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Rauner's private foundation has millions invested offshore

Chicago Tribune

Wednesday, October 10, 2018  |  Article  |  Todd Lighty

Rauner, Bruce

Republican Gov. Bruce Rauner repeatedly has ripped Democrat J.B. Pritzker for his extensive secret offshore dealings, sounding the campaign theme on social media, at political fundraisers and in speeches.

“A man who inherits billions of dollars but hides it in offshore bank accounts in the Bahamas to avoid paying taxes will not work to give you the tax relief that you deserve,” Rauner told supporters last month.

What Rauner doesn’t talk about are his own offshore dealings before and after he became governor. As with Pritzker, a lack of disclosure about his finances helps keep such details hidden.

The Tribune, piecing together a variety of records, has found that Rauner’s private foundation has invested in a Cayman Islands fund after he became governor, he has personal investments in at least three offshore funds and his former private equity firm once was considered a “top client” of a major law firm that provides offshore legal services.

How much money the governor has invested offshore remains unclear, except for the $10 million stake the Rauner Family Foundation has in Roundtable Hedge (Carleon) Offshore fund, according to the nonprofit organization’s 2016 tax forms and the General Registry of the Cayman Islands.

Rauner previously has dismissed criticism of his offshore holdings, saying they are not as extensive as those of Pritzker and he has “no control of the decision-making.”

But when it comes to his foundation, who made the decision to invest offshore is murky.

READ MORE: Rauner and Pritzker want to keep their offshore money a secret. Here's what we know. »

READ MORE: Democrat J.B. Pritzker has poured a record $146 million into his Illinois governor campaign. He won't provide details on where the money is coming from. »

Initially, a campaign aide said the governor and wife Diana Rauner control the foundation’s investments. “Yes, it’s under their control. That includes making decisions about donating money to charities and making decisions about investments,” Rauner campaign spokesman Will Allison said in an interview.

Asked later how the governor’s foundation came to invest in the offshore fund, Allison said he had misspoken earlier. He said the foundation’s investments actually are handled through the same arm’s-length procedures that have governed Rauner’s personal finances.

As he took office in 2015, Rauner set up a power of attorney to handle much of his wealth to try to avoid conflicts between his personal investments and his public duties. He gave that power to Roundtable Investment Partners, a New York firm.

When it comes to the Rauner Family Foundation, however, documents examined by the Tribune call into question the Rauner campaign’s assertion that Roundtable Investment Partners is guiding its financial strategy. The foundation’s most recently filed tax forms show the organization’s books are “in the care of” Diana Rauner, who also is listed as vice president, secretary and treasurer.

The foundation lists J.P. Morgan Chase as its investment adviser in 2015, paying the company nearly $100,000 that year, Rauner’s first as governor. No investment adviser is listed on the foundation’s most recent tax filing, which covers 2016. The Rauners’ foundation has not filed its 2017 tax forms and has asked for an extension until mid-November, shortly after the election.

Neither Diana Rauner nor Roundtable could be reached for comment. The campaign did not explain why Roundtable Investment Partners is not listed as the investment adviser on the foundation’s two most recent tax forms. Roundtable oversees the Cayman Islands-registered fund that the Rauners’ foundation now has a healthy stake in.

After a recent appearance before the Tribune Editorial Board, Rauner — who is listed as president of the family foundation — said “the Roundtable guys” control the foundation’s investments. Asked if he could provide a document showing that, Rauner said he did not know.

The governor and the private equity firm are intertwined both financially and politically. Rauner is an investor in the Roundtable firm and several of its funds. And Roundtable employees have donated nearly $90,000 to his campaign fund, according to state campaign finance records.

Rauner has disclosed an investment in the Roundtable Hedge offshore fund on his statements of economic interests. The form requires the governor to list what he has a financial interest in but does not require that he say how much money is invested.

Documents also show that Rauner has investments related to his personal wealth in three other Cayman Islands funds. Those offshore investments were made in a Lime Rock Partners energy fund; a fund from BDT Capital Partners, which is run by Winnetka’s Byron Trott, who has given $230,300 to Rauner’s campaign; and a fund from the Chicago-based private equity firm GTCR. Rauner was the longtime chairman of GTCR — the “R” is for Rauner — before running for governor.

READ MORE: Lawsuit Rauner fought to keep sealed alleges $15 million return 'apparently is not enough' »

Both the GTCR fund and the Lime Rock fund are registered at the Ugland House in Grand Cayman, the listed address for thousands of companies and investment funds. Former President Barack Obama once criticized the place as a tax haven. Pritzker, who Forbes magazine estimates is worth $3.2 billion, has at least four investment funds registered at Ugland House.

In addition, GTCR is listed as a “top client” for the financial year 2013 by Appleby, a century-old offshore law firm that provides legal services to large corporations and wealthy individuals. That designation from Appleby was contained in the Paradise Papers — a set of millions of leaked offshore financial records, many of which came from Appleby, where the motto is, “The right people. The right places.”

Rauner declined to say what role, if any, he had in hiring Appleby, how long his firm was an Appleby client and what matters Appleby handled for the firm when he was chairman. Allison said Rauner retired from GTCR prior to 2013 to run for governor and “cannot speak to their operations.”

A GTCR spokeswoman declined to comment. Appleby said in a statement that it would not comment about Rauner “for reasons of client confidentiality.

The Tribune asked the governor a series of questions about his offshore holdings, and the campaign responded with the same answer to several of them. “Gov. Rauner has never personally set up offshore accounts and he has always paid all of his taxes,” Allison, the campaign spokesman, wrote in an email. “He has placed his investments in blind trust procedures and does not control investment strategy.”

Rauner’s own offshore holdings haven’t stopped him from repeatedly accusing Pritzker of hiding his wealth in overseas tax havens.

After the Tribune earlier this year linked Pritzker to a series of shell companies set up in the Bahamas, Rauner accused him of dodging taxes. In a July 31 post on Twitter, Rauner’s team contended Pritzker “wants a tax hike on Illinois families but is hiding his own money offshore.”

For his part, Pritzker has tried to make a campaign issue out of Rauner’s personal investments, questioning just how far removed Rauner is from day-to-day involvement in managing them.

Pritzker seized upon a lawsuit unsealed earlier this year that alleged Rauner in 2015 had met with a onetime business partner on the back porch of the Governor’s Mansion to discuss a private investment. “Not only did Rauner lie about the meeting and conduct private business on state property, but he broke his promise to Illinoisans that he would not be involved in any business dealings while in office,” Pritzker wrote on Twitter last month.

Rauner, 62, was thought to be the richest person to seek elected office in state history when he ran for governor in 2014. He pegged his worth at more than $500 million. The next year, he reported making $188 million. He will not say how much he is now worth.

Still, Rauner has called Pritzker a “trust fund baby,” while citing his own humble roots. Rauner, however, was raised on the North Shore and in an upscale Phoenix suburb, the son of a senior vice president for electronics giant Motorola. During the 2014 campaign, Rauner presented himself as an average Joe who wore an $18 watch, stayed in the cheapest hotels and drove a 21-year-old van.

Nevertheless, Rauner has used tax strategies not available to most workers.

A Tribune analysis of Rauner’s finances in 2014 found that he had used tax-avoidance strategies available to a select few. He reported a major portion of his money as capital gains, which are taxed at a lower rate than ordinary income, and claimed losses in the regular business income category, which is taxed at the highest rate.

Rauner’s extensive real estate wealth has been well-documented. The Tribune reported in 2013 that Rauner owned nine properties across the U.S., including a Winnetka mansion; two units, including a penthouse, in a luxury high-rise overlooking Millennium Park; a home in the Florida Keys; a condo in an upscale Utah ski resort; ranches in Montana and Wyoming; and a New York penthouse.

The governor lists a financial interest in more than 100 entities, according to his statement of economic interests, including a minority ownership share in the Chicago Bulls and the Pittsburgh Steelers.

Like Pritzker, Rauner is largely self-funding his campaign. He has put nearly $58 million into trying to make sure he stays in the Governor’s Mansion — less than half of the money Pritzker has given his own campaign.

That’s a point Rauner brought up recently at a campaign event for Illinois House Republican leader Jim Durkin. “Look, let’s be clear. We’re being outspent this election cycle,” Rauner told the gathering of political contributors.

It’s a strange position for Rauner to be in — last time, he poured in $28 million of his own money and spent over $65 million on the race, more than twice what Democrat Pat Quinn spent.

tlighty@chicagotribune.com

Twitter @ToddLighty

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