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Republican money managers emerge in bid to shape Illinois politics

Published: Monday, Oct. 1, 2012 9:40 a.m. CDT

(MCT) — Spawned by frustration with the status quo and fueled by anti-union sentiment, a new money-manager style of Republican activism is taking hold in Illinois with the potential to reshape the political landscape heading into the 2014 statewide elections.

Venture capitalists and hedge fund directors have been writing six-figure donations with increasing frequency since the 2010 state elections and are spending big on the presidential and congressional races, taking advantage of the new era of super political action committees that can raise and spend unlimited amounts of money on campaigns.

The Nov. 6 contests for the White House and Congress are only part of the picture for the new cadre of wealthy financiers who are looking to magnify their impact by focusing on state and local politics. They are not putting much money into state Republicans' slim chances of reversing Democratic control of the Legislature this year, but insiders expect their influence to grow dramatically with statewide offices, including U.S. senator and governor on the ballot two years from now.

The leaders of the new movement include Bruce Rauner, a wealthy venture capitalist and private equity specialist who is a potential candidate for governor. Framing his argument in apocalyptic terms, Rauner lambastes public employee unions and says only a political revolution can pull Illinois out of an economic "death spiral."

Also stepping into a new activist role are mega-donors Kenneth Griffin, who founded the hedge fund firm Citadel LLC, and Anne Dias Griffin, who founded her hedge fund firm, Aragon Global Management. The husband and wife have donated more than $6.1 million to candidates and causes at the state and federal level since 1998.

Dias Griffin is the force behind a new social media operation, Reboot Illinois, that calls itself nonpartisan but has echoed GOP critiques on topics from public worker pensions to improving the business climate and school funding.

The influx of dollars from investment managers represents a generational shift in the funding of Republican candidates and interests in Illinois. The industrialists who traditionally donated to the state GOP are graying, and their publicly traded companies have been bought and sold in a world market where CEOs are transitional and less inclined to publicly play politics.

At the same time, the investment entrepreneurs are younger and more results oriented than their older counterparts and are unwilling to simply give money to a candidate and walk away.

"Why do you want to spend money if nothing's going to happen? The old traditional silk-stocking, lakefront white-bread Republican who would just write a check out of force of habit doesn't exist anymore," said Ronald Gidwitz, managing partner of the investment firm GCG Partners and a former GOP candidate for governor.

"Guys want to win, and if you can't win, they'll find other races where they can. If we don't produce, why would people invest a second time?" said Gidwitz, who also is co-founder of The New Prosperity Foundation super PAC, which has raised nearly $1 million this year and is aligned behind Republicans in six state congressional races.

There is one politician many in this new class of political players can agree on — Democratic Mayor Rahm Emanuel.

The new mayor made millions during a stint as an investment banker, including a deal involving Rauner's firm. In Emanuel, the investment community sees an activist mayor willing to make tough decisions who also is part of their social, financial and business sphere.

The genesis of the new investor-led movement can be found in the 2010 push to curb collective bargaining rights for public school teachers, when Rauner brought the Oregon-based Stand for Children group to the state. He got some of the city's leading investors and storied financial names to provide millions of dollars in seed money.

Since September 2010, the Stand for Children Illinois PAC has raised nearly $3.7 million, including $500,000 from Kenneth Griffin.

The Griffins also gave Emanuel a combined $200,000 for his election bid in 2010 while, at the same time, providing a combined $450,000 to Bill Brady, the GOP's unsuccessful candidate for governor that year. They also have donated $1.5 million in the last two years to American Crossroads, the super PAC co-founded by Karl Rove that backs GOP candidates and causes. Kenneth Griffin also has sent more than $1 million to Restore Our Future, the super PAC aligned with GOP presidential candidate Mitt Romney.

Neither Griffin nor Dias Griffin returned calls for comment. But in a Tribune interview this year, Griffin said the ultra-wealthy "actually have an insufficient influence," and need to be more involved.

"Those who have enjoyed the benefits of our system more than ever now owe a duty to protect the system that has created the greatest nation on this planet," he said.

Stand for Children led a successful effort at the Democratic-controlled Statehouse to change state law and make it harder for Chicago teachers to strike. The push increased tension between the Chicago Teachers Union and Emanuel, contributing to a strike that kept most Chicago public schools closed for seven days in September.

On the day the strike was resolved, Rauner blasted public employee unions and weak government leaders for contributing to the state's dire financial straits and offered a strategy for fellow conservatives during a political seminar.

"I think we can drive a wedge issue in the Democratic Party on that topic — that real folks will say, 'You know what? For our tax dollars, I'd rather help the disadvantaged, the handicapped, the elderly, the children in poverty. I'd rather have my tax dollars going to that than the SEIU or "AF-Scammy" who are out there for their own interests,'" Rauner said, referring to two of the state's most influential labor organizations — the Service Employees International Union and the American Federation of State, County and Municipal Employees.

Rauner has said he talks to Emanuel "all the time on a lot of topics" and was appointed by the mayor to the city's economic development and job creation council. But he was decidedly pessimistic about the state's job-creation prospects at the seminar.

Because of his lack of confidence in the state's government institutions, "if we were going to invest in a plant that would come to Illinois, I'd like to say yes, but I'd have to say no." He commiserated with other business leaders who talked of leaving Illinois.

"We have got to change the direction of our state," Rauner said in the speech. "And the rest of us in this business community who've been here for our whole lives have to say, 'Enough. No more. We're not going to stay in this death spiral.'"

Rauner declined to elaborate on his role in politics beyond the speech and called questions about a bid for governor unproductive "speculation." He has made nearly $1.7 million in state and federal political donations since 1998, campaign finance records show, including a sizable share to Democrats. In addition to contributions to Emanuel, Rauner gave $200,000 to former Mayor Richard M. Daley, $250,000 to current CTA head Forrest Claypool and a combined $65,000 to the Democratic National Committee and the Democrats' congressional campaign committee.

More recent donations have been targeted largely to Republicans, including $100,000 contributions each to the state GOP and the state House Republican political organization in 2010, $50,000 to U.S. Sen. John McCain's failed 2008 presidential bid and $50,000 to the pro-Romney Restore Our Future, records show.

Gidwitz said the donations from Republican-oriented financiers to Emanuel represent a "hope that Rahm will deliver on his promises."

"One of the things Rahm seems to be doing is making those hard decisions," Gidwitz said. "Everything he said he'd tried to do, it appears he's trying to do it."

One Republican campaign consultant, who was not authorized to speak publicly about working with the money-manager crowd, said they demand results.

"All these people, they make decisions based on data, on ROI (return on investment), based on performance. That's how they make money," the consultant said. "You can't just call up these folks and say 'I'm a Republican. I need money.' What is your plan? How do you get across the finish line. What's your ROI? What's your approach?"

And it appears that the investment community will pull back if results aren't delivered.

"They're no longer interested in jumping behind (someone) who has tried and failed," the consultant said. "They want to do it themselves because the (politicians) at the head tables haven't done it."

The investment community provided substantial seed money, including $190,000 from the Griffins, to the Two Party System Inc. PAC that in 2010 spent more than $800,000 to back state House GOP candidates and campaigns. But promises of major pickups against Democrats never materialized. Through the first half of this election year, the PAC has made no contributions.

Rauner has indicated that his indictment of the Illinois political scene goes beyond just the Democrats who control Springfield.

"The politicians here are so weak, so incapable of leading, they've just decided to sort of let the circumstances, let the bond market force the change, let the tax revolt force the change because they won't lead. We have got to replace the leaders," Rauner said.

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