Here’s more on the state GOP’s $285 million (con)man

The shock is setting in among state Republican Party officials after learning that one of their own, GOP State Committee member William Rauwerdink, harbors a secret past as a big-time, white-collar criminal.

U-Wisc. photo

Rauwerdink, a 14^th Congressional District representative on the committee from West Bloomfield Township, was hit with a 16-count criminal indictment by the feds in 2003 related to his fraudulent activities at Lason Inc. of Troy, a document-imaging and data-management company.

As I first reported for Deadline Detroit on Thursday (see story below), Rauwerdink pleaded guilty in 2007 to several charges in the massive fraud, served nearly four years in prison and was ordered to pay an astounding $285 million in restitution to many, many victims.

The timing of these revelations could not be worse for the MIGOP as they head into their state convention next Friday and Saturday to pick a new party chairman.

"I'm a little shell-shocked, like everybody else," Paul Welday, a former chairman of the Oakland County Republican Party and a fellow 14^th District GOP delegate, told the Detroit Free Press.
"I guarantee you nobody knew anything about this ... at least that I'm aware of."

But there are a lot more details about Rauwerdink’s sordid past that never made it into the Deadline Detroit story. This guy has been fooling people in various walks of life for years.

Here is Part II of Rauwerdink’s story, based on the 2003 indictment, U.S. District Court records, U.S. Attorney’s Office information, U.S. Securities and Exchange Commission documents, prior news reports, and Rauwerdink’s own blog and LinkedIn page:
* Rauwerdink certainly has not been hiding in the shadows since the criminal indictment. In 2004, he started a new, privately held firm, BAM Investments, a company he boasts about online in his LinkedIn biography (without mentioning Lason). He also has established numerous ties, as a classroom instructor and board member, at several universities.
At the University of Wisconsin, his alma mater, where he was a cheerleader before graduating in 1972, Rauwerdink serves on the university business school’s Dean’s Advisory Board. According to the university’s website, Rauwerdink started teaching an entrepreneurship class last fall at the Ross Graduate School of Business at the University of Michigan as an adjunct professor. He has also taught at Harvard, the Harvard Business School executive education programs, Simmons Graduate School (Boston), and Enspire Learning, a leading institution for executive education.
In addition, Rauwerdink is a member of the Michigan Venture Capital Association.

* Rauwerdink and Lason became an issue in last year’s Illinois governor’s race, due to the Republican gubernatorial nominee’s ties to the disgraced company, and as late as September Rauwerdink was still viewed as an anchor around the neck of the GOP’s Bruce Rauner (now the governor).

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On Sept. 13, 2014, with Rauner trailing the Democratic incumbent by three percentage points in the polls, a columnist for Crain’s Chicago Business wrote: “Rauwerdink was fined $200,000 by the SEC in connection with insider trading allegations at another company a few months before Rauner's (private equity) firm brought him aboard (at Lason in 1996), which leads me to doubt that Lason was ever on the straight and narrow.
"We've had enough of that corrupt nonsense in Illinois government. Rauner won't be able to run away so easily from a criminal appointee if he's elected -- assuming the Lason legacy doesn't bite his political rear first.”    

* When federal prosecutors brought charges against Rauwerdink, they said that he profited from the accounting scheme at Lason through his salary, bonuses, stock options and executive loans, much of which was awarded based on the rapid rise in Lason’s stock price on Wall Street. Two other Lason officers, Gary Monroe and John Messinger, were also convicted of fraud but, under a plea bargain agreement, their restitution was limited to $20 million each in federal court.

* Among Rauwerdink’s roles, beyond cooking the books, was to routinely issue press releases in which Lason falsely boasted of big revenue gains for the company, information that fooled stock analysts, underwriters, brokers, Lason shareholders, the investing public, and the media reporting on business news.

* SEC documents show that the ongoing scam culminated in the third quarter of 1999 when Lason’s earnings were overstated by 65 percent. Numerous fraudulent accounting entries throughout the 1999 financial documents were discovered later by federal investigators.

The well-organized fraud was known at Lason as “Tailwind,” a sleazy effort to wildly exaggerate Lason’s earnings and to hide large expenses. At one point, when a Lason auditor questioned an invalid invoice that was counted as revenue in 1998, the Tailwind team created a phony check to paper over the fraud.

* In March 2008, Rauwerdink put to rest another aspect of his legal troubles when he agreed to settle a separate civil suit brought against him and the other two convicted Lason officers by the SEC. The settlement barred the defendants from serving as officers in a publicly traded company and essentially warned them that they will face strong repercussions if they ever violate federal anti-fraud or record-keeping provisions in the future. The partners in crime accepted the settlement without admitting or denying wrongdoing.

* According to Gina Balaya, spokeswoman for the U.S. Attorney’s Office in Detroit, Rauwerdink was not banned from conducting business in the financial services sector. Rauwerdink apparently stayed in the game by steering clear of publicly held companies with shareholders.

* According to records at the SEC and the state Insurance and Financial Services Department, Rauwerdink is not licensed to do business in the financial services sector.

* From 1996 through the end of 1999, Lason engaged in a business growth strategy of acquiring similar document management companies. The indictment said that Rauwerdink and others at Lason encouraged several of these companies to engage in Tailwind-style accounting to further boost the value of Lason’s stock.

* The acquisitions were financed through loans from a group of financial institutions led by Bank One Michigan, now a part of JP Morgan Chase. The other banks, all insured by the Federal Deposit Insurance Corporation (FDIC), were: Comerica Bank; Hibernia National Bank; Bank of America; National City Bank; Michigan National Bank; Fuji Bank, Ltd.; Union Bank of California, N.A.; AmSouth Bank; BankBoston, N.A; Chase Manhattan Bank; Mellon Bank, N.A.; Fleet National Bank; and ABN AMRO Bank, N.V.

* A considerable portion of Lason’s business was conducted with the Big Three automakers, though General Motors dropped the firm in 1998 after Lason reportedly botched the job.

* In stories published by Crain’s Detroit Business on Jan. 17, 2000, and again on July 3 of that year, Rauwerdink – while hiding information from the public about Lason’s true financial picture -- insisted that the company’s sudden  difficulties could be cured through some basic restructuring.

* During his time at Lason, from 1996 until the company’s bankruptcy in 2001, Rauwerdink held the titles of executive vice president, chief financial officer (CFO), treasurer and board secretary.

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State GOP Official's Shady Past Includes Prison For $285-Million Fraud

By Chad Selweski

For Deadline Detroit

When the Michigan Republican Party elites gather on Feb. 20-21 for their state convention in Lansing, among the GOP State Committee members expected to attend is a West Bloomfield Township businessman who served nearly four years in prison and was ordered to pay $285 million in restitution after pleading guilty in a massive financial fraud case.  

William Rauwerdink has managed to keep his secret past hidden as he serves on the committee that oversees all party operations and policies. He was elected to that post by delegates at the 2013 state convention.
He may not be famous within the state Republican Party but Rauwerdink is infamous in some financial circles, from Metro Detroit to Wall Street.

Rauwerdink, 65, was indicted in 2003 by federal prosecutors on 16 counts of fraud related to his role as chief financial officer of a document- and data-management company, Lason Inc. of Troy.

This was not some nickel-and-dime scam. A Wayne State University professor who studies white-collar crime last year called it "one of the worst accounting frauds ever" before it was upstaged by much bigger scams at Enron and WorldCom.

Prison Term and Paybacks
After Rauwerdink admitted to cooking the books at the Troy firm, the company CFO pleaded guilty to mail, wire and bank fraud, and received a prison sentence in 2007 of three years and nine months, followed by two years of court-supervised release, restitution payments of $115 million to Lason’s former shareholders, and $170 million in restitution to Lason’s lenders, a 14-member bank group led by Bank One Michigan, now a part of JPMorgan Chase.
Prosecutors in the case said Rauwerdink was “deeply involved” in a scheme at Lason known as “Tailwind,” which reported revenues at heights that were wildly off the mark in order to boost the firm’s stock price on Wall Street. The indictment also charged Rauwerdink with repeatedly filing fabricated information – record earnings, quarter after quarter – with the U.S. Securities and Exchange Commission in 1998-99.

The staggering restitution amount was imposed by U.S. District Judge Arthur Tarnow of Detroit because of the “greed and avarice” that prevailed at Lason “at the expense of Lason’s shareholders, banks, employees, and customers,” the judge said at sentencing.

It’s unclear if any of his fellow Republican State Committee members realize that they have a big-time white-collar criminal in their midst. It’s even more unlikely that anyone in GOP inner circles knows that Rauwerdink has established a track record of fraudulent activities.
Rauwerdink first ran afoul of federal regulators in 1995, shortly before he landed his executive post at Lason. According to CFO Magazine, Rauwerdink, as CFO of a company called The Medstat Group, agreed to pay a $200,000 fine to settle charges brought by federal authorities of insider trading in Medstat stock.

State Party Position

Rauwerdink serves as a Republican State Committee member representing the 14^thCongressional District, which covers wide swaths of  Detroit and Oakland County.
In a blog that he wrote in 2011-13, the businessman recalled that he first dipped his toe into the political waters in 2010, when he was elected as a GOP precinct delegate and attended the August 2010 state convention, where delegates elected the party’s nominees for state Supreme Court, attorney general and secretary of state.
Though Rauwerdink remains a political neophyte in a relatively low-profile post, the shenanigans at Lason received scrutiny on a much bigger stage last year in Illinois. Early in his 2014 campaign, Republican Bruce Rauner, now the governor of Illinois, had to fend off questions about his involvement in Lason.

The Chicago Tribune reported in January 2014 that Rauner served on the Lason board of directors and that he had hired Rauwerdink, the primary architect of the bookkeeping sleight of hand, in 1996. The governor resigned from Lason in late 1999 just as the high-flying company’s stock began to crater and before it declared bankruptcy.

Rauwerdink, who is presumably seeking re-election to the state committee at next week’s MIGOP convention – he has given no indication to the contrary -- could not be reached for comment. He is currently listed as the founder of BAM Investments in Troy, which does not list an address or phone number.

Brazen Chutzpah

In a brazen display of chutzpah, he formed BAM Investments in 2004 as he awaited trial in federal court in the Lason case, and he boasts on his LinkedIn page of financial deals in excess of $10 million that he has completed at BAM.
The state  Republicans don't need any more blemishes.
At the state convention, Michigan Republicans will face the internal fallout of a rough 2014 when one state committee member resigned after getting sentenced to three years in prison for extortion; a county party chairman held onto his post despite two prior felony convictions, and Republican National Committee member Dave Agema who repeatedly refused to step down after posting several bigoted commentaries online.

Interestingly, as a state committee member with a supposedly successful financial services company, Rauwerdink would normally receive countless solicitations for campaign contributions from party candidates.

But those with their eyes on public office may want to cross him off their list. After all, any of his extra cash should be going to feds to pay off his restitution.