Proof Bruce Rauner was hands-on in nursing home business

By DOUG IBENDAHL   May 21, 2014

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Bruce Rauner has repeatedly denied being personally involved with the management of Trans Healthcare, Inc. – the nationwide nursing home empire founded by Chicago-based private equity firm GTCR in 1998. Rauner served as GTCR’s Chairman until he left the firm in October 2012 in advance of his run for governor.

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Rauner’s campaign has attempted to cast shame on Governor Pat Quinn and government union bosses for “blatantly ignoring the truth” about links between Rauner and the abuse and neglect of nursing home residents under the GTCR-controlled Trans Healthcare. The “truth” according to Rauner is that he was nothing more than a passive investor.

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It’s all hogwash.

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In fact so hands-on was Rauner he was GTCR’s point-man in a management/labor dispute between the Service Employees International Union (“SEIU”) and Trans Healthcare.

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In a 2004 interview with Kenneth MacFadyen of Thomson Financial (Buyouts), Rauner discussed the ongoing labor negotiations. From the interview:

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For its part, GTCR claims that the SEIU action is just sour grapes over ongoing labor negotiations at GTCR portfolio company Trans Healthcare Inc. “The SEIU has been battling with Trans Healthcare for a while, and started a smear campaign when they couldn’t gain any traction,” said Bruce Rauner, a senior principal with GTCR, in an interview with Buyouts. “That’s when they started on us. . . If they were really genuinely concerned about corporate governance, they would have called us and expressed their concerns, but they have never done that.”

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MacFadyen added in the article:

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Likewise, Rauner made sure to make the point that GTCR is not anti-union. He is unclear whether or not his firm and the SEIU will come to a meeting of the minds.

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The so-called “smear campaign” to which Rauner refers was in fact a publicity campaign launched by SEIU which highlighted reports of poor patient care at Trans Healthcare nursing homes as a method of putting negotiation pressure on GTCR.

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In September of 2003, Ohio State Representative Kenneth Carano joined SEIU representatives at a press conference to discuss the lack of quality of care being provided by the GTCR-owned and controlled Trans Healthcare nursing homes in Ohio. In December that same year, Ohio State Senator Teresa Fedor and SEIU representatives held another press conference to draw attention to “poor patient care, lack of building maintenance, and reduced staffing” at nursing homes operated by GTCR’s Trans Healthcare.

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SEIU also launched a website in 2003 to provide “consumers with detailed information about the crisis of care at Trans Healthcare Inc.’s nursing homes.”

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Given that wrongful death and negligence lawsuits continued to mount against Trans Healthcare, it is unclear whether conditions improved at the nursing homes as a result of SEIU’s publicity campaign.

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But what is crystal clear is that conditions did improve for both GTCR and SEIU, according to court filings in Aegis Services, Inc. v. Trans Healthcare, Inc., et al. (S.D. Ohio Dec. 20, 2005), No. 2:04-CV-01175.

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Plaintiffs in Aegis claimed that Trans Healthcare and GTCR secretly entered into an agreement with SEIU “to facilitate, encourage, and permit SEIU union organizing activities” in certain Trans Healthcare facilities. Trans Healthcare and GTCR were further alleged to have “permitted, condoned, and encouraged” SEIU union organizing activities “in order to encourage SEIU to continue to use the services of Defendant GTCR Fund VI, L.P. and/or its affiliates to manage its substantial pension fund assets, without concern for the financial well-being of THIC [Trans Healthcare of Columbus, Inc.], and which resulted in extreme financial hardship to Defendant THIC and the Facilities.” (Counterclaim, ¶¶ 58-61)

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Trans Healthcare and SEIU ultimately agreed to a five-year contract in 2004 which provided for “substantial raises, new additional compensation in the form of paid time off, which under certain circumstances, provided for lump sum payments to each staff member for unused time in December of each year.” (Counterclaim, ¶¶ 62-64)

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“As a direct and proximate result of Defendant GTCR Fund VI, L.P. and/or Defendant THI’s activities involving SEIU, THIC’s operation costs were needlessly increased solely to enhance Defendant GTCR Fund VI, L.P.’s relations with SEIU.” (Counterclaim, ¶ 65)

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So it appears that under Rauner’s hands-on leadership, GTCR and SEIU did come to a meeting of the minds after all.

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You can read Aegis’ full claims against GTCR HERE and HERE.

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Rauner was obviously not “very comfortable” allowing the Aegis litigation to proceed to trial. Shortly after the Federal Judge set the trial date, GTCR and other defendants entered into a multi-million dollar settlement.

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Steven Malanga discussed GTCR’s Trans Healthcare and SEIU in his book, Shakedown: The Continuing Conspiracy Against the American Taxpayer:

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Government spending has bred strange alliances as unions and managements put aside their differences to lobby for more public money. In Illinois, Maryland, and Ohio, for example, the nation’s largest operation of private nursing homes, Trans Healthcare, Inc., struck an agreement with SEIU locals not to oppose organizing efforts at its facilities if the union would help it lobby for higher Medicaid reimbursements. Together the two groups created a separate lobbying arm, financed with a $100,000 union contribution and a company pledge to match that amount. [Page 36]

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Bruce Rauner clearly has no problem cutting backroom deals with government union bosses if the deal will put more cash into his own already-stuffed pockets. Anyone still buying Rauner’s playacting at this point has simply chosen to remain willfully ignorant.

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

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