce’s and Kristen’s egos would never allow them to take a pass. We'’ll get some tortured explanation for why, despite “concerns” raised about Rauner, he’s still a risk worth taking. They editorially committed to that long ago, and nothing will shake it.
Comment by Willie Stark Thursday, Sep 25, 14 @ 12:44 pm
I’ll take Rauner’s explanation half way. Yes, what he said about why the $9 mil is probably true. The way it was distributed would be typical operating procedure for many LLCs and S Corps (this is assuming the $9mil is an estimate on the amount of tax due not the actual tax due). But the fact is the government had to step in to get the remainder. And that just looks bad.
Comment by Ducky LaMoore Thursday, Sep 25, 14 @ 12:46 pm
If the Quinn campaign can’t run with this then he doesn’t deserve to win.
Anyone here remember the movie “Kiss of Death” from 1947 with Richard Widmark playing psychopath “Tommy Udo” and the wheelchair scene?
Let me refresh your memories.
The last 25 seconds sums it up for those of you with attention deficit dis…..
http://www.youtube.com/watch?v=U_WEvWcVoFw
Comment by IrishPirate Thursday, Sep 25, 14 @ 12:58 pm
“The investment into Graceway was structured in a way that had taxable earnings flow through the holding company…” That’s the kind of talk that’s really going to connect with voters.
Comment by Roland the Headless Thompson Gunner Thursday, Sep 25, 14 @ 1:02 pm
Rauner’s team reminds me of Ike Turner. They don’t contest the overall action, they just quibble about the details.
“I never forced Tina to eat the cake, I just told her to do it.”
Comment by Jocko Thursday, Sep 25, 14 @ 1:02 pm
“So why were you ordered to return $6 million in cash to the company?
If you didn’t have the cash, how did you pay it back? Did you claw it back from the government, lol?
Seems the explanation is a wee bit incomplete?”
—————————
This might be more to do with the Bankruptcy Court than anything. As I understand it, all recoveries and distributions are made under the purview and order of the Bankruptcy Court. And the Court can order ‘claw backs’ for a period prior to an entity filing for bankruptcy.
Can’t tell if the $6 mil +/- is additional money that GTCR had to (was supposed to) add, or if this was just funds that were improperly distributed without Bankruptcy Court authorization.
That’s the question. GTCR may have done nothing wrong in terms of the money (the $9 mil), just really screwed up on both procedure and paperwork in Bankruptcy Court.
Btw, they may have had to ‘claw back’ the money from the fed’s so it could be properly handled by the Bankruptcy Court when it was re-paid to the fed’s.
But if there’s not more money owed by GTCR (that can be substantiated), then a lot of folks here have, IMO, gone way overboard with all the vitriol.
Too many of you seem to think this is unusual in corporate bankruptcy cases. It’s not…. It’s what happens when there’s not sufficient funds to pay all the obligations. It’s not a pretty sight.
Comment by Judgment Day Thursday, Sep 25, 14 @ 1:11 pm
this is potent stuff, but is it making it more to tv and radio than the scary elderly commercials? Rauner can’t manage things. don’t think the full weight of this is getting past the lengthy important inside baseball here.
Comment by Amalia Thursday, Sep 25, 14 @ 1:17 pm
So the 9 million was a distribution to pay taxes on earnings. Who received the earnings? If the earnings were used to pay bills, then the earrings wouldn’t be taxable. The explanation doesn’t hold water which is why they had to pay it back.
Comment by A Jack Thursday, Sep 25, 14 @ 1:25 pm
Irish - I tried finding the video of Kramer giving a defective wheelchair to his girlfriend. No dice.
Comment by Team Sleep Thursday, Sep 25, 14 @ 1:28 pm
ITA with RNUG. Rauner will privatize/outsource.
Don’t forget Rauner’s financial support in getting the 75% min vote required for the teacher strike and Rahm’s desire to raise property taxes and get a casino. You get one, you get the other. They’re a packaged deal.
Comment by Emily Booth Thursday, Sep 25, 14 @ 1:31 pm
Out here in red country where Rauner signs dominate 100 to 1 (OK, I haven’t seen a single Quinn yard sign so I give 1 to the 1 that must be there somewhere — not everyone is subject to the tyranny of the GOP village), will any of this make any difference? Not a chance. The only hope for Quinn is for enough of us ‘neither one’ voters to weight passable (in)competency over legal chicanery.
Comment by vole Thursday, Sep 25, 14 @ 1:41 pm
Vole, I think Quinn’s campaign is spending money on TV ads, not yard signs. A lot of campaigns are dropping yard signs because of studies showing they are one of the less effective forms of voter persuasion.
Comment by Archiesmom Thursday, Sep 25, 14 @ 2:02 pm
==The Rauner campaign’s statement was highly misleading. The fact that it was a tax distribution does not change a thing. It just means that GTCR obtained $9 million from an insolvent company to pay their own tax liabilities on their investment in Graceway before creditors could state their claims to the money.==
Sorry, IL Freedom, which part of “required” do you not get?
Comment by so... Thursday, Sep 25, 14 @ 2:03 pm
@ vole, you are in red country therefore spending money and time there is not wise, even on one sign. ( although I have faced more than one candidate who just cannot get over sign distribution.) Chicago media market. Chicago media market. Chicago media market.
Comment by Amalia Thursday, Sep 25, 14 @ 2:10 pm
–Sorry, IL Freedom, which part of “required” do you not get?–
LOL, you mean as required by a judge to pay back $6 million of what they skimmed?
Comment by wordslinger Thursday, Sep 25, 14 @ 2:11 pm
It appears that the Rauner campaign’s basic argument is that they had to take the $9 million because their LLC agreement required that. My question to them would be who wrote the terms of the LLC agreement that would require that this transfer take place? My guess is that it was GTCR. The fact that they were clever enough to anticipate such a situation when they put together the LLC agreement doesn’t change the fact that the bankruptcy judge determined that they took more than their share of the company’s assets. If it was a legitimate transfer which only paid Graceway’s tax liability, why did the judge order them to return the majority of the money?
To me, GTCR exemplifies the problems with modern structured finance. They use complex legal entity structures to create situations where they have the potential to win big if a company is a success but have the ability to transfer the losses to others if it is not. That can make a lot of money for the partners and investors this way, but I don’t see how that benefits the economy or society as a whole. I also don’t see how those skills transfer to running a government.
Comment by Pelonski Thursday, Sep 25, 14 @ 2:12 pm
It is always amazing that Rauner/GTCR supporters can recite a talking point like, it was for a TAX payment, but can’t remember other details.
Sgt Schultz has selective memory it seems.
Comment by Tim Snopes Thursday, Sep 25, 14 @ 2:38 pm
Were any of those employees let go “VETERANS” ?
Comment by foster brooks Thursday, Sep 25, 14 @ 3:24 pm
RNUG: A fly in your visionary soup. Illinois is already, by some measures, the most “outsourced” state government in the country. There’s not a lot left in that bucket. I think he will just stop paying the pension payments at all, and blame it on th e court if they find the last pension “reform” bill unconstitutional. That’s how he balances his unbalanced budget.
Comment by walker Thursday, Sep 25, 14 @ 3:28 pm
Walk, I wouldn’t ever be supportive of that. My only question is, why wouldn’t these characters do the same thing? They’ve done it to get us this far into the ditch? It’s possible it’s more likely they would do it. I hope no one does. The thought is awful.
Comment by A guy... Thursday, Sep 25, 14 @ 4:06 pm
A Guy: I agree it’s an awful thought. I hope no one does skip pension payments again.
I just don’t see how Rauner will make his numbers without doing something dramatic that he has not yet announced.
One thing about Quinn — the major reason he is under significant financial pressure, even with increased revenues, is that he has been paying the pension ramp-up in full for all five years, unlike almost all his predecessors. Your “these characters” don’t include Quinn, on this one.
Comment by walker Thursday, Sep 25, 14 @ 4:49 pm
Walker, let’s not forget that the pension payments were made in FY 10 and 11 by borrowing money, not that there’s anything wrong with that.
Comment by Arthur Andersen Thursday, Sep 25, 14 @ 5:11 pm
AA: good comment, any snark accepted.
Comment by walker Thursday, Sep 25, 14 @ 5:16 pm
- walker - Thursday, Sep 25, 14 @ 3:28 pm:
I’m fairly well aware of what is already outsourced. That’s part of why I think Rauner will try to expand it further. I’ve often joked the goal for the ideal State agency is just a Director, a Contract Administrator, a Chief Fiscal Officer and one peon to blame if anything goes wrong.
Comment by RNUG Thursday, Sep 25, 14 @ 5:25 pm
RNUG: LOL Add in the 10,000 auditors required.
Yes, I’m sure you are well aware.
I just awkwardly tried to get onto the pension-shorting possibility. He’s $5.5 to 8 Billion short so far with his “Blueprint.” What’s he going to do?
With Respect.
Comment by walker Thursday, Sep 25, 14 @ 6:10 pm
I am no rocket scientist, but someone please explain to me why Team Rauner is arguing about their nursing home record?
Comment by Yellow Dog Democrat Thursday, Sep 25, 14 @ 7:02 pm
YDD, I’m sure there will some glowing testimonials coming soon from families who had loved ones at Trans Healthcare facilities.
I mean, the dude’s running for governor — why wouldnt’ they trot those out?
Comment by wordslinger Thursday, Sep 25, 14 @ 7:15 pm
RNUG, you’ve been retired too long. You forgot the:
- chief of staff to make all the decisions since the director will be out making speeches touting the governor’s accomplishments;
- executive asst to the director to serve as Sprinfield secretary;
- special asst to the director to answer phones in Chicago;
- executive to cos to make coffee for the executive office and arrange travel to out of state conferences;
- chief counsel to deny FOIA requests and come up with convoluted justifications for nonsensical contracts;
- chief information officer to teach the senior staff how to use email and their new iPhone x.s;
- public information officer to write press releases about how the governor is doing great things that are implemented by the agency and return reporter calls in a week or so;
- house legislative liaison to grovel before the speaker and point to the peon during legislative oversight hearings into malfeasance at the department;
- senate legislative liaison to do above liaison duties as applies to the Senate and to chauffeur the director to pre-confirmation meetings with members of the Exec Appointments Committee; and, most importantly
- assistant director to sit in the 2nd largest office thinking about how to show his gratitude to his sponsor for such a cushy do-nothing job.
Comment by Norseman Thursday, Sep 25, 14 @ 8:22 pm
This guy can’t not be trusted period.
Comment by Anonymous Thursday, Sep 25, 14 @ 8:53 pm
Norseman, you’re right. They need all those positions you list because with only 4 people per agency, there aren’t enough patronage positions.
Comment by RNUG Thursday, Sep 25, 14 @ 10:57 pm
- walker - Thursday, Sep 25, 14 @ 6:10 pm:
Good point but … are we sure they won’t outsource the auditors also?
Comment by RNUG Thursday, Sep 25, 14 @ 11:13 pm
about the only sizable thing left to outsource (in term of number of state employees) is corrections, and my recollection is that there are some pretty restrictive statutory prohibitions in place on that one
Comment by Anonymous Thursday, Sep 25, 14 @ 11:49 pm
The pension ramp law is still the law. How can Rauner avoid making the payment if the legislature doesn’t modify that law, or eliminate it?
Comment by PublicServant Friday, Sep 26, 14 @ 7:45 am
- PublicServant - Friday, Sep 26, 14 @ 7:45 am:
IFT v Lindberg 1975 - the ISC ruled that the GA has to pay the pensions when due but can choose to fund (or not) the pensions any way the GA wants to … which is exactly how we got back into this mess following the 1970 Constitution Pension Clause enactment.
Comment by RNUG Friday, Sep 26, 14 @ 10:26 am
RNUG, but unless the GA would so act, the continuing resolution funds the certified amounts automatically, right?
Comment by Anonymous Friday, Sep 26, 14 @ 12:20 pm
My mom dies here in Florida and this guy was on the board when they owned the nursing homes and took the money out causing my mom to get her head injured and his company did not care, He has said Ill run this state like I did my company, the people are in a rude awaking if you elect him governor just like his in FL
Comment by me Tuesday, Oct 7, 14 @ 9:28 am