The indictment this week of two high-level employees of one of the many companies that form the basis for Bruce Rauner’s wealth drew renewed attention to a central conundrum of the governor’s race.
At what point does Rauner bear responsibility for problems in his wide-reaching business empire, or does he just get credit for his money-making success?
For more than a year now, Rauner’s opponents — whether Republican, Democrat or just plain anti-Rauner — have struggled with the challenge of how to exploit his record as a businessman.
It’s the only record he has, of course, being someone who has never previously been involved in the public arena and therefore never having been forced to cast an unpopular vote or make a decision on a matter of public policy.
Indeed, the investments of Rauner’s Chicago-based private equity firm GTCR have produced no shortage of material for opposition researchers — from a Michigan company where fraudulent accounting fueled an insider trading scandal to nursing homes allegedly drained of resources until the patient care went to hell to these latest accusations of fraud at ConvergEx, a brokerage company that has admitted fleecing its customers through hidden fees.
Yet, nothing seems to stick to Rauner. It’s as if he is so wealthy he is presumed to be two layers removed from the nitty gritty where his money was made.
On Friday, Rauner set us straight, declaring himself “five layers” removed from the troubles at ConvergEx.
That might make sense if he were a more passive investor, but Rauner’s whole business reputation has been based on him being a hands-on guy whose company is an active participant in its dealmaking.
It wouldn’t surprise me to find that somewhere along the way Rauner had invested in the company that makes Anolon, today’s non-stick answer to Teflon.
Even in the deals gone sideways, there’s a recurring theme that Rauner and his GTCR made their profit. Yet, when pressed about what went wrong, Rauner always distances himself from the failings.
And so it is again with the latest developments in the now two-year-old scandal at ConvergEx Group, where two former executives were accused Thursday of stealing millions of dollars in a sophisticated trading fraud.
In essence, ConvergEx played some of its customers for suckers, routing their orders through Bermuda and adding a mark-up or mark-down that were labeled as “trading profits” and never disclosed. This was in addition to the commission they were charged.
Late last year, the company agreed to pay $150 million to settle civil and criminal wrongdoing by three of its subsidiaries. At that time, two other former employees pleaded guilty to their roles in the scam.
The new indictments targeted, Anthony Blumberg, 49, of New Jersey, and Craig Marshall, 47, of Bermuda.
Blumberg was CEO of ConvergEx Global Markets, one of the subsidiaries, and also an executive managing director of the parent, ConvergEx Group.
ConvergEx was created in 2006 by Rauner’s GTCR and the Bank of New York, which each took 35.4 percent stakes and controlling positions on its board.
The Rauner campaign initially tried to dismiss the indictments as the work of “rogue employees at a subsidiary of a company GTCR had invested in.”
That doesn’t quite wash. Blumberg in particular was no mere employee but a key figure in the ConvergEx management, and federal prosecutors say the stealing he is accused of overseeing was part of the company’s normal business practices.
Plus, GTCR plays a much more aggressive role in its deals than to just put up its money (which as you realize is usually somebody else’s money.)
Still, I can’t tell you what Rauner knew. Joseph Velli, the former CEO of the parent company, has not been accused of wrongdoing, so if he has deniability, then Rauner can plausibly claim to be least one step removed from the mess.
Rauner has been able to use his financial resources to define himself as an affable, but hard-nosed businessman who made himself rich and now wants nothing more than to use that know-how on behalf of the people of Illinois.
As I’ve tried to make clear since the day after the primary, I don’t trust him. I don’t think he’d be good for Illinois working people. You may consider that bias. I consider it being transparent.
Gov. Pat Quinn’s stewardship of the state, from the economy to the failings of his anti-violence program, is fair game for this campaign.
So is Bruce Rauner’s business record, including his fumbles.