THE LATE SHOW
Company founded by two Democratic Party insiders getting millions from state’s tardy bill- paying
“THIS ISN’T A PARTICULARLY PROFITABLE BUSINESS. . . . WE CERTAINLY DIDN’T GET THE VOLUME WE ANTICIPATED.”
Cashing in on the state of Illinois’ financial crisis, a company founded by two Democratic Party insiders has been paid millions by fronting money to vendors the state is behind in paying — and then getting the late fees once the state pays up, records show.
Brian Hynes and Patti Solis Doyle’s company has gotten more than $ 22 million from the financially battered state government through those late fees in the past three years.
Hynes is a lobbyist whose political career began under House Speaker Michael J. Madigan, D- Chicago. Solis Doyle managed Hillary Clinton’s 2008 presidential campaign and is a sister of Chicago Ald. Danny Solis ( 25th). She’s also a political commentator for CNN.
Just as failing to pay your own bills on time costs you money, late payments have been costing the state of Illinois — with its $ 6.7 billion backlog of bills — a fortune. Over the past dozen years, Illinois government has paid $ 611 million in late fees to vendors forced to wait months to get paid for their services, state records show.
With the state spending so much on late fees to health insurers, technology firms, social service agencies and other vendors, Hynes and Solis Doyle started a company called Vendor Assistance Program, known as VAP, to cash in. They began working with the administration of then- Gov. Pat Quinn five years ago on a first- ofitskind state initiative with a similar name— the Vendor Payment Program. It allows the state’s vendors to get their overdue money sooner — if they’re willing to give up their late fees to Hynes and Solis Doyle’s company.
If the state doesn’t pay a bill within 90 days, eligible vendors can collect 90 percent of what they’re owed by selling their unpaid bills to the Hynes- Solis Doyle venture. When the VAP collects the full payment from the state, it pays the vendors the remaining 10 percent but keeps all of the late fees. Under the law, the state has to pay 1 percent interest a month on all bills more than 90 days past due.
DAVID REAPE, VAP chief executive officer
Since 2011, more than 900 state vendors have signed up with VAP. The company has bought late bills from only 180 of them, according to records it submits to the state.
VAP borrows the money to pay those vendors. Since 2011, the state has paid the company $ 570 million toward late vendor invoices totaling $ 585 million, the most recently available state records show. VAP was still waiting for the state to pay the rest of those bills as of the end of July.
The state has paid VAP $ 22.3 million in late fees.
The Hynes- Solis Doyle company has marketed itself as a lifeline for small businesses that can’t afford to wait for the state to pay their bills. But it has spent 90 percent of its money helping just three companies: two of them health insurance companies for state employees— Health Alliance and Coventry Health
Care — and tech giant IBM. Together, the three have accounted for $ 529.6 million of the $ 585 million in invoices VAP has taken on.
Since Malcolm Weems, a former top Quinn aide, developed the Vendor Payment Program, four other companies have been given state approval to compete for the business with VAP. Three of them haven’t bought a single unpaid bill. The fourth has bought late state bills totaling less than $ 100,000. Weems couldn’t be reached for comment.
With Gov. Bruce Rauner and the Legislature failing so far to agree on a state budget, and many state bills unable to be paid as a result, VAP has seen its business slow down.
“This isn’t a particularly profitable business,” says David Reape, VAP’s chief executive officer since 2012. “We had to spend a lot of money to build systems. This was a very expensive programto finance. We certainly didn’t get the volume we anticipated.”
When Hynes and Solis Doyle started VAP, it operated out of the same Pilsen storefront building as the 25th Ward Regular Democratic Organization, headed by Danny Solis.
The alderman says he has no involvement with VAP, but he owns Solis Enterprises, a consulting business he says refers clients to his sister’s communications company, Solis Strategies. Solis Doyle holds her stake in VAP through Solis Strategies.
Solis Doyle got her start in politics working on Richard M. Daley’s 1989 mayoral campaign and Bill Clinton’s first presidential campaign. She later ran Hillary Clinton’s Senate and presidential campaigns. In 2012, when VAP began buying state contractors’ unpaid bills, she was working as an adviser to President Barack Obama’s re- election campaign.
In a posting on VAP’s website, Solis Doyle writes: “Doing what we do requires a close working partnership with government. And there’s not a nook or cranny of the government I don’t know about.”
Hynes is a lawyer and lobbyist who grew up a block away from Madigan. In addition to having worked on the speaker’s staff, he once did legal work for convicted political fixer Tony Rezko and was involved in business deals with the late Kevin F. Flynn, best known for his failed effort to bring a casino toRosemont.
VAP has borrowed hundreds of millions of dollars from lenders including Citibank and Flynn to buy vendors’ unpaid bills while waiting for the state to pay up.
Hynes and Solis Doyle also tried to get other states to set up similar programs, but they weren’t successful.
VAP gave $ 70,000 to the Democratic Governors’ Association in 2012 and 2013, and Solis Doyle gave $ 700 to the DGA. The association helped bankroll Quinn’s losing campaign against Rauner last year.
Solis Doyle also gave $ 1,000 to Quinn’s campaign last year, when VAP contributed $ 10,500 to the re- election campaign of Republican state Comptroller Judy Baar Topinka, whose office pays the state’s bills and late fees. Topinka has since died.
The Wall Street Journal put the company on the national stage with a 2013 profile that described VAP as “aiming to mine a silver lining in the fiscal misery hanging over Illinois.”
Last year, VAP collected $ 14.5 million in late fees from the state — four times more than it got the previous year.
But business has fallen this year. In the first seven months, the company has collected $ 4.4 million in late fees. The amount of unpaid bills it is buying has plummeted since Quinn left office in January.
Hynes and Reape say it’s harder for them to make money because the state’s Vendor Payment Program excludes Medicaid, which accounts for the bulk of the state’s unpaid bills.
They also say they’re losing business to “factoring” companies, which aren’t bound by the Vendor Payment Program’s rules. Those businesses can buy unpaid bills more quickly under terms negotiated between the buyer and the unpaid state vendor.
Under terms of the state’s program, VAP can’t buy an unpaid bill unless it’s at least 90 days past due — and it has to guarantee that the vendor will receive all the money owed.
“At the end of the day, the programhasn’t been successful,” Hynes says. “We never had the volume of business we need to make a profit.”
“DOING WHAT WE DO REQUIRES A CLOSE WORKING PARTNERSHIP WITH GOVERNMENT. AND THERE’S NOT A NOOK OR CRANNY OF THE GOVERNMENT I DON’T KNOWABOUT.”
PATTI SOLIS DOYLE, on her Vendor Assistance Program company website