Republican News Watch had an interesting article written by Doug Ibendahl (former General Counsel of the Illinois Republican Party) on Republican gubernatorial candidate Bruce Rauner. Rauner has a history of shady business deals resulting in multiple lawsuits involving Rauner’s former private equity firm.
“In 2000 The Wall Street Journal said: “The vultures are circling the carnage in the nursing-home industry. With some of the largest nursing-home operators under bankruptcy protection and others heading in that direction, a number of deep-pocketed investors are preparing to swoop in on the choice morsels.”” Bruce Rauner’s Chicago-based investment firm GTCR, LLC (formerly known as GTCR Golder Rauner) decided to get in on the action and one vehicle it used was Trans Healthcare Inc. (“THI”). THI’s launch to acquire nursing homes appealed to GTCR “because a new prospective payment system for Medicare was just being implemented,” said Ned Jannotta Jr., then a GTCR principal.”
Rauner was with GTCR for three decades. He left the firm in October 2012 in advance of his run for governor. According to court documents, many elderly residents of those nursing homes paid the ultimate price. The article gives a few examples but others are well known in the industry.
” A jury in Polk County, Florida, returned a $1.1 billion verdict last month in a case involving what was described as “corporate corruption” and “misconduct” that ultimately led to the death of a nursing home resident. The jury agreed that defendant, Trans Health Care, Inc. (THI), deserved to be punished for such severe corporate greed that it caused Ms. Arlene Townsend to suffer for years in a nursing home that was short-staffed and under-supplied. The jury awarded $110 million in compensatory damages and $1 billion in punitive damages.”
The Plaintiff’s lawyers presented evidence showing how Ms. Townsend was the victim of a scheme by an enterprise that included: New York real estate investors including Rubin Schron and Murray Forman; financiers General Electric Capital Corporation (GECC) (a private bank) and Ventas, Inc. (a real estate investment firm); and multi-billion dollar Chicago private equity fund GTCR Golder Rauner, LLC. According to trial testimony, this group conspired to run a nursing home chain into insolvency without regard to the harm the nursing home residents would experience.
“An expert forensic accountant testified that GTCR founded THI in 1998 with a plan to create the largest privately owned nursing home company in the country through a series of mergers and acquisitions. Their Boards of Directors were composed solely of investors and bankers, and did not include a single health care official. From 1999 to 2003, GTCR and THI began acquiring nursing homes with funding from GECC, Ventas and other lenders. THI became one of the nation’s largest health care operators with more than 220 facilities and more than a billion in revenue at that time.”
When Medicare money for residents’ rent flowed into the THI account, GECC and Ventas took their share before monies were available to cover payroll, supplies, utilities, etc. for the hundreds of nursing homes, according to evidence presented at trial. Insider operators and former employees began suing GTCR/THI over poor management, as did nursing home residents and their families because of what was described as abysmal care.
Eventually, to protect itself from financial loss, GTCR/THI agreed to sell THMI for a mere $100,000 to Fundamental Long Term Care, Inc. (FLTCI), a shell company that had no employees. On November 13, 2013, a U.S. Bankruptcy Judge for the U.S. Bankruptcy Court, Middle District of Florida, Tampa Division, notes “[a]s of now, the targets are defendants to fraudulent transfer and alter ego claims asserted by the creditors in this Court.” The case is In re Fundamental Long Term Care, Inc., Debtor, Case No. 8:11-bk-22258-MGW, Chapter 7. “Targets” include General Electric Capital Corporation; Fundamental Administrative Service, LLC; THI of Baltimore, Inc.; Fundamental Long Term Care Holdings, LLC; Murray Forman; Leonard Grunstein; Rubin Schron; Ventas, Inc.; GTCR Golder Rauner, LLC; GTCR Fund VI, LP; GTCR Partners VI, LP; GTCR VI Executive Fund, LP; GTCR Associates, VI; Edgar D. Jannotta, Jr.; and THI Holdings, LLC.