As a federal trial targeting Bruce Rauner's venture capital firm unfolds in Florida, a string of new developments has emerged in an especially tawdry and disturbing bankruptcy case that threatens to derail the Illinois governor candidate's campaign ahead of November's election.
The timing could not be worse. Nor could revelations that GTCR, the Chicago-based firm where Rauner served as managing partner for decades before retiring in 2012, may have masterminded an operation to allegedly avoid responsiblity for the deaths of elderly patients residing in nursing homes it had invested in.
Some background for the uninitiated: Last spring, a Tampa federal bankruptcy judge, opining that the purported scheme had "all the makings of a legal thriller," ruled in favor of continuing litigation into a $1 billion case that involves alleged incidents of wrongful death and abuse by Trans Healthcare Inc., a nursing home chain GTCR co-founded in 1998. Among the accusations: That GTCR had purposely killed off Trans Healthcare and hoodwinked an aging graphic artist into unwittingly signing papers to buy the cash-strapped company, which has been in receivership—a form of corporate bankruptcy—since 2009.
Making efforts to separate himself from the seediness of it all, Rauner has denied playing a significant part in Trans Healthcare-related business decisions and said he believes the court "will find there was no wrongdoing by anyone."
Behold the latest details to surface from the unraveling courtroom drama that launched Monday and is proving to be a giant thorn in Rauner's previously unstoppable path to Springfield:
1. After a Chicago Tribune report cast doubt on the Winnetka multi-millionaire's earlier claim that he only sat atop the Trans Healthcare board for one year—it was four, according to the paper—and cited prosecutors as alleging he had a hand in managing Trans Healthcare to the very end, a defensive Rauner dismissed the information as "false" and pegged a media flare-up to smear tactics by Gov. Pat Quinn's re-election team: "This is a destruction, a distraction from a failed governor who is creating a diversion away from his failure inside his administration. Pat Quinn is under federal criminal investigation himself, and his office."
2. Rauner's former colleague, Edward Jannotta Jr., an ex-GTCR partner who oversaw the nursing home network and is a defendant in the case along with the firm itself, was heard in recorded testimony Wednesday calling fellow investors "perhaps a little bit unsavory, as it turns out." Defense attorneys argue that GTCR had no knowledge of the 2006 sale to graphic designer Barry Saacks and that GTCR's shady New York-based partners were responsible for the allegedly improper deal. Jannotta said a "consideration" of selling off Trans Healthcare was passing down "responsibility for those liabilities" (translation: wrongful death lawsuits) to a new company.
3. Abe Backenroth, an attorney for the aforementioned New York investors and a self-described Saacks pal, testified that Saacks was included in the transaction with the best of intentions, citing an opportunity for the "ne'er-do-well" to sell Trans Healthcare's computers. (This argument raised the judge's eyebrows.) But Backenroth said nursing home staffers "dropped the ball" on a promise to "execute the termination agreements" (which ostensibly would have prevented Saacks from being burdened with any unseemly business associated with a problematic purchase of which he had no apparent recollection).
4. The defense alleges that the other side is more interested in winning lucrative damages for victims' families than anything else, hence the move to hold GTCR accountable over Saacks. And according to the Trib, lawyers on Wednesday "sought to demonstrate their clients had little motive to try to avoid liability because they didn't believe it would be that expensive to settle any neglect and wrongful death lawsuits."
5. Meanwhile, The Pantagraph's Kurt Erickson reported that 11 other companies linked to GTCR have gone bankrupt, to which Rauner spokesman Mike Schrimpf responds: "Most of GTCR's investments were successful, but some did not work out. That's the nature of investing." (Capitol Fax's Rich Miller outlines the full anti-Rauner "oppo" dump HERE.)