Tuesday, October 7, 2014

“Hardball tactics” alleged in lawsuit against Bruce Rauner by Dave McKinney, Carol Marin and Don Moseley

SPRINGFIELD — Republican Bruce Rauner had a quick answer when asked to assess blame for the fast collapse of a once-promising business venture created and backed by his one-time Chicago investment firm. Christine Kirk.
The accomplished CEO he recruited from a high-flying national accounting firm couldn’t make their business-outsourcing firm, LeapSource, based in Tempe, Ariz., profitable because he said she didn’t share his vision of what makes a “good company.”

“The only thing Chris did on a consistent basis, on a timely basis, was spend,” Rauner said. “That’s the easy thing to do.

“The hard thing is getting customers; the hard thing is cutting expenses; the hard thing is laying people off. But that’s what good companies do when times are tough, and she just would not do it,” said Rauner, who sat on LeapSource’s board.

That statement comes from a June 2005 deposition that arose from litigation over a messy corporate divorce between Kirk and Rauner and his business partners at Chicago-based investment firm GTCR.

Her lawsuit against him, GTCR and several of its partners offers a firsthand look into Rauner’s business philosophy. It’s a philosophy Rauner has fine-tuned over the years that he repeatedly has said forms a cornerstone of what kind of Illinois governor he would be as he runs to unseat Gov. Pat Quinn. The lawsuit was settled in 2008 after a judge threw out most of the counts for a variety of legal defects.

The court case provides an unusual window into Rauner’s actions while under the stress of immense financial pressures, his attitude toward claims of hostile work environment and the tactics he employed when it appeared certain that Kirk intended to sue to challenge the start-up’s dismantling.

Kirk alleged in the lawsuit that Rauner threatened her personally and through a LeapSource board member — a claim she made in a sworn deposition. That former LeapSource board member confirmed in a deposition that “threatening things...were said to her” and that he had been involved in some of those conversations. Rauner denied the allegations through a spokesman.

The lawsuit alleged that Rauner told Kirk in February 2001: “If you go legal on us, we’ll hurt you and your family.”

Kirk also alleged that Rauner, wary of a her possibly suing, relayed a similar threat to her a few days earlier through another board member, Thomas Gilman, a consultant and ex-top executive at Chrysler Financial.

“I will bury her,” Rauner is alleged to have told Gilman.

“I will make her radioactive,” Rauner allegedly told Gilman, according to the complaint. “She will never get another job anywhere, ever. I will bankrupt her with legal fees. I don’t know if she has a family or not, but if she does, she better think twice about this.”

Gilman declined to comment.

A federal judge threw out most of the lawsuit, including the counts containing the allegations involving the threats. The judge, though, did not make a determination on the credibility of those allegations.

With part of the case still intact, Kirk and GTCR agreed to settle in 2008, with GTCR agreeing to pay $511,000 to Kirk, Gilman and six other plaintiffs, all of who were LeapSource employees.

What makes the LeapSource case unique among the dozen subsidiaries that went bankrupt during Rauner’s watch at GTCR is that in this case, his own voice is accessible through excerpts of his court deposition — most of which is still under seal — and in transcripts from a series of  board meetings that Kirk recorded in her closing weeks as CEO.

On Monday, a Rauner aide strenuously denied he ever threatened Kirk.

“It’s no surprise these false allegations were dismissed in summary judgment, which means the complaint had no merit in the eyes of the judge,” Rauner spokesman Mike Schrimpf said in a statement.

A GTCR spokesperson did not respond Monday to questions about the case…

Rauner and GTCR succeeded in having nearly all of Kirk’s case against them tossed out because in part it wasn’t proven they had “breached the fiduciary duties of loyalty and due care, which, indisputably, are the touchstone of corporate governance,” U.S. District Judge Robert C. Broomfield wrote in his opinion. But Broomfield characterized the way in which Rauner and his co-defendants conducted themselves.

“At the end of the day, it appears that plaintiffs were displeased because at nearly every step of the way, from negotiating the original purchase agreement to the wind-down operations, defendants chose to ‘play hard ball,’” the judge said.

Dave McKinney is the Sun-Times Springfield bureau chief. Carol Marin is a Sun-Times columnist and political reporter at NBC 5 News where Don Moseley is a producer.

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