Rauner wants to run Illinois like one of his failed businesses

by Amy Excell | Sep 26, 2014
Illinois voters who care about education, jobs, and their loved ones should be asking, "Which one?"

Billionaire gubernatorial candidate Bruce Rauner says that if he is elected, he wants to “run Illinois like a business.” Based on his frightening track record as a partner in GTCR (R=Rauner), a multi-billion dollar Chicago investment firm, Illinois voters who care about education, jobs, and their loved ones should be demanding to know, “Which one?”

Maybe Rauner is referring to his for-profit education ventures like Avenues, an elite private school in Manhattan that Rauner invested in last year. With tuition of more than $40,000 per year, Avenues caters to the children of the 1 percent. The school’s CEO - Chris Whittle, former CEO of for-profit Edison Schools -  told The Economist that Avenues has no social mission other than profits.

“As for making money, having given so much thought to how to survive on the $8,000 a pupil that Edison used to get from the government, Mr. Whittle says he should have no trouble profiting from parents, who will pay five times as much.”

(You may remember that as CEO of Edison, Whittle was forced to settle with the Securities Exchange Commission after the company was accused of inflating revenues.)

Fortune magazine reported that Rauner’s Avenues school has boosted its profit margin by increasing class sizes to reduce labor costs. And the New York Observer noted that Whittle proudly admits the school operates privately to avoid regulations and union involvement.

“Operating as a private institution rather than a public one means there’s virtually no regulation. And you don’t have unions, which is another form of regulation, basically.”

Or maybe Rauner plans to run Illinois like Student Transportation of America (STA), a private school bus company that GTCRauner co-founded in 1997 and controlled until 2004. To secure big profits, STA privatized public school bus services, resulting in layoffs and public sector job loss.

“After buying a company, STA is able to seek out contracts in the area. Also, while it is a $15 billion industry, about two-thirds of school districts still operate their own buses. So, STA tries to convince school districts to privatize.” - Denis Gallagher, CEO of Student Transportation of America, Asbury Park Press, 2/3/08

While owned by GTCRauner, STA eliminated employee benefits and dramatically increased healthcare costs, forcing workers to the picket lines.

“The workers have been fighting for wage increases and better benefits…The STA drivers, who…lost their two weeks paid vacation and paid snow days in a contract that began in 2002, are seeking wage increases, paid vacation, paid sick days and a lower employee contribution toward health-care benefits.” - Fairfield County Business Journal, 11/10/03

The awful labor practices at Rauner’s STA led the California Public Employees’ Retirement System to consider an investment policy that would bar it from investing with firms that back companies like STA.

During the GTCRauner years, STA also had multiple serious safety incidents, including drivers charged with DUIs and the death of a 7-year old boy who was run over by an STA employee.

Or maybe Rauner’s business plan for Illinois would be similar to the one he used to run Trans Healthcare Inc. (THI), a now-bankrupt (like many other Rauner companies) nursing home chain once owned by GTCR.

Rauner’s firm dramatically cut costs at THI to make a profit, resulting in a string of wrongful death and patient-neglect lawsuits that total billions of dollars in damages. In a trial that began this week in Florida, attorneys for the grieving families are presenting their case, asserting that GTCRauner fraudulently shielded its assets to avoid paying damages to the grieving families.

Rauner has said he wasn’t involved with decisions made at his negligent nursing homes, and he told the Chicago Tribune that he served as a director on the THI board for just one year. But a document bearing his signature shows he was a board member for nearly four years longer than he claimed.

The Tribune rightfully points out the problem that presents for the billionaire businessman.

“This represents the central dilemma for Rauner’s candidacy: He touts his financial acumen at GTCR while repeatedly professing little knowledge about the inner workings of companies built by his firm that later faced accusations of mismanagement, fraud or worse.”