Tuesday, March 4, 2014

The Rauner Money Machine

The Inside Workings of Bruce Rauner’s Fundraising Circle February 28, 2014   
Citizen Action/Illinois (CA/IL) has worked for over two decades on campaign finance reform.  The organization led the original charge to ban campaign gifts in the 1980’s, and has been a vocal advocate for public financing of elections.  William McNary, co-director of CA/IL, recently served on Governor Quinn’s campaign finance task force which was charged to review the current campaign finance structure of Illinois.  Thus, CA/IL took a particular interest in the latest, and soon to become, largest self-funded campaign in the history of Illinois - The Bruce Rauner Money Machine. 
Bruce Rauner, hedge-fund venture capitalist, catapulted himself onto the political scene in past two years, and has since become a leading candidate for Illinois Governor.  Mr. Rauner positions himself as the “outsider candidate” who has emerged to “shake up Springfield”.  Airwaves across Illinois have been blanketed with images of Rauner in his Carhartt jacket and $18 wrist watch, symbols of the everyman image he wants the disenchanted voters of Illinois to buy in order to propel him to leadership of one of the largest states in the country.   
However, as this report will show, contrary to Mr. Rauner’s self-proclaimed “outsider status”, he is the ultimate insider when it comes to leveraging his wealth and relationships to fund his vast campaign war chest.     
1. The Floodgates Open – Bruce Rauner - The Billionaire Self-Funder  
It is well known that Republican gubernatorial candidate Bruce Rauner has fantastic personal wealth. He was a named partner is GTCR (the “R” stands for Rauner), an investment firm with a total capitalization of $8 billion dollars that managed investments from public pension retirement funds in several states, among others, and now runs G8 Capital, a personal investment vehicle which manages over $500 million in investments. 
Rauner has acknowledged personal income of $53 million in 2012.  His income that year was nearly 1,000 times what the median Illinois household earned: he personally brought home as much as 1,000 typical Illinois families.  
The primary source of Rauner’s wealth is a series of holding companies, investment vehicles, and limited liability companies that he controls. Rauner reports significant financial interests in 131 different holdings. These range from stock in publically-traded firms to privately-held companies that exist solely or primarily for Rauner’s benefit. 
Rauner’s wealth has benefited his campaign in two ways. First, Rauner has moved over $5 million of his own funds into his campaign, and has the capacity to move significantly more if he so chooses. He is his own largest contributor, accounting for nearly 40% of the funds in his war chest.  Second, Rauner’s ability to self-finance has also opened the floodgates for cash from other wealthy donors who would have been constrained by contribution limits.  
2. It’s “All in the Family”  - Bruce Rauner’s Corporate Campaign Contributions and Connections 
Bruce Rauner’s campaign has received 150 donations from donors whose total giving is above Illinois’ legal contribution limits.  The only reason Rauner can use these funds is because he personally gave enough to his own campaign to bust the limits. These donors, including people and corporations, have given him $3.5 million that he could not otherwise have accepted. 
A significant amount of his other campaign funds, however, come from companies and key employees that are owned, in whole or in large part, by Rauner. These employees and companies have given hundreds of thousands of dollars to Rauner’s campaign. Over $600,000 has gone to Rauner himself. But other candidates and PACs have also benefited from contributions from Rauner-affiliated contributors. 
 Edgar “Ned” Jannotta worked for GTCR, including a stint as principal at a Florida nursing home where a resident died.  Jannotta has given Rauner’s campaign fund $255,300 in the last year.

 Peak 6 Investments is a financial services firm owned in part by Rauner. The company and many of its key employees have given $164,150 to Rauner’s campaign fund.  BDT Capital is another investment firm owned in whole or in part by Rauner. The company and its employees have given Rauner’s campaign $58,700.  Other companies owned in whole or in part by Rauner have supplied $156,000 to his campaign fund, including Arbor Investments ($53,200), Education Management ($3,500), Klaff Realty ($5,000), Performance Health Systems ($4,500), R8 Capitol ($2,500), Roundtable Investments ($48,900), SCP Worldwide ($15,300), Triple Tree Holdings ($12,800), and Verifone ($10,300) 
This list does not include companies in which Rauner has significant personal interest, but which is likely not large enough to provide Rauner with influence over their political giving or where the company has a history of political donations that precede Rauner’s own bid for office.  
Rauner has significant financial interest in companies like Astrazeneca Pharmaceuticals, British American Tobacco, the Chicago Bulls, Deutsch Telecom AG, GlaxoSmithKlein, Goldman Sachs, HSBC Holdings (Household Financial), JP Morgan Chase, Nestle, Novartis, Royal Dutch Shell, Sanofi-Aventis, Siemens, Sotheby’s, Unilever, and Zurich Insurance. While all of these companies have made political contributions to candidates for office in Illinois in the past, their contributions are not counted toward Rauner’s degrees of influence. 
3. Buying His Political Network—Bruce Rauner’s Personal Contributions to Political Parties and Politicians 
Mr. Rauner has personally given extensively to other PACs around the state and the nation. Rauner has extensive political contacts across the country. He has given to over 113 political committees in five states from coast to coast, including controversial giving to the governor of Pennsylvania shortly before receiving an allocation of pension funds to invest. 
Other PACs, noticeably the Committee on Legislative Reform PAC he chairs, have benefited from contributions made by Rauner or related donors. In the last five years, Rauner has given to 109 Illinois PACs, including 34 candidate committees, 59 township and county Republican organizations, 5 state or legislative Republican party PACs, and 9 interest groups, in addition to giving to his two PACs. This extensive history of political giving shows the breadth of the political network Rauner has been buying over the last five years.  
Type of Recipient (Count) Total Candidate (34 different PACs) $312,050 County or Township Republican PAC (59) $119,750 Interest Group (9) $193,600 Committee on Legislative Reform and Term Limits $250,000 Citizens for Bruce Rauner, Inc. $5,050,000
State Party or Legislative Caucus (5)  $310,000 Grand Total $6,235,400 
The following graph shows a rapid increase of Rauner’s personal giving in the past two years, prior to forming an exploratory committee and announcing his candidacy for Governor.   
*See end chart for a full list of Rauner’s personal contributions. 
4. The Inner Circle—Rauner’s Top Donors 
In addition to the largesse from Rauner himself, his campaign has been funded by a small circle of extremely wealthy individuals with deep political connections in Illinois and around the country, who also have broad experience working with government. 
This tiny network of extremely wealthy donors directly accounts for a one-quarter of the money Rauner’s campaign has raised from others. Including Rauner, 12 donors gave a mean average of $515,000, and a minimum of $100,000 each.  
Combining spouses and related companies, three-fourths of the money Rauner has raised came from 74 donors who gave a minimum of $20,000, and a mean average of $100,000. 
 Ken Griffin, 45, is a hedge fund manager with a net worth estimated over $4 billion. He is ranked #103 on the Forbes 400, a listing of the wealthiest people in the world. He told the Chicago Tribune he thought the very wealthy have “insufficient influence” in politics and, together with his wife, Anne, who also manages a hedge fund, he has set out to change that. A bundler for John McCain in 2008, in the last five years Mr. Griffin has given $6,872,331 to 91 different PACs, including 29 Illinois candidates, 15 Illinois party committees, and candidates and parties in 20 other states. 
 Richard Uihlein runs Uline Industries, a company specializing in shipping materials. In the last five years, he has given $6,059,410 to 151 political committees in a dozen different states, including $1,525,000 to Liberty Principles, $355,300 to Rauner,  $250,000 to the Committee for Legislative Reform and Term Limits, and $158,000 to help Wisconsin Gov. Scott Walker beat a recall effort. 
 Glen Tullman ran Allscripts Healthcare, a firm that made millions processing pharmaceutical claims for health care insurers and providers. He now runs 7Wire, an investment group. He has given $510,523 to 38 PACs, including 17 candidates in other states. Nearly half of his giving, $255,300, went to Rauner, while other recipients include Democratic candidate committees like Raja for Illinois ($30,500) and Taxpayers for Quinn ($35,000) in the last five years. 
 Barry MacLean runs MacLean-Fogg company, a privately–held company that makes components for the automotive and power generation industries. The company, founded by MacLean’s grandfather, has annual sales approaching $1 billion. MacLean’s son, Duncan, runs MacLean-Fogg Component Solutions, a subsidiary. MacLean and the company have given $1,057,525.64 different political committees in the last 5 years, including candidates in 16 states outside of Illinois. 
 Edgar Jannotta, a former managing partner at William Blair & Co. bond and investment advisors and a managing principal at Rauner’s GTCR, has served on the board of directors over a dozen large corporations, including Aon Insurance, ComEd, and Rush- Presbyterian-St. Luke’s Medical Center.  He served as GTCR’s principle at THI, a nursing home company accused of financial improprieties and neglect in the death of a patient in Florida. He has given $352,060 to a dozen political committees in six states in the last five years. 
 Michael Keiser founded Recycled Paper Greetings, which he later sold to American Greetings. A prominent actor in Republican political circles, he given $724,189 to 67 different political committees in half a dozen states in the last five years. 
 Elizabeth Christie founded the Avent baby product company which she later sold to venture capitalists and devoted her time to investment, philanthropic and political endeavors. She now sits on the Board of Directors of the Illinois Policy Institute. In the last five years she has given $619,600 to PACs in Illinois and two other states, plus federal and presidential PACs.   
At the other end of the spectrum, small donors, who gave less than $150, account for less than 1% of his receipts.   
In conclusion, Bruce Rauner’s money machine is an intricately designed and insider-driven campaign apparatus. The voters of Illinois should think twice before buying into Bruce Rauner’s self-proclaimed “outsider” image. The record shows, Bruce Rauner is the political insider who doesn’t hesitate to use his well-connected inner circles to buy whatever he wants, including the governorship of Illinois.

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