CHICAGO - GOP gubernatorial candidate Bruce Rauner faced another round of finger-pointing late this week when a top CEO of a company owned by Rauner's GTCR was indicted on security and wire exchange charges.
The Securities and Exchange Commission also sued Andrew Blumberg, 49, who ran ConvergEx Global Markets Ltd., or CGM Limited, according to a filing in federal court in New Jersey, Bloomberg reports.
ConvergEx, which executes trades for hedge funds and endowments, agreed in December to pay more than $150 million in settlements with the SEC and the Justice Department that included a deferred prosecution agreement and a guilty plea by its Bermuda unit.
The brokerage defrauded institutional clients from 2006 to 2011, telling them it would trade stock for them at market rates and then sending the orders to a subsidiary that inflated prices, the SEC said.
Rauner's firm GTCR purchased ConvergEx in 2006 and sold it in 2011, a GTCR press release announcing ConvergEx's sale said GTCR had been a "true partner":
“I’d like to thank GTCR for their unwavering support in helping ConvergEx become an industry-leading company. They have been a true partner,” said Joseph Velli, then-ConvergEx's CEO said in the release. “We have had a fantastic period of growth with GTCR ..."
GTCR partnered with The Bank of New York Mellon Corporation (“BNY Mellon”), Velli and other senior managers in 2006 to form ConvergEx Group. The initial transaction combined BNY Mellon’s leading agency execution businesses with Eze Castle Software, a leading order management system vendor.
"This transaction provided an opportunity to bring cutting-edge technology to the buyside and capture a growing share of electronic trading volumes," the 2011 press statement said. "Since then, the company has executed its strategy well, expanding the range of its technologies through a series of strategic acquisitions as well as through organic growth."
Another ConvergEx Group employee Craig Marshall, 47, of Bermuda, also faced indictment with Blumberg. The Rauner campaign said the two were "rogue employees." The two are accused of defrauding clients by marking up what they charged their customers for transactions.
"These were rogue employees at a subsidiary of a company GTCR had invested in," Rauner campaign spokesman Mike Schrimpf said. "The employees were fired, and ConvergEx cooperated with the investigation. What they are alleged to have done is unacceptable, and they are rightfully being prosecuted."
Then Rauner commented later Friday on the indictment and GTCR's association with ConvergeEx.
“You know what? Behavior inside large organizations unfortunately is not always perfect, and nobody can control every element and every behavior,” said Rauner in the Sun-Times. “As soon as that behavior came to light, the board of directors of ConvergEx — I was never on that board, I wasn’t directly involved with the company — but from everything I understand the board immediately took action, fired those employees, helped with the investigation, and it’s great that their behavior was prosecuted.”
Rauner has faced criticism this week on investments sent to Cayman Island accounts and in the past for his company's involvement with nursing home operations.