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GOP Candidate Rauner, Bankrupt Nursing Homes, Political Intrigue

In United States District Bankruptcy Court in Tampa, Florida, a judge decided to allow a case to proceed (basically meaning that he will not dismiss the case at this juncture) that involves allegations that a private equity firm botched the financing of nursing home management companies that are being sued for neglect and wrongful death of patient residents. The equity investment firm at the heart of this case was managed by Bruce Rauner, who now seeks to unseat current Illinois Governor Pat Quinn in the upcoming state gubernatorial election. Mr. Rauner is no longer with the firm as he seeks political office. In the suit, plaintiffs allege that Rauner’s equity firm, GTCR, instituted particular financial restrictions on the nursing homes it owned such that patients consequently suffered negligent care, and many died.

According to the Chicago Tribune, the equity firm financed a nursing home firm called Trans Healthcare Inc. in the late 1990s. By 2004, Trans Healthcare Inc. faced a number of negligence claims for lack of care of the patients. The nursing home firm subsequently had to restate prior financial statements to show a serious net loss of $26.6 million, as opposed to the net gain of $9.4 million previously reported. By 2009, the company had to enter a receivership after selling a subsidiary to an entity called Fundamental Long Term Care Inc., which itself was forced into bankruptcy after it had to pay damages awards in negligent care lawsuits. These judgments became a part of the claims against the company in its bankruptcy filing, thus bringing enforcement of these awards under the purview of the federal bankruptcy court in Tampa. Plaintiffs in the case seek over $1 billion in damages awarded to them in states courts in Florida for the negligence claims.

Their litigation in the bankruptcy court is also specifically against the former principal of the equity firm and director of the nursing home firms it financed for his breach of fiduciary duty as well as against the firm itself for “aiding and abetting” this breach. This portion of the claims arises out of an alleged scheme to avoid paying judgments: In addition to the claims of complicity in the negligent abuse and wrongful deaths of nursing home patients, the equity firm was also accused of making fraudulent asset transfers in order to keep them away from plaintiffs.

Putting Profits Over Seniors
Candidate Rauner was chairman of the equity firm GTCR throughout the relevant time period up until 2012, when he left to run for the governor’s chair. He was not named as an individual defendant in the bankruptcy lawsuit. Yet that does not mean that his conduct was not part of the situation.

This case demonstrates the ongoing tragedy of negligent and unnecessary abuse and death that goes on in nursing homes. It further demonstrates, however, the complexities where nursing homes owners are financed by equity firms, and often must follow certain restrictions or limitations imposed on them by the equity owners and management, in this case financial controls that presumably limited the care the nursing homes could provide. While the political implications make for good theater, the focus must be on the danger of poor management that seriously impact the elderly and disabled residents of these homes, and their families.