Wallace Says Federal Takeover Of Business' Major Investor No Problem

The federal government has taken over the controlling shareholder of the business GOP gubernatorial candidate James Wallace founded, TWG Capital, to help recover tens of millions of dollars it owes the SBA, but he says the federal takeover poses no problems to his business. The Star's John Russell has Wallace's reaction to a story first reported by the Chicago Sun-Times, which has been closely tracking developments concerning Cardinal Growth because of its financial ties to former Chicago Mayor Richard Daley's son, Patrick:

Just a few months after launching a campaign for the Republican nomination for governor, strongly touting his business experience, James Wallace is facing an unclear future for his company, TWG Capital of Indianapolis.

The company's biggest investor, Chicago venture capital fund Cardinal Growth LP, is being taken over by the federal government after failing to repay $21.4 million in loans from the Small Business Administration.

The ties between the two firms run deep. Cardinal Growth owns about 80 percent of Wallace's company, based on East 75th Street. Both of TWG's board members are principals with Cardinal Growth . . .

Wallace said his Indianapolis company, which provides money to insurance brokerages and agents, is not among the underperforming assets.

He said TWG is solvent, profitable and current on its financial obligations. But it declined to provide financial records to The Indianapolis Star and referred all such questions to the court receiver in Washington, who could not be reached for comment Tuesday.

"We're rather insulated from Cardinal's other portfolio companies, but my understanding is that they had eight or ten other companies, the bulk of which had already been sold, some at a profit, some at a loss, which triggered an audit by the SBA," Wallace said in an interview Tuesday . . .

TWG remains part of the Cardinal operation, as does one other company, a shrimp distributor in California.

Wallace said the overall impact of Cardinal's financial problems would be "pretty minimal" on TWG. He said the receiver could sell Cardinal's stake in TWG to another company. He said TWG was not on the hook to repay the SBA loan.

"We're not at all affected by one of our investors' liquidation," he said.

He added: "But for the hiccup on Cardinal's part, our business is doing fine."

Wallace rolled out his campaign for governor in May, saying his business experience could trump the star power of front-runner Mike Pence.

But some political observers say the business problems could become a campaign issue for Wallace. "Whether or not this financial problem is Wallace's fault, it won't help people from bringing it up," said Andy Downs, assistant professor of political science at Indiana University Purdue University-Fort Wayne.

Wallace, a former Hamilton County Council member, is largely self-funding his campaign. He told The Star last week that his campaign will report about $930,000 in cash on hand later this month.

Russell's story does not seek comment from Wallace on the role Patrick Daley has had with his firm. According to the Sun-Times, Daley has received payments from Cardinal Growth related to its investment in TWG. Daley's financial ties to Cardinal Growth has drawn the scrutiny of federal investigators because the company invested in at least two businesses that that won lucrative contracts with the City of Chicago while his father was mayor.