Trial starts today in “legal thriller” case against Rauner’s GTCR

By DOUG IBENDAHL • September 22, 2014


The long-awaited trial involving Bruce Rauner’s private equity firm’s alleged “bust-out” of its nursing home company is set to begin today, September 22, at 8:15 a.m. Eastern before Judge Michael G. Williamson in U.S. Bankruptcy Court in Tampa, Florida.


This is the case Judge Williamson previously described as having “all the makings of a legal thriller.


The case is brought on behalf of the estates of six elderly victims who suffered abuse and inadequate care while residents in nursing homes controlled by Trans Healthcare, Inc. (“THI”). GTCR acquired THI in 1998 and made the company its vehicle for rapidly buying-up over two-hundred nursing homes around the country.


Rauner was chairman of the Chicago-based GTCR when all of the alleged wrongdoing occurred. A series of GTCR entities are named defendants: GTCR Golder Rauner, LLC; GTCR Fund VI, LP; GTCR Partners VI, LP; GTCR VI Executive Fund, LP; GTCR Associates, VI; and THI Holdings, LLC.


Edgar D. Jannotta, Jr., formerly one of Rauner’s fellow GTCR principals, and now one of the largest contributors to Rauner’s gubernatorial campaign, is also named as a defendant in his individual capacity.


This trial isn’t about deciding whether elderly people suffered at the hands of unscrupulous operators. We already know they did. State courts have already returned verdicts and awarded damages in excess of a combined $1 billion to the six victims’ estates.


The hitch is that years have gone by and the victims’ families have yet to see any of those monetary awards.


The parties are now in Federal Bankruptcy Court because the plaintiffs allege there was a deliberate scheme to hide assets from the victims which involved massive fraud and an unlawful abuse of the bankruptcy laws. The plaintiffs essentially allege GTCR’s owners (including Rauner) plundered what they could while driving the nursing home business into bankruptcy, and then simply walked away from the elderly victims in the wake of massive court judgments.


That’s the textbook definition of a “bust-out” scheme.


Plaintiffs seek to prove that Jannotta breached his fiduciary duty, and further that GTCR aided and abetted a breach of fiduciary duty.


The exhibit list filed by the victims’ estates cites 1,430 documents they seek to introduce into evidence. Judging from the document descriptions it appears the anticipated 10-day trial will provide much insight into the inner workings of GTCR’s nursing home business – details which Rauner has refused to share with voters.


GTCR is represented in this case by high-powered Chicago-based law firm Kirkland & Ellis. But the plaintiffs bring big guns of their own and according to one of the plaintiffs’ lawyers, over 90 days were spent on depositions alone to get to this point. Among other experts, the plaintiffs enlisted multiple forensic accountants, some with IRS experience.


It’s now up to Judge Williamson to sort it all out.


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


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