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Internal Memo Exposes Holes In Bruce Rauner's Nursing Home Narrative

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Last week we learned that Illinois GOP gubernatorial nominee Bruce Rauner's nursing-home problems now extend to long-term-care facilities for the developmentally disabled in Texas and Florida.

But whether it's his direct links to the suffering of the elderly or the developmentally disabled, Rauner has the same excuse. He expects a pass from voters because he had so many things on his plate and was so busy making money in so many different ventures that obviously, as such an important guy, he can't be responsible for the day-to-day operations in any particular facility.

Putting aside the fact that an owner is always responsible no matter how uninterested he might be, a bigger problem for Rauner is that even his "we weren't involved in the day-to-day management" excuse is utterly dishonest.

As we've previously reported, a lawsuit is moving forward in U.S. bankruptcy court in Florida, where Federal Judge Michael Williamson is trying to sort out what plaintiffs allege was a nursing-home "bust-out" scheme perpetuated by Rauner's GTCR and other defendants.

In response to a motion to compel production of documents, the defendants turned over a copy of a March 30, 2006, internal memorandum from Brad Bennett to all employees of Trans Healthcare, Inc. ("Trans Health").

Bennett was one of GTCR's former management leaders (see GTCR's website here). And at the time of the 2006 employee memorandum, Bennett was also CEO and President of Rauner-owned Trans Health.

Trans Health was created by Rauner and his fellow GTCR principles in 1998 for the sole purpose of acquiring nursing homes around the country, and Bennett's 2006 memo advised employees that Trans Health would remain majority-owned by Rauner's GTCR.

The memorandum from the GTCR Management Leader advises all employees that:

Trans Health will employ all staff and provide all services related to operations and clinical, as well as, having final authority for all financial projections and accounting policies (i.e. Trans Health will be responsible for delivery of care, supervision of care givers, implementation and enforcement of all operational and clinical protocols, all lender relationships, projections provided to lenders, and sign off on all accounting policies and procedures). [Emphasis added.]

So the subsidiary that Rauner's GTCR created, owned and controlled was responsible for "delivery of care," "supervision of care givers" and "implementation and enforcement of all operational and clinical protocols." If that's not "involved," maybe Mr. Rauner can tell us what is.

Rauner's repeated suggestion that GTCR was just an "investor" in Trans Health is nothing short of a blatant lie, and the memorandum from GTCR's own management leader is simply further proof.

You can read the entire internal memorandum here.

Despite the optimistic tone of the March 30, 2006, memorandum, within a few years Trans Health would be rendered little more than an empty shell. The company would seek bankruptcy protection in the face of massive jury verdicts for wrongful death and abuse. By that time Rauner and his fellow GTCR partners had walked away and abandoned the disaster they allegedly created.

Now that he's been called out on the issue in the campaign, Rauner cries crocodile tears for the victims. But there's no evidence Rauner ever lifted a finger at GTCR once he learned of the problems. And don't forget that Rauner chaired GTCR while all of this was going on. Rauner presumably continued to personally profit from his firm's nursing-care vehicles, but he now tries to tell us any problems were all the fault of lower-level officials, whom his firm hired and, in most cases, continued to keep in place.

The fact is that Rauner and his small club of fellow GTCR partners controlled these long-term-care facilities through outright ownership and/or through management-service contracts. And as we previously wrote, in a 2004 interview Rauner himself acknowledged that he was personally involved in management/labor negotiations with SEIU on behalf of Trans Health.

An owner can't escape liability by saying, "Oh, I was too busy on other things and never paid attention." If you expect a share of the profits, you have to expect a share of the liability. If you're an owner, you have legal duties. Any first-year law student gets this.

We still have no idea how much cash Rauner might have personally harvested from the nursing-home business before things went belly-up. But one thing is certain: Bruce Rauner owes the people of Illinois some honest answers for a change.

Doug Ibendahl is a Chicago attorney and a former general counsel of the Illinois Republican Party.