Revolving door from Rahm's City Hall to hedge-funder's office keeps turning

Matt Hynes

I reported last month about Rahm's machine bagman Matt Hynes jumping ship to go spend "more time with his family." Remember Hynes, the son of former longtime Cook County Assessor, ward boss (19th) and big-time lobbyist Tom Hynes and brother of former state Comptroller Dan Hynes, was the guy who first put the great pension heist idea in Rahm's ear and got SEIU leaders to buy into it.

Now we know who Hynes meant by his "family".

Crain's reports:

Mayor Rahm Emanuel's departing chief lobbyist has a new gig and, metaphorically, it isn't far from City Hall. Matt Hynes, who last month announced his departure as the the mayor's director of legislative counsel and government affairs, will be joining Grosvenor Capital Management L.P., the firm run by Emanuel confident and kitchen-cabinet member Michael Sacks.

Sacks is one of the biggest money-bags patrons feeding Emanuel's campaign trough. He was part of the Emanuel team that negotiated City Council's parking meter deal with operator Chicago Parking Meters LLC. Former mayor Daley now works for that firm. Sacks reportedly talks with Rahm several times daily.

Ald. Bob Fioretti, 2nd, one of Rahm's potential opponents in next year's race, voted “no” on the meter deal and says unpaid mayoral advisers are one thing. “It's another thing when you have them as active participants in a government function,” he says. “We want government-business partnerships, but not these types.”

Sacks is a big promoter of charter schools and serves as a mayoral adviser on the topic. He also sits on the board of After School Matters, Mayor and Maggie Daley's cash-cow after-school program which was used as back entrance to the old City Hall patronage system.

Hynes is not the first Chicago politico recruited by Sacks. Earlier moves to the firm include Kurt Summers, former chief of staff to Cook County Board President Toni Preckwinkle, and Mr. Emanuel's chief information officer, Brett Goldstein.

The great $660 billion public pension rip-off

Edward Siedle is president of Benchmark Financial Services and is a former investigator with the Security and Exchange Commission's Division of Investment Management. He writes in Sunday's New York Times:

Nearly a quarter of all state and local public pension assets have disappeared -- $660 billion in state workers’ retirement savings taken off the radar and swept into high-cost hedge, private equity, venture and real estate funds with little or no public oversight.

Kickbacks, bribery, self-dealing, fraud, tax evasion and outright theft have been protected as confidential “trade secrets” or “proprietary business information” exempt from disclosure to the public under various state freedom of information laws. Not surprising, the parties complicit in this secrecy strategy neglected to tell workers and other stakeholders about it. The policy itself was crafted and set in place in secrecy.

Read Siedle's entire account here.

'Illinois is open for business...' No revenue for pensions. Millions for new basketball stadium.

“Today, with this bill, Illinois is open for business,” said state Sen. Toi Hutchinson (D-Olympia Fields), the chief Senate sponsor.of the $173 million DePaul basketball arena bill. 

With the failure last night, to pass a bill that would have given Chicago Public Schools another pension holiday, the IL State Legislature ended it Spring Session failing to do anything to provide either the state or Chicago with any new revenue to solve its ongoing pension crisis. But it had no problem finding  $173 million to help pay for Rahm Emanuel's latest boondoggle, (that's what Sports Illustrated is calling it) a new 10,000-seat basketball arena for DePaul, the nation's largest private Catholic university.

According to Crain's, Rahm is counting on the sale of 22 luxury suites in the arena at $45,000 each per year and 300 club seats to account for near $500,000 in operating income. But there's little hope of filling the new arena with city basketball fans. DePaul's program abandoned Chicago back in 1980. This year's team roster included not one player recruited from Chicago's public schools.

CTU V.P. Jesse Sharkey calls the boondoggle yet another reason why we need an elected school board in Chicago and an end to mayoral control of the schools:

The mayor has demonstrated a lack of leadership and his appointed Board of Education has done a miserable job governing the district. They have closed 50 elementary schools without a plan and now they will have to deal with a looming budget issue. But rather than finding additional revenue, the mayor pushed through spending for the DePaul basketball arena, millions for Navy Pier development, and extended TIFs that were set to expire. Now more than ever we must demand an end to mayoral control and push for an elected representative school board. -- Fred Klonsky's blog

Amen!

Standard & Poor's -- No standards but a lot of folks made poor

Forget for a brief moment that the current Illinois teacher-pension crisis is a manufactured one, caused primarily by the state's inability or unwillingness to raise enough revenue to make it's necessary contribution to the pension fund. Forget also for a brief moment, that the state legislature grabbed millions from that fund, into which retirees had been paying out of their take-home pay for decades and used that money to pay off other debts.

Let's look for a moment instead at how the threat by Gov. Quinn, and other Dems,of a reduced state credit rating by Standard & Poor's, was used to try and steamroll the legislature into passing SB1. That bill would have dropped an unconstitutional bomb on the cost-of-living adjustments and the health care contributions being made by the state to aged, sick and poorest retirees.

S&P, which is owned by McGraw-Hill Publishers (one of the nation's largest testing and textbook companies) went along with the pension-crisis narrative and announced on January 24th that IL's credit rating has been downgraded again making it the nation's lowest.

ABC reported,

"Standard & Poors analysts said even if Illinois is able to pass pension legislation soon, the state is likely to face a legal challenge, so it could be years before the budget situation or the unfunded liability improve. That, along with an income tax increase that's scheduled to expire on Jan. 1, 2015, contribute to the state's negative economic outlook."

And you can count on those S&P analysts to make an honest assessment of a state's credit worthiness. Right? Well let's have a look and see.

Today, the Justice Dept. announced that it was suing S&P for its actions in rating the complex securities that helped cause the global financial crisis by misleading investors with falsely high credit ratings on bonds backed by toxic subprime mortgages.

According to the L.A. Times:

S&P executives were motivated by a desire to increase the company's profits and delayed downgrading its AAA ratings on the mortgage-backed securities because it did not want to lose business from banks trying to package bad loans for sale to investors to get them off their books...

Lisa Madigan announces S&P suit. 

 In addition to the federal suit, California, Illinois and several other states filed their own suits against S&P on Tuesday on top of some existing state suits. S&P's intentionally misleading information of these securities could have contributed to the drubbing many state pension funds took during the past five years. The actions mean that 16 states and the District of Columbia will have suits against S&P.

The irony here is that it was Illinois Atty. Gen. Lisa Madigan who announced the state's suit against S&P while her father, political machine boss Mike Madigan, along with Quinn, used the threat of a poor S&P rating to launch the stampede on the pension fund.

Look who's 'leaning' on pols to cut more out of pensions

THE POWER BEHIND THE PENSION GRAB -- Second from left, R. Eden Martin, past president of the Civic Committee ,Lester Crown, chairman of Henry Crown & Co., and Tyrone Fahner, head of the Civic Committee and former chairman of the management committee at the Mayer, Brown, Rowe & Maw.

An editorial in today's Sun-Times unmasks the real power and the face behind the current attacks on the pensions and health care supports for retired teachers and public workers. It's the face of the Civic Committee of the Commercial Club of Chicago and its union-hating leader, Ty Fahner.

While the leaders of both parties worry about union opposition to their proposed pension-cutting billls, Sen. Pres. Cullerton is whining about the undue influence Fahner and his boys are having on the legislature as it tries to find a successful route in the current pension grab.

Cullerton, for example, says he can’t get House Minority Leader Tom Cross on board with his favored pension cost-cutting plan because Cross is being on leaned by the Civic Committee, which says the plan doesn’t save enough money. Cross and Republicans, Cullerton said, “are getting pressure from people like Ty Fahner saying: Vote no. . . . You’ve got to save more.” 

The one thing Fahner won't tolerate from either Cullerton or Cross is any talk of a progressive state income tax and an end to the ridiculous tax breaks being given the the state's largest corporations. These two things would go a long way towards saving retiree pensions and solving some of the state's budget problems.

Caterpillar: Why IL Dems go after teacher pensions

Slowpoke Comics

How much do Illinois' largest corporations pay in state income taxes? It's a complex question, but the answer is simple: Nobody knows. Well, almost nobody. The companies know, but they're not telling. Tax collectors know, but they're not allowed to tell. That leaves the rest of us with just one safe guess: as little as legally possible. -- Chicago Tribune

If you're looking for clues as to why a Democratic governor and House Speaker as well as a Dem-controlled legislature in Springfield, continues to go after the teachers pension fund instead of tax revenue from the biggest corporations, look no further than Caterpillar, Inc.

The company, the world’s largest construction-equipment maker, uses its campaign contributions to Democratic politicians like Michael Madigan, Dick Durban, and even Barack Obama when he was a state senator, along with threats to abandon Illinois for southern, right-to-work states like Georgia or move jobs offshore to China to leverage tax breaks.

From the Tribune:

"Cat," made waves last year when CEO Douglas Oberhelman wrote a letter to Gov. Pat Quinn complaining about the recent hike in state tax rates. "I want to stay here," he wrote from Cat's Peoria headquarters. "But as the leader of this business I have to do what's right for Caterpillar when making decisions about where to invest."  And invest it has, building plants in right-to-work states such as North Carolina, Texas and Indiana, typically after securing millions in state and local taxpayer subsidies — as is routine now in a system that pits state against state, city against city, in a race to the bottom for jobs.

The Peoria-based company, which reported year over year earnings growth exceeding 250 percent, is among several U.S. multinationals asking Congress to end U.S. corporate income taxes on profits earned abroad. The company pulls in around $3.7 billion of pretax income on about $42.6 billion in revenue, 68 percent of which came from offshore. Last year, Cat closed its Canadian locomotive plant in London, Ontario, after unionized employees refused to accept a big pay cut. 780 union machinists then went on strike  for four months at the Cat plant in Peoria.

Caterpillar Inc. used offshore subsidiaries in Switzerland and Bermuda to avoid about $2 billion in U.S. taxes from 2000 to 2009, boosting its earnings through a “tax and financial statement fraud,” according to a Caterpillar executive’s lawsuit.

Then on the political side you have Caterpillar Inc. Director Miles White, Chicago's highest paid CEO, who pulls down more than $25 million/year in compensation. He is also a big-wig in the Civic Committee of the Commercial Club of Chicago, the most rabid group when it comes to raiding the teachers pension fund and busting the teachers union.

Since a progressive state income tax appears to be the only viable alternative to cutting the pensions and health care of retirees, we've got to get rid of pols who are tied to corporations like Caterpillar or no change can come.

"This is how things are done in Illinois."

That's what Joseph Cari, former finance chairman for the Democratic National Committee, told a Virginia investment firm seeking millions in business with the Illinois State Pension Fund. Cari told them that they could get a piece of the state's teacher retirement money if they would only kick back $850,000 his way.

Cari's downfall came after he assisted Stuart Levine, a corrupt trustee of the Illinois Teachers' Retirement System who was also convicted in the scandal, in an attempted extortion. Levine made a series of calls in 2004 to  executives of JER Inc. demanding $850,000 — equal to 1 percent of the $85 million the Virginia investment firm was seeking from the teachers retirement board to invest. The firm, however, refused to pay. -- Chicago Tribune.

So with teachers desperately trying to hang on to their meager pensions, as state politicians circle around like vultures, Cari  and other Democratic Party rainmakers were using the fund as their own private profit center.

Cari, threw himself on the mercy of the court, pleading severe mental anguish and promising never to do it again. U.S District Judge Amy St. Eve bought Cari's story and spared him from prison, sentencing him to three years of probation, a small fine, and nine months of home confinement. Of course in Cari's case, "home confinement" means that he will be able to leave to go to work every day and even travel abroad on business.

After all, that's how things are done in Illinois.