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Rauner seeks to keep details of business lawsuit secret, court filing shows

Chicago Tribune

Thursday, October 12, 2017  |  Article  |  Becky Yerak

Rauner, Bruce

Gov. Bruce Rauner, who worked in the private equity industry before becoming Illinois’ chief executive, wants to keep secret details of a lawsuit filed against him last week by a fellow investor in a Michigan mortgage business, court records show.

 

Harreld N. “Kip” Kirkpatrick III and Kirkpatrick Capital Partners sued Rauner in Cook County Circuit Court on Thursday, but the lawsuit and three exhibits are entirely redacted.

 

Kirkpatrick, a former Democratic candidate for state treasurer, is currently co-chief executive of Vistria, a private equity firm co-founded with Martin Nesbitt, a confidant of Barack Obama.

 

It’s a motion by Kirkpatrick that seeks the court’s permission to keep details out of the public’s eye, but he blames Rauner for the secrecy. Kirkpatrick says in a court filing that Rauner wants the complaint and exhibits sealed due to a confidentiality clause in their limited partnership agreement. Rauner, elected governor in 2014, previously was chairman of private equity firm GTCR.

 

Kirkpatrick says in a court filing that he doesn’t believe the complaint and exhibits needed to be sealed, partly because the confidentiality provision in the partnership agreement has an exception for litigation. In his motion, Kirkpatrick says he filed a fully redacted complaint “in an abundance of caution and so as to avoid any liability for breaching the confidentiality provision in the limited partnership agreement.”

 

While the exact allegations remain unclear, the lawsuit against Rauner is tied to how settlement proceeds from a Michigan lawsuit were divvied up.

 

Kirkpatrick Capital Partners paid $10 million in 2011 for a 20 percent stake in what’s now Troy, Mich.-based United Shore Financial Services, according to the Michigan lawsuit.

 

Kirkpatrick served as the firm’s CEO from 2011 to 2013, but relations between him and the company’s founding family soured.

 

In 2015, Kirkpatrick Capital sued United Shore and Jeffrey and Mathew Ishbia, members of the founding family that remains the majority owner. The Ishbias, the lawsuit claimed, pulled the plug on Kirkpatrick’s efforts to sell the company — which by then was valued by Raymond James Financial Services at $400 million to $525 million. At least four firms expressed interest in buying the company in early 2013, but the Ishbia family suspended the sales process because it “did not want to give away so much of this newly created value to” Kirkpatrick Capital, the lawsuit says.

 

“The parties understood that Kirkpatrick Capital was not making a long-term investment in Shore,” Kirkpatrick’s lawsuit against United Shore said. “Kirkpatrick was investing in Shore with the understanding that Shore would be marketed for sale in the near term.”

 

Kirkpatrick alleged in his lawsuit against United Shore that he was fired from the company in mid-2013 without cause.

 

In the lawsuit, Kirkpatrick Capital said it was seeking damages of at least $90 million from United Shore, mainly tied to the decision not to sell. The case was dismissed last year with the agreement of both parties, according to court records in Oakland County, Mich. Terms of the settlement were confidential, said David Zacks, one of United Shore’s lawyers.

 

Rauner’s investments in 2016 still included a stake in Kirkpatrick Capital, according to his financial disclosures filed with the state in April.

 

While Kirkpatrick led day-to-day operations of United Shore, Rauner wasn’t an unknown entity to the Ishbia family.

 

In March 2013, Jeffrey Ishbia and his wife, Joanne, each gave $5,300 and United Shore donated $10,500 to Citizens for Rauner, the governor’s campaign fund, Illinois records show. State records show no other contributions from Jeffrey or Joanne Ishbia or United Shore to Illinois candidates.

 

A Rauner spokesman declined to comment.

Kirkpatrick, who also declined to comment, addressed the lawsuit against Rauner in a memo Thursday to Vistria investors and colleagues.

 

“We have spent months trying to avoid this action, but must do what is in the best interests of all stakeholders involved,” Kirkpatrick wrote. “Governor Rauner has requested that the details of this lawsuit be sealed, so I am unable to provide you with additional information at this time.”

 

Kirkpatrick said in the memo that he hopes a judge denies the request to keep it from public view. Vistria Group isn’t involved in the lawsuit, he said.

 

A hearing is scheduled for next week on whether the details of the lawsuit against Rauner should remain out of the public eye.