During a 10-month period starting in November 2015, four firms qualified by Illinois Governor Bruce Rauner’s administration purchased $1.12 billion in unpaid bills due scores of vendors providing critical goods and services. In return, the firms stood to pocket at least $118 million in state-funded late-payment penalties as of late September.
Firm Receivables acquired* Late-payment penalty*
Vendor Assistance Program $707.2 million $82.4 million
Illinois Financing Partners $275.4 million $18.6 million
Vendor Capital Finance LLC $145 million $16.9 million
Payplant $475,330 $39,530
*As of Sept. 28, 2016
Source: Illinois Department of Central Management Services
Vendor Assistance Program (VAP)
VAP’s February 2014 disclosure, its latest available, identifies six funding sources and 12 owners, including Citibank N.A. and the consulting firm owned by Democratic political strategist Patti Solis Doyle, Hillary Clinton's 2008 presidential campaign manager.
Another VAP investor listed on that document is Manchester Securities, which is owned by billionaire hedge fund manager Paul Singer and had a 4 percent stake. State records show Singer donated $250,000 to Rauner in September 2014, two months before Rauner's election and 14 months before the launch of the Rauner administration's Vendor Support Initiative.
Argentina dubbed an affiliated Singer-owned company a "vulture" investor for its hardball tactics in a decade-plus legal battle with the South American nation over defaulted sovereign debt. At one point, the Singer firm had an Argentine naval training vessel briefly impounded by Ghana in an attempt to extract money from Buenos Aires.
Illinois Financing Partners (IFP)
Illinois Financing Partners, LLC's involvement in the program is backed by a $500 million Bank of America commitment, according to an IFP filing with the state in April. IFP’s purchases have consisted entirely of overdue Health Alliance bills. The group's president, founder and majority investor is Lindsay Trittipoe, who holds a 58 percent stake in the company.
IFP's minority investors include former two-term Illinois Republican Governor Jim Edgar, who is IFP's board chairman, and former U.S. Representative Jerry Costello, an Illinois Democrat. Both hold 1 percent stakes in the company.
Vendor Capital Finance LLC
A February 2014 disclosure to Illinois, the most recent available, lists New York municipal finance consultant Le Chen as VCF's chief executive officer. LeRose, LLC, of which Chen is identified as the lone member in state business records, reported a 6 percent ownership stake in VCF. With a nearly 94 percent stake, VCF's largest owner was ER Illinois LLC, based at the same New York address as Richmond Hill Investment Co., LP, VCF's filing showed.
The Palo Alto, California-based firm was co-founded by Ronjon Nag, an inventor and smartphone pioneer, and Neerav Berry, a computer engineering expert and co-founder of a mobile app store platform acquired by Blackberry. A February 2014 filing with Illinois showed Nag and wife Sally Ann Rudd committing $5 million to Payplant with another $5 million coming from the Berry & Pandey Living Trust.
HOW IT WORKS
The program targets invoices from contractors providing vital state services 90 or more days overdue. To date, Illinois has designated a variety of vendors, including some that supply state employees and retirees with medical services, feed prison inmates and keep Illinois’ computer systems functioning.
The outside groups front unpaid vendors 90 percent of the face value of their receivables. Whenever Illinois eventually pays those bills, vendors keep the remaining 10 percent of what they are owed, then forward the balance and late-payment penalties to the lenders.
SOURCES: Illinois Department of Central Management Services REUTERS