Did Rahm Emanuel, Bruce Rauner violate SEC pay-to-play rules with pension-tainted cash?

Did Rahm Emanuel, Bruce Rauner violate SEC pay-to-play rules with pension-tainted cash?

Pension birds of a feather flock together – so the saying goes.

It is no secret that Chicago Mayor Rahm Emanuel and Illinois Governor-elect Bruce Rauner are bosom friends and business partners.  However, according to an investigation by reporter David Sirota at IBTimes.com, the two also appear to have something else in common:  serious violations of SEC law involving pension fund-tainted political donations.

The IBTimes.com reports that since 2011, Mayor Emanuel and his political action committees have accepted more than $600,000 in contributions from executives at firms that manage city pension funds – if true, these contributions constitute a serious violation of federal law.

Sirota points out that the contributions also violate a 2011 executive order signed by Mayor Emanuel himself that prohibits city contractors and subcontractors from making campaign donations to city officials.

“The acceptance of contributions by city officials [Mayor Rahm Emanuel] from advisers managing city funds, in my book, smells like bribery,” said former SEC Chairman Arthur Levitt in an interview with IBTimes.com.

Chicago aldermen are now calling for an SEC probe into Emanuel’s contributions.

Read Sirota’s full exposè here.

Sirota reported Tuesday that Illinois’ Governor-elect Bruce Rauner also received $140,000 in contributions from firms that manage state pension business – another serious violation of federal and state law.

As former chairman of GTCR, Rauner already has undeniable conflicts-of-interests concerning Illinois’ pension fund system – a system that he will now exert full control over as Illinois Governor.  As governor, Rauner’s appointees will manage the same pension funds Rauner, his “former” firm, and their clients have a financial stake in.

According to IBTimes.com:

No political candidate has deeper connections to pension management than Rauner. He was a longtime principal of GTCR — a firm that has managed the money of state pension systems for decades. That includes the $39 billion Illinois Teachers Retirement System and $13 billion Illinois State Board of Investment, both of which are run by gubernatorial appointees.  Rauner retains an ownership stake in 15 different GTCR entities. Though he said he retired from GTCR in 2012, the firm’s SEC documents show that he still retains an active partnership stake in at least one GTCR entity called GTCR Management X, L.P.

Although Rauner has pledged to put his pension fund interests in a blind trust, serious SEC conflicts-of-interest remain.

The Illinois State Board of Investment is now investigating Governor-elect Rauner’s donations. After Rauner is sworn in as Governor, he, too, will appoint trustees to this Board.

In light of these alleged violations of state and federal pay-to-play law, the decades-long personal relationship between Mayor Rahm Emanuel and Governor-elect Bruce Rauner becomes even more significant.

“But we’ve not had a situation like this, where the governor and the mayor are personal friends,” said former Republican Governor Jim Edgar. “This is unique.”

Emanuel’s friendship and business dealings with Rauner go back as far as 1999 when Rauner’s firm GTCR tapped Emanuel, a first-time investment banker, to secure an FCC exemption for the firm’s sale of SecurityLink to SBC for $479 million. The SBC deal netted GTCR a half-billion dollars in just six months and made Emanuel a millionaire overnight.

Former Obama White House Chief of Staff Bill Daley was President of SBC at the time the deal was struck. By happen chance, Daley was added to Rauner’s gubernatorial transition team late last week.

In 2011, Emanuel appointed Rauner chairman of Choose Chicago, the city’s tourism arm that was actively seeking investment dollars for the Mayor’s Chicago-based casino. Rauner resigned from his chairmanship in May 2013 before announcing his candidacy for governor.

The pension crisis in Illinois and Chicago are considered the worst in the nation.  Chicago owes more than $33 billion in debt and pension obligations combined. According to Moody’s, Illinois’ pension liability as a percentage of state revenue is the worst in the nation.

Illinois can’t afford any more funny business with cronyism or pay-to-play pension schemes – especially from two pension birds like Rahm Emanuel and Bruce Rauner.

SEC, are you paying attention?

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