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The [Tuesday] Papers

By Steve Rhodes

“The most easily disprovable falsehood of this year’s gubernatorial campaign also is one that the mainstream media has not bothered to correct, possibly because the purveyors of the tall tale push back so hard when somebody tries to write the facts,” Capitol Fax impresario Rich Miller writes in his weekly column for Crain’s.
“The Associated Press in April uncritically reported a statement by Republican nominee Bruce Rauner, who ‘criticized Quinn for cutting funding to schools by some $600 million – cuts that led to teacher layoffs and larger class sizes.'”
Miller goes on to show that state education spending has actually increased under Quinn; I recommend you click through to read how that’s happened.


But in my view “the most easily disprovable falsehood of this year’s gubernatorial campaign” is that Rauner didn’t clout his daughter into Payton Prep. While Miller did disprove Rauner’s claim about education funding, it took a lot of expertise to do so. The Payton lie is staring us in the face. (The real sin with Rauner’s claim about education spending is that, having had the claim disproven by the facts, he continues to make it.)
Besides, Rauner has made so many fantastical claims that it’s hard to pick one as more easily disproven as another. As I’ve said before, Rauner is running a deeply disingenuous campaign almost wholly based on falsehoods gilded by the art of evasion, spin and reversal.
For example, Rauner is now running an internet ad stating that “Quinn didn’t raise the minimum wage. We have a plan to do it.”
For someone who said in a campaign forum that he wanted to cut the state’s minimum wage, as well as someone caught on tape saying he was “adamantly, adamantly” against a minimum wage hike, that’s a lot of gall.
His subsequent gymnastics on the issue have been deeply dishonest; the notion that he supports a rise in the minimum wage if coupled with other reforms – including tort “reform,” a change in the corporate tax structure, and workman’s comp “reform” – is a neat trick that has both eluded the media and is intended to make people think he supports a minimum wage, albeit under some conditions that will produce enough extra revenue for employers to cover the additional labor costs.
Those conditions, though, might as well include Jenny McCarthy learning to split the atom and the Cubs winning the World Series. And even if those conditions are miraculously met, why would he then want to stymie the economic wonderland he’d have created by forcing employers to give up more of their immense profits? I’d be surprised if, deep or even not-so-deep in his heart, he even believed in a minimum wage at all. Which is a position even political candidates are allowed to have, but not allowed to hide.
But now Rauner has a plan. I clicked on “Learn more” to see what that plan was. There is no plan there.
More recently, a Rauner ad accuses Pat Quinn of allowing murderers to be released early from prison, even though an AP fact-check states clearly that no murderers were released early. The ad has not been pulled or amended.
So when Rauner says Quinn will say anything to maintain power, well, it sounds like he’s just projecting. The pattern is that Rauner will say anything to get elected. Just look at how he took the GOP for a ride during its primary, assuaging fears that he was a closet liberal and then 24 hours after winning the nomination putting up an ad with his pseudo-Democratic wife Diana assuring general election voters that, sure, he was Republican, but just barely so.
Rauner is also willing to spend as much of his personal fortune as it takes to win – his version of the Friday news dump is to choose that day each week lately to transfer another $1 million out of his billfold and into his campaign fund – and if money is speech, well, that means he’s willing to say as much as it takes to win.
As I’ve said and written before, I’m no fan of Quinn. He’s been a royal disappointment. I would have like to see even Dan Hynes or Lisa Madigan knock him off in primaries, and Lord knows I’m no fan of the names Hynes and Madigan. I am a fan of competence, however, in lieu of change agents.
Quinn is far from “honest as the day is long;” he has his own unique relationship with the truth. But it’s not borne of a businessperson’s DNA and practiced so consciencelessly as to be pathological. Quinn is at least uncomfortable with his lying. He squirms. That’s a low bar, sure, but this is Illinois.
At the same time, I found this NBC Chicago/Sun-Times piece to be, gulp, grossly unfair to Rauner.

* * *

“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,” the Sun-Times version of the report says.

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.

That’s an awful long lead-up to the central allegations of the article. To not have led with the central allegations – which we shall see shortly – leads me to believe that the reporters weren’t 100 percent confident in the veracity of the allegations. It’s a hedge – as is the classic “provides a window” and “offers a look.” Really? You have no idea of knowing if this is typical behavior or anomalous behavior. It’s just a way to rationalize publishing what you really want to publish. Which is this:

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.

It’s certainly possible Rauner made those exact statements. But anyone can make an allegation – and in this case it wasn’t even in open court or in the court filings, but in a sealed deposition. The explosive nature of unfounded allegations often contained in such documents is such that repeating what is in these records does not always come with the same kind of libel protection that usually attaches to public documents.
“[S]ometimes litigants or their lawyers may slip a copy of the papers to reporters,” my Associated Press Stylebook And Libel Manual says. “Publication of the material is dangerous because often the litigants come to terms outside the court and the case never goes to trial. So privilege may never attach to the accusations made in court papers.”
(I figured this out in my first reporting job in Florida, to the consternation of my editors who wanted to rush some allegations from a sealed deposition into print without giving proper thought to what we were doing; because we were working for a New York Times Co. regional newspaper, we were able to consult, at my instigation, with a New York Times lawyer. The material stayed out of the story.)
My bible, The Reporter’s Handbook, published by Investigative Reporters & Editors, says of civil case files involving businesses generally: “Remember, however, that everything in the files is not true, and shouldn’t be reported as such.”
I would contend that NBC Chicago and the Sun-Times are reporting the claims of Kirk and Gilman as such – even though both refused to comment for the story.
I simply wouldn’t trust what one or two people said in a deposition nine years ago unless there were a slew of lawsuits in which the language and tactics used were uncannily similar and seemed to show a pattern. (An example of that would be the reporting by Jim DeRogatis and Abdon Pallasch on civil lawsuits filed against R. Kelly, which fit together in ways that could only lead to one unmistakable conclusion.)
The depositions are a good lead, but they don’t prove anything.
To put it another way, if your mother says in a deposition that she loves you, check it out.

* * *

Back to the story:

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.

It appears that nobody did.

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.

Just because you have the transcript of Rauner giving a deposition doesn’t mean you have to use it.

But the Phoenix lawyer who once represented her said GTCR’s promise of a partnership with her to make a financially viable company was an empty one that hurt his one-time client, who was paid $600,000 a year to head LeapSource.
What I think is typical of investment banking firms, they do a very good job of taking care of themselves, and they can be very ruthless in their treatment of everybody else,” said the attorney, Scot Stirling.

That sentiment would be more in line with the pattern we have seen in Rauner’s business dealings and, in fact, how private equity works as a whole. You don’t need the allegations of personal threats to show that.

In his deposition, Rauner saw things differently.
“She would say whatever she felt she needed to say to get us to continue to fund the business, that we were very close to a sale, that we were very close to an investor, that . . . we had a lot of clients signed up or virtually signed up,” Rauner said.
“We were trying to be pretty believing and tried to be pretty patient, and we would keep going. And then we would explore whatever came up, whatever she brought up, and it would end up, in my judgment, being a house of cards,” he said.

So Rauner chose the wrong CEO. Not everyone is going to bat 1.000, but picking the right executive is not only the business skill Rauner most prides himself on, but the essence of GTCR’s business model.
Rauner has gotten extremely wealthy on that model, but I’d be curious to know just what his batting average really is – beyond the fact that a dozen companies went bankrupt on his watch, which might be typical for a private equity firm of GTCR’s size. I still don’t feel like I have a complete and concise picture of Rauner as a business chieftain.
But back to our story:

Shortly before her firing, Kirk recorded a board meeting in February 2001, where discussion about the company’s precarious finances was sidetracked after she brought to the board’s attention allegations that a LeapSource manager routinely brought a gun to work in his car, had a violent temper and had threatened to “take someone out” at work, according to a transcript in the court record.
Kirk also alleged the same employee, Matt Appel, wound up striking his secretary, causing her to quit, and posed “some big risks” to GTCR “from a litigation perspective,” the transcript shows.
“Whether it’s true or not, it’s a hostile work environment, it’s well documented and it’s not a good thing,” Kirk said in the transcript.
Rauner expressed sympathy for the former secretary but also suggested LeapSource’s precarious financial condition trumped concerns about the manager and any liability related to the secretary being struck.
“In a normal operating company, there would be certainly channels on how to deal with that and no company and no civil person would want to have anything to do with an employee like that,” Rauner said at one point, according to the transcript. “The flip side is, we as a board . . . are you know, debating issues of whether LeapSource has its lights on on Monday. I mean, and so, you know, whether the secretary sues or not, you know, pales by comparison.”

The Sun-Times is inferring if not outright saying that Rauner was wrongly dismissive of allegations that an employee struck a secretary, kept a gun in his car and threatened to “take someone out.”
I read it differently. Where the hell is Kirk? She hadn’t dealt yet with an employee who, according to her wavering, may or may not have struck a secretary, and threatened to take someone out while keeping a gun in his car in the office parking lot?
Rauner is right. A well-run company, or even a poorly run company, would have procedures in place to deal with just such situations. But if the company doesn’t open for business on Monday, the point is largely moot, outside of notifying the police of a possible threat.

There is no evidence that Appel ever was disciplined.

Why? Were the allegations not true? Or did Kirk fail to act?

“It is clear from the partial transcript that Bruce went into the phone call completely unaware of Appel’s alleged behavior,” [Rauner spokesperson Mike] Schrimpf said. “He was disturbed to learn that no executives at the company had done anything to address the issue with Matt Appel when they had first come to learn of it. That is what would have happened in a normal operating company.”

This might be the first time all campaign that I agree with Schrimpf.
(By the way, Appel did speak to NBC and the Sun-Times, and denied the accusation. Kirk refused to comment and therefore her role in the situation could not be ascertained.)
And, ultimately, a federal judge ruled that Kirk didn’t prove her case, at least in a fiduciary sense.

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 the Sun-Times wants you think otherwise. (Always look for the closing quote to see which way a reporter or their news organization leans.)

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.

In this case, the Sun-Times uses “hard ball” as a pejorative, though it’s not clear the judge intended it as so. For Rauner, well, playing “hard ball” is exactly what he says he’ll do in Springfield.

* * *

Playing “hard ball” as a pejorative is also the lead of the broadcast version of the story – though the judge seems to have been criticizing Kirk, not Rauner in that statement. The lawsuit, which was actually about the financials of severing of LeapSource from GTCR, simply stemmed from Kirk being “displeased” about Rauner’s hard-nosed but standard business negotiations, the judge said by my reading.
Here’s the NBC version of the story:

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Pat Rauner Vs. Bruce Quinn
A few Quinn allies have latched on to this quote as evidence of Rauner’s heartlessness:

“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.

But isn’t cutting expenses and laying people off just what Quinn has done during tough times?
That’s just what Rauner accuses Quinn of doing in his new ad – to fatal results!
From the press release accompanying the ad:

DCFS Funding Has Been Cut By $115 Million Since FY2010
In FY2010, DCFS Funding Stood At $1,297,400,000. (“State Of Illinois Enacted FY2014 Budget,” Civic Federation, 10/2/13, p.28)
In The Enacted FY2015 Budget, DCFS’s Funding Is $1,181,622,000, A Decrease Of $115.8 Million Since FY2010. (State of Illinois Budget Summary – FY2015, Commission on Government Forecasting And Accountability, p. 39)
Quinn Proposed A 5 Percent Cut To DCFS’ Budget For FY2013. “The Legislature has reduced DCFS funding by nearly 10 percent in five years, and Gov. Pat Quinn’s budget proposes cutting another 5 percent, although about 2 percent would be offset by increases in federal funding.” (Christy Gutowski and Bill Ruthhart, “DCFS Poised To Do More With Less,” The Chicago Tribune, 4/22/12)
However, The General Assembly Cut DCFS’ Budget By $50 Million, Threatening Layoffs. “Thursday some 375 employees of the Illinois Department of Children and Family Services got some good news, their layoff notices were revoked. But it’s unclear how long they will be spared thanks to a $50 million budget cut for DCFS passed by the Illinois legislature back in May.”(Kendall Downing, “Massive DCFS Layoffs Averted For Now,” WPSD, 10/12/12)
$25 Million Of The Cuts Were Replaced In A Supplemental Appropriations Bill. “A year after crippling budget cuts, the Illinois Department of Children and Family Services is finally getting some good news. Help is on the way. ‘The biggest trauma that was inflicted was not knowing whether or not they were going to be able to provide services in their community to their children and families and what would happen to this very vulnerable population,’ said Carlene Hawkins, AFSCME President Local 265. A bill passed Thursday, gives the DCFS $25 million dollars.” (“DCFS Gets $25 Million In Funding,” CBS 4, 2/7/13)
Without The Extra $25 Million, DCFS Would Have Been Forced To Lay Off 2/3rds Of Its Staff. “Now the General Assembly has to act. If it doesn’t, up to 1,957 DCFS workers – two-thirds of the staff – could lose their jobs in March, the agency says.”(Editorial, Editorial: Don’t Trim At-Risk Kids Out Of State Budgets,” The Chicago Sun-Times, 2/9/13)

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Quinncidence
Push-polling on the NBC Chicago/Sun-Times story.
Follow that link for the Rauner campaign’s response, too. I wonder if they made this case to NBC Chicago and the Sun-Times or are just making it now.
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Spin Sin
Rich Miller also doesn’t appear to be buying it either, though I disagree on him with the potential impact:

While many of the allegations in the Sun-Times story appear to be bogus or directly contradicted by other evidence, particularly since they were tossed by a judge, if Rauner loses the spin war on this thing he may very well be toast. Done. Put a fork in him. Ergo, the vigorous pushback.

I don’t care about the spin war and neither should you. We need a fact war, and for that, it’s clear, we need more facts.
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Algren Is Back
Plus: Gangsters, Grifters & Pig’s Blood. In Local Book Notes.
The Weekend In Chicago Rock
Featuring: L’Assassins, Dick Diver, Ausmuteants, Warpaint, Vicious Attack, Al Stewart, Erasure, Suicide Silence, John Fullbright, The Screamin’ End, The Fauntleroys, Tawdry Hepburns, Twenty One Pilots, Christopher Owens, Coheed and Cambria, The Wood Brothers, Stick Figure, Slaughter and the Dogs, Alterbeast, Chelsea Grin, Daedelus, Liam Hayes and Plush, Vintage Trouble, and Affiance.
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BeachBook
* Matt Forte’s Fumble Was The Most Damaging Play Of Week 5.
Jay Cutler’s fourth-quarter interception was the fifth-most damaging.
* Neil Young On Obama: What Happened?
Obama happened; should’ve been reading the Beachwood!
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TweetWood


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Posted on October 7, 2014