Ex-CEO of Rauner-tied firm, associate charged by feds with fraud
The onetime head of a company tied to Bruce Rauner and an associate — men the GOP candidate for governor Thursday called "rogue employees" — have been indicted in federal court in New Jersey on charges they stole millions of dollars in a sophisticated trading fraud.
Anthony Blumberg, 49, of New Jersey, and Craig Marshall, 47, of Bermuda worked for ConvergEx Global Markets Limited, a Bermuda-based broker and subsidiary to a firm Rauner’s former private equity company helped found.
Blumberg and Marshall were indicted late Wednesday on criminal charges of securities fraud, wire fraud and conspiracy to commit securities and wire fraud.
Blumberg — the CEO of ConvergEx Global Markets Limited — also faces a separate civil lawsuit filed by the Securities and Exchange Commission.
According to the indictment, both Blumberg and Marshall — a trader — routed trades through Bermuda between 2007 and 2011 to fraudulently charge clients fees, which they then hid.
Though the indictment was only announced Thursday, the allegations against ConvergEx Global Markets Limited are not new.
ConvergEx Group LLC, the parent of ConvergEx Global Markets Limited, admitted wrongdoing in December and agreed to pay $150 million in a plea deal with the government. The subsidiary's lead trader, Jonathan Daspin, also pleaded guilty at that time.
Regulators had previously alleged the firm took advantage of funds managed on behalf of charities, religious organizations, retirement plans, universities and governments, who were less likely to ask questions.
Rauner’s one-time private equity firm, GTCR Golder Rauner, had teamed up with the Bank of New York and a software firm to form ConvergEx in 2006, according to an SEC filing. GTCR held a 35 percent stake at the time, but a deal to sell ConvergEx collapsed in 2011 under the weight of the SEC’s investigation.
"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."
Rauner joined GTCR in 1981 and was its chairman until stepping down in October 2012 but "had no say in hiring either of the two people," Schrimpf said.
Gov. Pat Quinn's campaign teed off on Rauner and demanded a full accounting of what happened at the ConvergEx subsidiary from the Republican candidate himself.
"Bruce Rauner is dodging accountability yet again for conduct at another one of GTCRauner's businesses," Quinn spokeswoman Brooke Anderson said. "If Mr. Rauner is not responsible for anything that happens at his businesses, what exactly is he responsible for and where does the buck stop?
"As chairman of GTCR, he started ConvergEx and profited from it at the same time its leadership — that GTCR put in place — was committing fraud," she said. "He owes the public an explanaton of what went wrong, when he learned of the fraud and what he did to fix it."