Federal court rules $1 billion nursing home case can proceed, ties alleged poor management to IL gubernatorial candidate

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Federal court rules $1 billion nursing home case can proceed, ties alleged poor management to IL gub
Federal court rules $1 billion nursing home case can proceed, ties alleged poor management to IL gub

A legal case involving $1 billion in wrongful death and other judgments against a bankrupt nursing home company can proceed, a federal court has ruled. The matter involves private equity firm GTCR, which was helmed by current Illinois Republican gubernatorial candidate Bruce Rauner.

In 1998, the GTCR Group provided initial funding for Trans Healthcare Inc., a company operating Florida nursing homes and other post-acute and long-term care facilities, according to documents from Judge Michael G. Williamson of the U.S. Bankruptcy Court of the Middle District of Florida. By 2006, Trans Healthcare was facing 150 lawsuits, with allegations including financial mismanagement, resident neglect and wrongful death, according to court papers. The judgments against the company at one point came to more than $2.3 billion.

Some of these judgments, totaling more than $1 billion, have been rolled into the bankruptcy case now before Williamson. The plaintiffs allege that GTCR engaged in a “bust-out” scheme, or a transfer of assets to avoid paying out to creditors and parties awarded damages, prior to Trans Healthcare going out of business and entering state-court receivership.

Many of the claims can proceed against GTCR and Edgar Jannotta, its principal and director of nursing home firms, Williamson determined in a legal opinion dated March 14. The decision “came to light” Wednesday, the Chicago Tribune reported.

The judge was not called upon to determine whether the allegations are true, only whether they have merit.

The ruling was seen as a blow to Bruce Rauner, who was chairman of GTCR up until 2012 and is currently the Republican candidate for governor in Illinois. Doug Ibendahl, the former general counsel of the Illinois Republican Party, described it as “very bad news” for the GOP candidate, who is not a defendant in the suit. The judge's statement that “GTCR Group was also instrumental in [Trans Healthcare's] day-to-day management and administration” might challenge Rauner's ability to claim he was simply an investor who was well removed from the provision of allegedly substandard care, Ibendahl wrote in the Huffington Post.

Rauner's political opponent, incumbent Gov. Pat Quinn (D), seized on the ruling. His campaign released a statement that read, “This was an elaborately orchestrated scheme to cheat the legal system, defraud families and take advantage of those who were too vulnerable to care for themselves in order to make a buck.”

Rauner downplayed the legal decision, saying it simply is part of the ongoing process to determine the truth. He again distanced himself from any knowledge of what went on in the nursing homes.

“The reality is, what happened in those nursing homes, it sounds like there were some very sad events,” he said Wednesday, according to the Tribune. “I hope if there is any wrongdoing, that it gets punished.”