Bruce Rauner says there’s “nothing sinister” about venture capital firms using the Cayman Islands as a tax shelter, but says he has never used the investment vehicle for his personal benefit. […]
Until he stepped down to run for governor, Rauner was head of a capital investment firm, GTCR, which has several investment pools there.
At an appearance at the Illinois State Fair last night, Rauner — wearing a plaid shirt, jeans and brown boots — insisted it’s a “widespread, common practice.”
“What my firm did is what many, many financial firms do and I think the majority of venture capital firms and private equity firms do, and that is - when they invest in a foreign company, a non-U.S. company, they’ll set up an investment vehicle, often in the Caymans, so that their limited partners are treated, for tax purposes, the same way as, as if it was a U.S. company.”
He ran GTCR, so if his firm made money off Caymans investments, then he personally profited.
* But the focus is shifting today to another island nation, Bermuda…
The onetime head of a company tied to Bruce Rauner and an associate — men the GOP candidate for governor Thursday called “rogue employees” — have been indicted in federal court in New Jersey on charges they stole millions of dollars in a sophisticated trading fraud.
Anthony Blumberg, 49, of New Jersey, and Craig Marshall, 47, of Bermuda worked for ConvergEx Global Markets Limited, a Bermuda-based broker and subsidiary to a firm Rauner’s former private equity company helped found.
Blumberg and Marshall were indicted late Wednesday on criminal charges of securities fraud, wire fraud and conspiracy to commit securities and wire fraud.
The indictment is here.
“These were rogue employees at a subsidiary of a company GTCR had invested in,” Rauner campaign spokesman Mike Schrimpf said. “The employees were fired, and ConvergEx cooperated with the investigation. What they are alleged to have done is unacceptable, and they are rightfully being prosecuted.” […]
Rauner joined GTCR in 1981 and was its chairman until stepping down in October 2012 but “had no say in hiring either of the two people,” Schrimpf said.
* Background info from the Quinn campaign…
GTCRauner formed ConvergEx in October 2006 and installed Blumberg as CEO that very month until 2011:http://www.convergex.com/about-us/history
GTCR was the largest shareholder and controlled the board (they had more seats than any other partner)
GTCR features ConvergEx on its website as an example of a successful company: http://www.gtcr.com/our-focus/financial-services-technology/portfolio/convergex-group
Rauner told Chicago Magazine in 2011 that GTCR’s - his- whole business strategy was handpicking executives. Here’s the profile.http://www.chicagomag.com/Chicago-Magazine/June-2011/GTCRs-Bruce-Rauner-Talks-Investments/ Here’s Rauner’s q&a in the article:
Q: Most private equity firms buy mature companies and unwanted divisions of large corporations, managements intact. But you seem to go out and find management and then, together with them, go buy the companies.
Rauner: We’re in two businesses: industry research and executive recruiting. We study industries, and we network like crazy to find the superstars. Today, we’re partners with two dozen CEOs. Some we’re backing for the second, third time. It can take from six months to nine years from the time we meet someone until we actually become partners with each other.
Q: But sizing up the executive is nearly everything?
Rauner: A lot of reference checking. Are they winners? How did they handle failure in their careers? We go to all the trade shows. We call it the leader strategy. Deal flow comes to them. Talented executives come to them.
Key Point: Now GTCR Chairman Rauner wants to pretend he has nothing to do with the guy who was put in place by GTCRauner to be the CEO of ConvergEx from Day One when GTCR was in charge every step of the way? How stupid does he think we are?
* Background info from the Rauner campaign…
BNY and GTCR were equal investors in Convergex. Convergex though was staffed with BNY executives. As shown below, Blumberg was already with BNY and had been since 2002. He came with the deal.
Anthony Blumberg Came Into Convergex From Bank Of New York-Mellon. “BNY ConvergEx management includes Velli, Kerry Pack, John Meserve, Anthony Blumberg, George Costafos and Charlie Raphold from BNY. The trading grossed $297 million last year. Tom Gavin, David Quinlan and Jeff Shoreman make up the Eze contingent. The vendor grossed $43 million last year. Much of that is recurring or commission-like coming from routing orders to brokers. Goldman Sachs, previously a large owner of Eze Castle, does not have a stake in BNY ConvergEx. Operations will be split between New York and Boston, Eze’s current headquarters. The deal is expected to close this year.” (Peter Chapman, “BNY ConvergEx Eyes Hedge Funds with Eze Merger,” Traders Magazine, 8/1/06)
Anthony Blumberg Originally Worked For Credit Lyonnais, And Then Bank Of New York-Mellon, Before Joining Convergex. “Prior to the formation of ConvergEx Group, Mr. Blumberg served as a Managing Director at Credit Lyonnais Securities where he established G-Trade Services, one of the world’s largest global portfolio trading groups, which was later acquired by The Bank of New York and became a part of BNY Securities Group in 2002.” (“Our Leadership Team,” Archived Convergex Webpage, 2/10/11)
…Adding… More from the Rauner campaign…
(T)he Quinn fact sheet you just put up on ConvergEx is false and intentionally misleading. It’s not a typo, the Quinn campaign has repeatedly tried to mislead the public over the last 16 hours by claiming Mr. Blumberg was the CEO of the entire CovergeEx company to give the false impression that he was hired by or otherwise directly connected to Bruce Rauner.
That’s simply false. He was the CEO of a subsidiary to ConvergEx who was hired by Bank of New York Mellon in 2002, four years before GTCR invested. Additionally, GTCR was not the “largest shareholder” of Convergex. It was an equal investor with BNY Mellon, which is why the firm’s and its subsidiary’s leadership, including Blumberg, came over from BNY Mellon.