Nursing home problems may dog Rauner
GOP candidate's business deals, accusations of patient neglect scrutinized
The business dealings of Republican Bruce Rauner could offer ammunition for his challengers in the governors race. (Michael Tercha, Chicago Tribune)
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As the Republican governor campaign unfolds, state Treasurer Dan Rutherford and state Sens. Bill Brady and Kirk Dillard each find themselves defending the votes they've cast and their records spanning more than two decades in state government.
For rookie candidate Bruce Rauner, there is no voting record to analyze. Instead, the scrutiny has fallen on the numerous business deals that generated billions of dollars at the private equity firm the wealthy Winnetka businessman co-founded in 1980.
It's what one foe has referred to as the "drip, drip, drip" of revelations that opponents argue could cost the GOP the chance to oust Democratic Gov. Pat Quinn this fall should Rauner win the March 18 primary election.
The latest criticism came late last week after a Peoria debate and centered on the GTCR private equity firm's investment in the nursing home business. After Rauner left the post-debate spin room, Dillard raised the issue, accusing Rauner of "greed" and indifference in how the nursing homes were run.
"People have died (in) nursing homes, because of the way Bruce Rauner and his friends have invested in these homes," said Dillard, while talking with reporters about a series of court awards against the business venture in lawsuits alleging patient abuse and neglect.
But the issue of GTCR's nursing home investment — and any culpability over patient abuse or neglect — is much more complicated than Dillard or the anti-Rauner blogger he cribbed from made it sound.
At issue are lawsuit awards in a half-dozen wrongful death and patient-neglect cases that at one point totaled more than $2.3 billion, as well as allegations by personal injury attorneys that GTCR and other nursing home investors failed to provide proper funding for care and later moved to shield assets to avoid paying damage claims.
But most of those big-dollar jury awards were reached without any defense being presented because the former GTCR-backed firm that was being sued was no longer in existence after ending up in receivership.
Those damage awards are now held up as part of a federal bankruptcy proceeding involving a successor company to the one GTCR previously financed. The case features myriad legal pleadings with trial set for September.
In one 2012 case, a jury awarded $900 million in damages for neglect involving a man who had been in a Gainesville, Fla., nursing home. But in December, a Florida state appeals court overturned the award and sent it back to the trial court, saying the trial judge had erred by preventing the defense from making its case. Last July, another $1.1 billion judgment was handed down in a 2007 wrongful death of a Florida woman, but that award was put on hold as part of the bankruptcy proceedings, court documents show.
Rauner, who left GTCR in October 2012 as he began his bid for governor, was not named in legal documents, though GTCR and related firms are listed as defendants on the various cases. Rauner, however, was GTCR's chairman when it moved into the nursing home business through its initial $1 million financing of Trans Healthcare Inc. in 1998 as well as when the health care firm put itself in receivership 11 years later, according to court documents and Rauner's campaign. Rauner declined to be interviewed for this story.
In announcing Trans Healthcare's planned purchase of another long-term care firm in 2003, GTCR, then known as GTCR Golder Rauner LLC, said THI had completed acquisitions of seven other firms since it was started and touted the operation as "one of the leading long-term care companies in the United States."
"THI will operate 274 facilities representing over 25,000 beds in 21 states with a workforce of 48,000," a news release said. "THI's executive management team has extensive experience and a proven track record in the health care industry."
But beginning in 2004, the firm also faced a series of negligence lawsuits alleging inadequate care, court documents showed. And in a court filing, GTCR said the nursing home firm was forced to restate its year-earlier financial statements from showing net income of $9.4 million to a net loss of $26.6 million.
By March 2005, Trans Healthcare was down to 185 locations and "more than 13,000 employees," according to a news release from the privately held company.
Following poor financial performance and with lenders claiming default on loans, in 2006 Trans Healthcare sold a nursing home management subsidiary to Fundamental Long Term Care Inc. At the time, Trans Healthcare agreed to fund any negligence lawsuits pending during the sale of the subsidiary.
But Trans Healthcare couldn't stave off its financial problems and entered receivership in 2009. A year later, its appointed receiver opted to stop representing the firm in lawsuits. Fundamental Long Term Care went into involuntary bankruptcy after damages were awarded in a negligence case, court documents show.
In seeking payments for the nursing home negligence damage awards through the federal bankruptcy court, the law firm of Wilkes & McHugh P.A. has alleged GTCR and lenders and investors such as General Electric Capital Corp. and Ventas Realty L.P., conspired to "split up and conceal all of the assets of THI and (its previous subsidiary) so that they could not be reached by these lawsuits and other creditors."
But earlier this month, attorneys for GTCR and the other parties called the law firm's complaint a "fantastical, meandering tale."
"Each successive pleading is more chaotic, implausible, melodramatic and absurdly far-reaching in the scope of its various conspiracy theories than the last," the defendants' lawyers said.
In a separate court filing this month, attorneys for GTCR said the equity firm lost "substantially all" of the $60 million it invested in the nursing home firm since 1998, including $20 million when it tried to restructure Trans Healthcare's finances in 2006.
GTCR's court filing went on to allege that the attorneys who won the $900 million judgment for the estate of the Gainesville man previously had reached a settlement with the actual operator of the nursing home for $575,000.
Rauner campaign spokesman Mike Schrimpf labeled the damage lawsuits a "classic plaintiff lawyer scheme" to "go after as many deep-pocketed entities as possible," including GTCR and other former investors.
Still, in a high-stakes campaign for governor, a link between a candidate and nursing home abuse could prove to be politically toxic should it gain traction. The Rauner campaign is well aware of that.
"These were sad events. Everyone's heart goes out to any family that is impacted this way," Schrimpf said. "The fact is, Bruce had nothing to do with the management of the nursing home company when these events occurred. It's deeply disappointing that any politician would try to use human tragedy in an attempt to advance their own political campaign."
Tribune reporter Maura Zurick contributed.
rap30@aol.com
rlong@tribune.com
For rookie candidate Bruce Rauner, there is no voting record to analyze. Instead, the scrutiny has fallen on the numerous business deals that generated billions of dollars at the private equity firm the wealthy Winnetka businessman co-founded in 1980.
It's what one foe has referred to as the "drip, drip, drip" of revelations that opponents argue could cost the GOP the chance to oust Democratic Gov. Pat Quinn this fall should Rauner win the March 18 primary election.
The latest criticism came late last week after a Peoria debate and centered on the GTCR private equity firm's investment in the nursing home business. After Rauner left the post-debate spin room, Dillard raised the issue, accusing Rauner of "greed" and indifference in how the nursing homes were run.
"People have died (in) nursing homes, because of the way Bruce Rauner and his friends have invested in these homes," said Dillard, while talking with reporters about a series of court awards against the business venture in lawsuits alleging patient abuse and neglect.
But the issue of GTCR's nursing home investment — and any culpability over patient abuse or neglect — is much more complicated than Dillard or the anti-Rauner blogger he cribbed from made it sound.
At issue are lawsuit awards in a half-dozen wrongful death and patient-neglect cases that at one point totaled more than $2.3 billion, as well as allegations by personal injury attorneys that GTCR and other nursing home investors failed to provide proper funding for care and later moved to shield assets to avoid paying damage claims.
But most of those big-dollar jury awards were reached without any defense being presented because the former GTCR-backed firm that was being sued was no longer in existence after ending up in receivership.
Those damage awards are now held up as part of a federal bankruptcy proceeding involving a successor company to the one GTCR previously financed. The case features myriad legal pleadings with trial set for September.
In one 2012 case, a jury awarded $900 million in damages for neglect involving a man who had been in a Gainesville, Fla., nursing home. But in December, a Florida state appeals court overturned the award and sent it back to the trial court, saying the trial judge had erred by preventing the defense from making its case. Last July, another $1.1 billion judgment was handed down in a 2007 wrongful death of a Florida woman, but that award was put on hold as part of the bankruptcy proceedings, court documents show.
Rauner, who left GTCR in October 2012 as he began his bid for governor, was not named in legal documents, though GTCR and related firms are listed as defendants on the various cases. Rauner, however, was GTCR's chairman when it moved into the nursing home business through its initial $1 million financing of Trans Healthcare Inc. in 1998 as well as when the health care firm put itself in receivership 11 years later, according to court documents and Rauner's campaign. Rauner declined to be interviewed for this story.
In announcing Trans Healthcare's planned purchase of another long-term care firm in 2003, GTCR, then known as GTCR Golder Rauner LLC, said THI had completed acquisitions of seven other firms since it was started and touted the operation as "one of the leading long-term care companies in the United States."
"THI will operate 274 facilities representing over 25,000 beds in 21 states with a workforce of 48,000," a news release said. "THI's executive management team has extensive experience and a proven track record in the health care industry."
But beginning in 2004, the firm also faced a series of negligence lawsuits alleging inadequate care, court documents showed. And in a court filing, GTCR said the nursing home firm was forced to restate its year-earlier financial statements from showing net income of $9.4 million to a net loss of $26.6 million.
By March 2005, Trans Healthcare was down to 185 locations and "more than 13,000 employees," according to a news release from the privately held company.
Following poor financial performance and with lenders claiming default on loans, in 2006 Trans Healthcare sold a nursing home management subsidiary to Fundamental Long Term Care Inc. At the time, Trans Healthcare agreed to fund any negligence lawsuits pending during the sale of the subsidiary.
But Trans Healthcare couldn't stave off its financial problems and entered receivership in 2009. A year later, its appointed receiver opted to stop representing the firm in lawsuits. Fundamental Long Term Care went into involuntary bankruptcy after damages were awarded in a negligence case, court documents show.
In seeking payments for the nursing home negligence damage awards through the federal bankruptcy court, the law firm of Wilkes & McHugh P.A. has alleged GTCR and lenders and investors such as General Electric Capital Corp. and Ventas Realty L.P., conspired to "split up and conceal all of the assets of THI and (its previous subsidiary) so that they could not be reached by these lawsuits and other creditors."
But earlier this month, attorneys for GTCR and the other parties called the law firm's complaint a "fantastical, meandering tale."
"Each successive pleading is more chaotic, implausible, melodramatic and absurdly far-reaching in the scope of its various conspiracy theories than the last," the defendants' lawyers said.
In a separate court filing this month, attorneys for GTCR said the equity firm lost "substantially all" of the $60 million it invested in the nursing home firm since 1998, including $20 million when it tried to restructure Trans Healthcare's finances in 2006.
GTCR's court filing went on to allege that the attorneys who won the $900 million judgment for the estate of the Gainesville man previously had reached a settlement with the actual operator of the nursing home for $575,000.
Rauner campaign spokesman Mike Schrimpf labeled the damage lawsuits a "classic plaintiff lawyer scheme" to "go after as many deep-pocketed entities as possible," including GTCR and other former investors.
Still, in a high-stakes campaign for governor, a link between a candidate and nursing home abuse could prove to be politically toxic should it gain traction. The Rauner campaign is well aware of that.
"These were sad events. Everyone's heart goes out to any family that is impacted this way," Schrimpf said. "The fact is, Bruce had nothing to do with the management of the nursing home company when these events occurred. It's deeply disappointing that any politician would try to use human tragedy in an attempt to advance their own political campaign."
Tribune reporter Maura Zurick contributed.
rap30@aol.com
rlong@tribune.com
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