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House Republican Leader Durkin criticized over 'horrible conflict of interest'

Madison County Record

Friday, October 6, 2017  |  Article  |  by W.J. Kennedy

Ethics, Campaign Reform, Transparency (12a) , Local Government (60) Cullerton, John--State Senate, 6 , Durkin, Jim--State House, 82 , Madigan, Michael--State House, 22
Since assuming control of the Illinois House Republican Caucus four years ago, the law firm of State Rep. Jim Durkin (R-Western Springs) has helped Illinois municipal governments and state agencies amass more than a quarter of a billion dollars in public debt, according to an analysis by Prairie State Wire.

Meanwhile, Durkin has actively backed controversial legislation in Springfield that would encourage more Illinois government borrowing, protecting the buyers of such debt at the expense of taxpayers and, in turn, benefiting his own business.

"It's a horrible conflict of interest," said Mark Glennon, publisher of WirePoints Illinois Financial News and a municipal bond expert who has written frequently on the subject. "I was stunned when I found out what law firm Durkin was associated with."

The firm, Saul Ewing Arnstein & Lehr, hired Durkin in April 2011 to help lead its "Municipal & Government Practice Group" in Chicago.

Completed deals since 2015 touted on the firm's web site total $264 million, including $60 million for Hoffman Estates, $27 million for Berwyn, $11 million for Orland Park and $10 million for Matteson.

As a partner in the firm, Durkin personally has collected fees on this borrowing.

Yet he didn't disclose this conflict – nor offer to recuse himself – when voting to support Senate Bill 41, which Glennon described as "an obscene sellout to the municipal bond industry and betrayal of the public interest."

Glennon explained that the legislation, sponsored by Senate President John Cullerton (D-Chicago) and House Speaker Michael Madigan's (D-Chicago) top lieutenant, Rep. Barbara Flynn Currie (D-Chicago), effectively allows local governments to transfer ownership of future income to a lender by creating a separate entity through which, in the event of a bankruptcy, bondholders would get "first crack."

“It allows governments to borrow more and the assets are held by the bondholders and not the taxpayers,” he said. “Almost no one outside the bond community gets this. What they’re doing is ‘collabering-up’ all the assets they can with liens and mortgages, ensuring they’ll get everything when things crash.”

Durkin was one of 13 Republicans in his caucus who backed the legislation – 38 opposed it – during a House vote in May.

Gov. Bruce Rauner vetoed the bill on Aug. 25.

Durkin spokesman Eleni Demertzis told Prairie State Wire that Durkin hasn't felt the need to disclose his role with Arnstein & Lehr, nor recuse himself, when considering legislation related to such government borrowing.

"There is no conflict," she said. "Jim's firm represents municipal governments, not bondholders."

Glennon said Durkin is being disingenuous.

"Utter nonsense," he said. "The point is that (Durkin's) generating more work for his firm, no matter which party it represents in the transaction, by spinning up new and dangerous ways for municipalities to borrow more."

"Instead of fighting to keep ownership of public assets in the public’s hands, he’s feeding the debt beast that has many heads – bond issuers, buyers, law firms, credit rating agencies and underwriters. It’s a financial version of the military-industrial complex. They are very powerful and crony capitalists abound," Glennon said.

In 2013, Durkin was also a co-sponsor of legislation that expanded the borrowing capacity of the Illinois Finance Authority (IFA), which provides state-subsidized, state taxpayer-guaranteed debt to private Illinois businesses and non-profits

According to its website, Arnstein & Lehr has worked on four IFA deals worth $75.4 million since 2015.

They include $30.2 million in state-backed debt for North Central College in Naperville, $20.2 million in debt for Elmhurst College, $20 million for Oak Park Residence Corp., which builds Section 8 housing in Oak Park, and $5 million for The Moorings of Arlington Heights, an assisted living facility owned by Presbyterian Homes of Evanston.

Durkin's partner in the public finance group at Arnstein & Lehr, Joe Ourth of Riverside, is registered to lobby General Assembly members, according to the Illinois Secretary of State. 

Arnstein & Lehr represents Advocate Health Systems and Northwestern Memorial Healthcare. 

In both cases, lobbyist registration records show it teams with two other lobbying firms: Fletcher, O'Brien, Kasper & Nottage (FOKN) and N.J. Kimme & Company.

FOKN's principals include Jim Fletcher, campaign manager to former Illinois Gov. Jim Thompson, and Michael Kasper, longtime chief legal counsel to House Speaker Madigan.

N.J. Kimme is led by Nancy Kimme, the former top aide to former Illinois GOP Chairman and gubernatorial candidate Judy Baar Topinka who turned super-lobbyist in 2015.

Kasper is representing Kimme in a lawsuit over whether she misused Topinka's campaign funds after her death in December 2014. The case was dismissed by a Cook County judge with that ruling being upheld by an appellate court in March. Last week, the Illinois Supreme Court denied the plaintiff's petition for leave to appeal. 

Durkin was first appointed to the Illinois House in 1994 to fill a slot opened after Topinka, then a state senator from Riverside, won election as Illinois State Treasurer. 

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Durkin has collected fees on $264.3 million in Illinois government borrowing since 2015.

Through his law firm, Arnstein & Lehr, Durkin has helped facilitate 20 municipal and state bond deals since June 2015, while concurrently serving as the Illinois House Republican Leader.

Who borrowed? How much?

Borrower Month / Year Amount
IFA/The Moorings of Arlington Heights 2/2017 $5,000,000
IFA/Oak Park Residence Corp. 1/2017 $20,000,000
IFA/Elmhurst College 12/2016 $20,200,000
City of Berwyn 11/2016 $20,155,000
City of Yorkville 10/2016 $5,800,000
Village of Sherman 9/2016 $1,600,000
North Pullman TIF 8/2016 $7,400,000
Village of Hodgkins 8/2016 $9,990,000
City of Blue Island 6/2016 $1,300,000
Village of Burlington 6/2016 $300,000
Village of Orland Park 5/2016 $6,535,000
Village of Hoffman Estates 4/2016 $8,975,000
City of Berwyn 11/2015 $6,725,000
Village of Matteson 11/2015 $9,550,000
Village of Hoffman Estates 10/2015 $21,905,000
Village of Hoffman Estates 8/2015 $6,125,000
Village of Hoffman Estates 8/2015 $23,415,000
Village of Orland Park 8/2015 $4,475,000
IFA/North Central College 7/2015 $30,177,000
DuPage County 6/2015 $54,635,000

TOTAL $264,262,000

Source: www.arnstein.com