New Federal Court Filing Packs Explosive Allegations About Rauner's GTCR

In response to devastating television ads currently airing statewide exposing disturbing connections between Bruce Rauner's former private equity firm GTCR and nursing home neglect and abuse, the Rauner camp issued what it calls a "fact sheet." A "misrepresentation of the facts sheet" might be a more accurate term.

Rauner's so-called "fact sheet" includes this:

The Latest: In Jackson, after $110 million judgment was entered, Wilkes sued more than a dozen third parties, including certain GTCR entities, GECC, and others, to collect on that judgment. Earlier this month a federal judge granted GTCR's motion to dismiss the case.

The reference there is to the case of Juanita Amelia Jackson, whose estate won a $110 million default judgment for negligence, including $100 million in punitive damages, against the operators of the Auburndale Oaks Healthcare Center, a nursing home in Florida. That facility was just one of many previously owned and operated by the GTCR-controlled Trans Healthcare, Inc. ("THI") and Trans Healthcare Management, Inc. ("THMI"). I cited that verdict in my original story, which broke the Rauner nursing home scandal five weeks ago.

I followed up with more on Juanita Jackson's case on January 23. The 76-year-old Ms. Jackson died in July 2003.

That state court judgment was issued in July of 2010. Nearly four years have now passed and the estate has yet to see a dime of the award the state court ruled it deserved. Recovery has been frustrated by complicated legal maneuverings, bankruptcy filings, and some very fishy (at best) shuffling of assets.

When Rauner says "a federal judge granted GTCR's motion to dismiss the case," he's only talking about a subsequent federal complaint filed by the estate in an effort to sort out what the estate essentially claims were fraudulent activities specifically designed to allow responsible parties to escape accountability for their negligent and unlawful acts.

Just one of the things Rauner's "fact sheet" neglected to mention is the fact the motion to dismiss was granted without prejudice and specifically allowed the plaintiffs leave to amend by February 14. Also, the court's dismissal was largely on technical jurisdictional grounds, and not on the merits. The court's Order of February 3, 2014 is here. The court is the U.S. District Court for the Middle District of Florida, Tampa Division, and the case number is 8:13-cv-1133-T-33MAP.

The court subsequently granted an extension of time to file an amended complaint to Friday, February 21. The Estate of Juanita Amelia Jackson did in fact timely file an amended complaint with the U.S. District Court on yesterday's deadline.

The amended complaint names eight defendants - two of which are GTCR entities: GTCR Golder Rauner, LLC and GTCR Partners VI, L.P. Bruce Rauner is not personally named as a defendant and his name is not specifically mentioned anywhere in the amended complaint. However at the time of the events at issue, he was not only one of the small number of Principals of the firm (in other words one of the partners and owners), he was also GTCR's Chairman. Rauner was with GTCR for three decades. He left the firm in October 2012 in advance of his run for governor.

Here are just some excerpts from the amended complaint filed yesterday, with cites to the applicable paragraphs.

¶ 23. At all relevant times, GTCR provided equity funding to THI and maintained the controlling interest of THI (82.7%).

¶ 24. THI and its subsidiary THMI did not function or exist independent of GTCR. THI and THMI were the mere instruments and alter egos of GTCR. These entities shared a continuity of management, personnel and assets.

¶ 25. Through a Professional Services Agreement, GTCR operated and controlled THI and THMI by taking a hands-on-approach and day-to-day involvement in the operations of THI and THMI. The Professional Services Agreement provided for services including corporate strategy formulation, budgeting of corporate investments, acquisitions and divestures, and debt and equity financing.

¶ 26. At all relevant times, GTCR principals controlled the three-person board of directors of THI. The board of directors made all the material financial decisions and directed all business and strategy decisions of THI and THMI.

¶ 37. At the time the Jackson Estate filed its claim against THI and THMI, these combined, vertically integrated companies were the largest private nursing home management chain in America, with revenues of over a billion dollars.

¶ 38. During the course of litigation, THI and THMI, however, had been made judgment-proof via a multi-year national conspiracy to defraud the creditors of THI and THMI by stealing their assets, concealing them in newly created companies, and placing the remaining shell in a Maryland state court receivership to conceal the conspiracy and avoid any scrutiny by outsiders - including the Plaintiff.

¶ 42. Through their large investment, GTCR gained majority control over THI's board of directors and placed their principals, [Edgar D.] Jannotta and Ethan Budin, on the three-person board in order to actively manage THI and its subsidiaries. [Editor's Note: Edgar D. Jannotta, former Principal of GTCR, is one of the largest contributors to Rauner's campaign fund.]

¶ 58. By misrepresenting its earnings, THI obtained monies to which it was not lawfully entitled, including Medicare and Medicaid monies.

¶ 93. By the actions of Ventas, GECC, and GTCR, THI was unable to fulfill its operating obligations, resulting in lawsuits against various THI subsidiaries for failure to maintain its healthcare facilities, to maintain appropriate insurance, and to pay rent, as well as conversion, misappropriation of revenues, racketeering, and other fraud. See Aegis Services, Inc. v. Trans Healthcare, Inc., Case No.: 2:04-cv-01175-JLG-NMK in the United States District Court for the Southern District of Ohio; Lyric Healthcare, LLC v. Trans Healthcare, Inc., Case No. C-05-013156, in the Circuit Court for Baltimore County, Maryland (owner of Florida facilities managed by THMI and THI alleging misappropriation of revenues).

¶ 319. Defendants, the Receiver, Tydings, GECC, GTCR, and Ventas have knowingly and willingly conspired to seize the assets of former nursing home operators, conceal them in newly created entities, and leave behind empty shells for the purpose of defrauding the creditors of THI and THMI, including the Plaintiff.

¶ 325. GTCR entered into a conspiracy to pay GECC and Ventas with fraudulently obtained funds and with funds intended to be spent on resident care, in order to protect GTCR, GECC and Ventas from the damaging financial consequences of exposure of THI's misconduct.

The 68-page Amended Complaint filed on February 21, 2014 can be read in its entirety HERE.

These are of course allegations, and all of the defendants will have their opportunity to respond with their own court filings very soon - although I certainly wouldn't expect that to happen before the March 18 Primary.

There is a lot of complexity here - complexity which GTCR and others have intentionally contributed. And this particular lawsuit is only one of the many moving parts in this nursing home story. There is for example also related litigation working its way through U.S. Bankruptcy Court in Florida right now.

But on March 18 Republicans will not be deciding a legal case. We'll be choosing our standard bearer and the person we as a party say is the best leader to oversee and run the government of America's fifth most populous state.

Republicans -- and no resident of Illinois for that matter -- can afford to wait for GTCR's lawyers to weigh in on these extremely serious matters.

Many questions remain unanswered. But I know one thing for certain. If Bruce Rauner was running with a "D" by his name, every Republican I know would be demanding answers and calling for the candidate to immediately come clean.

Doug Ibendahl is a Chicago Attorney and a former General Counsel of the Illinois Republican Party.

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