Hedge Fund Owned By Emanuel's Top Campaign Donor Stands To Profit Off DePaul Arena Deal [UPDATE]

By Chuck Sudo in News on Apr 9, 2014 8:50PM

Update 5:44 p.m. Chicagoist received an email from a Citadel spokesman.

"The Reader/PandoDaily story is completely irresponsible. It is comprised of nearly equal parts baseless speculation devoid of any real factual grounding and preposterous conclusions."

Chicago may be “The City That Works” but for keen observers of the local political process that effort may appear very dirty. When one of those observers has the writing and reporting skills of journalist David Sirota the view attains a better sense of clarity. Team Sirota with Chicago Reader rabble-rouser Ben Joravsky and watch some local politicos duck for cover.

Joravsky and Sirota teamed up for a joint investigation by the Reader and website PandoDaily looking at the connections between the hotel set to be built near the DePaul university basketball arena and one of Mayor Rahm Emanuel’s biggest donors. Kenneth Griffin, founder and CEO of investment firm Citadel LLC and the richest man in Illinois, stands to make millions from the hotel once it’s built. Sirota and Joravsky do a masterful job setting up the details.

On February 19, 2013, Mayor Emanuel and Illinois Governor Patrick Quinn (D) announced that the Exposition Authority would be building a giant hotel not far from the McCormick Place convention center. In May of 2013, they announced DePaul would be constructing the basketball arena events center. And on September 13, 2013, the Authority’s board of directors, who are appointed by the mayor and governor, announced that they had chosen Marriott—over Hyatt and Hilton—to run the hotel. According to the Authority’s spokeswoman Mary Kay Marquisos, the board did its due diligence through “a two phase process” of review.

In the months before the development deal was announced, Griffin’s hedge fund was buying up large blocs of Marriott stock. According to SEC filings, Citadel purchased 1.6 million shares of Marriott stock in late 2012. By September of 2013, SEC filings showed the hedge fund owned 2.3 million shares of Marriott. As of the last SEC filings at the end of 2013, Citadel still owned roughly 1.6 million shares of Marriott stock worth an estimated $88 million.

According to NASDAQ figures, Citadel became - and remains - one of the 25 largest institutional owners of Marriott stock.

Citadel stands to make nothing but pure profit from the development deal without having to pay for the construction of the hotel or pay property taxes on it. That is being funded in part with $55 million in tax increment financing; anyone who’s read Joravsky for an extended amount of time knows TIFs is his Great White Whale.

The report notes Griffin and his wife, Anne Dias Griffin, donated over $200,000 to Emanuel’s campaign fund in the last three years. Griffin’s largesse extends to both sides of the political aisle; he’s donated to the campaigns of former Mayor Richard M. Daley, ex-Gov. Rod Blagojevich, Illinois GOP gubernatorial nominee Bruce Rauner, 2012 Republican presidential nominee Mitt Romney and New Jersey Gov. Chris Christie.

Griffin describes himself as a “right-of-center free market advocate” yet Citadel’s purchase of stock in a hotel chain that stands to make a ton of money from a taxpayer-funded development deal runs counter to that ideology. Sirota and Joravsky tried to get Griffin and Emanuel to comment for their investigation, to no avail.

This is Sirota’s second article looking at Chicago’s TIF, essentially a slush fund controlled directly by the mayor, in the past week. Last Friday PandoDaily published a report on Chicago’s TIF programs, which Joravsky has long called Chicago’s “shadow budget.” Sirota notes the tax money siphoned to that fund means less money for schools, parks, city departments and other aspects of local government. Sirota notes the total money collected by TIF districts far outweighs what Chicago owes annually in pension payments.

Voters may remember Emanuel promising TIF reform was one of his priorities during his 2011 mayoral campaign. Now he's saying the city is too broke to afford its pension obligations and championing a pension reform bill that only awaits Quinn’s signature to become law, people should be angrier than they are.