By PETER HANCOCK
Capitol News Illinois
phancock@capitolnewsillinois.com

SPRINGFIELD – A federal judge in Puerto Rico last week told a politically connected former state contractor that if he wants to sue for defamation against the people who’ve accused him of defrauding the state of Illinois, he’ll have to do so in an Illinois courtroom.

U.S. District Judge Silvia Carreño-Coll issued that order Monday, formally transferring a defamation case from Puerto Rico to the Northern District of Illinois following the recommendation of a magistrate judge in San Juan who said there was no legal justification for keeping the case in Puerto Rico.

“Not a single one of the Defendants resides in, conduct business in, or has anything to do with, Puerto Rico,” Magistrate Judge Marshal Morgan wrote in a March 15 report.

The case involves Brian Hynes, a Chicago-based lawyer and one-time protégé of former Illinois House Speaker Michael Madigan, who maintains a residence in Puerto Rico. Hynes has operated lobbying and business entities over the years that work with the state of Illinois and the city of Chicago.

The entity at the center of the defamation case is Vendor Assistance Program LLC, or VAP, a company he set up to take part in a program the state has used to pay its bills during periods of tight cash flow. It was used extensively during the 2015-2017 budget impasse under former Republican Gov. Bruce Rauner.

Under that program, private financial firms like VAP would purchase unpaid bills that the state owed its vendors. The vendors would receive the money owed to them and the financial firms were paid interest of 1 percent per month, or 12 percent annually.

During a nine-month period in 2018, the Chicago Tribune reported, Comptroller Suzanna Mendoza’s office issued more than $133 million in late-payment interest penalties to VAP. During that same period, campaign finance records show, another of Hynes’ business entities associated with VAP – Bluestone Capital Markets LLC – contributed $22,200 to Mendoza’s campaign committee.

Hynes, VAP and Bluestone are all named as defendants in a lawsuit currently pending in Cook County Circuit Court that alleges Hynes and his companies should not have been allowed to profit from the program because they violated several of its rules.

That suit was filed under the Illinois False Claims Act in 2021 by two other Chicago lawyers, Michael Forde and Michael Leonard. That’s a law that allows, under certain circumstances, private individuals to bring civil actions against people or entities that file false or fraudulent claims with the state or any of its municipalities.

Also named in the suit are two other VAP-affiliated entities, Greysand Finance LLC and Greysand Capital LLC.

The suit does not allege a specific dollar amount that Hynes and his companies allegedly received through improper means, but it is believed they purchased roughly $2.5 billion worth of state debt while they participated in the program, with interest on that debt totaling in the hundreds of millions of dollars.

If successful in their False Claims Act suit, Forde and Leonard stand to receive 25 to 30 percent of the state’s award.

The suit was originally filed under seal because the False Claims Act gives the attorney general’s office a sort of right of first refusal, meaning it can opt to take the case itself or decline to take the case, in which case the private individuals can pursue it.

In this case, Attorney General Kwame Raoul declined to take the case, so the seal was lifted and information about the case became public.

Chicago public radio station WBEZ first reported on the lawsuit in April 2022 as part of an investigative reporting project with the Reporters Committee for Freedom of the Press.

But Hynes now claims in his own suit that attorneys Forde and Leonard leaked information about the case to reporters while the case was still under seal, and that much of the information they leaked was false and defamatory to him and his businesses.

Hynes filed his suit in March 2023 in federal district court in Puerto Rico, where he maintains a residence and where Bluestone is headquartered.

In her ruling Monday, however, Judge Carreño-Coll transferred the case to the Dirksen Federal Courthouse in Chicago, just blocks away from where the False Claims Act case is pending in Cook County Circuit Court.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.