Legislature thwarts FOIA abuses, aids VCs

August 15, 2005

BY MICHAEL KRAUSS

Can too much freedom and transparency be a bad thing? Yes. You need to strike a balance. Last week, Gov. Blagojevich signed legislation clarifying how the Freedom of Information Act relates to private equity investments made by Illinois' public pension funds. The bill unanimously passed the state Senate, and was approved by a 112-to-3 margin in the House. It struck the right balance.

Entrepreneurial companies such as Naperville-based Optobionics will continue clinical trials of artificial retinas for victims of blindness without fear its trade secrets will be stolen by competitors using the Freedom of Information Act.

The FOIA was enacted several years ago to assure the free flow of information from state government agencies and officials so interested parties -- notably the media -- can scrutinize public agencies and protect the public interest.

But FOIA has been abused by corporations and individuals engaged in industrial espionage. When public pension funds invest in venture firms, their private portfolio companies become exposed to unusual scrutiny. This led leading venture firms to consider rejecting investments from public pension funds in order to protect the trade secrets of companies held in VC portfolios.

The new law will prevent the worst abuses. Individual pensioners' rights to information are protected because the law gives visibility to public pension fund investment performance, but private company trade secrets are protected.

"It's leadership for Illinois," says Keith Crandell, managing director of Arch Venture Partners, a leading Chicago based venture capital firm. "It took some effort to balance public accountability with the need to have a successful private equity community in Illinois. I'm really excited."

Crandell is co-chair of the Illinois Venture Capital Association's legislative committee which sought the legislation. He's worked closely with the legislature and the Department of Commerce and Economic Opportunity to achieve last week's legislative success.

Now Illinois joins a handful of states that have tackled the FOIA dilemma. These include Michigan, Colorado, Massachusetts Virginia and Texas.

"This is one of the few times Illinois has an advantage," says Maura O'Hara, executive director of IVCA. "It's nice to be in the front."

The legislation was a bipartisan effort. Credit goes to the bill's sponsors, senators Don Harmon (D-Oak Park), Kurt Granberg (D-Carlyle), Kirk Dillard (R-Hinsdale) and Dan Rutherford (R-Chenoa).

While the move marks a step forward for Illinois entrepreneurs and VC's, there's more work to be done. IVCA chairman Keith Bank says: "We'd like to see Illinois public pension funds invest more in Illinois venture capital and private equity funds. That's still a big challenge."

Economic Club hosts Hurd

Abbott Labs CEO Miles White doubles as chairman of the Economic Club of Chicago, and he just landed Hewlett-Packard CEO Mark Hurd, one of the technology industry's top executives, to speak Oct. 24.

Oracle security guru

Chicago's Rich Niemiec, founder of TUSC, one of the nation's leading consulting firms on Oracle software, hosts Oracle chief security officer Mary Ann Davidson on Friday at the University of Illinois at Chicago. Davidson keynotes a meeting of MOUG, the Midwest Oracle Users Group.

Davidson will review Oracle's new approach to data encryption that aims to limit corporate data theft. "Not every problem has a technical solution," says Davidson who urges caution when disclosing your Social Security number or personal data. "Our encryption approach will be best practice," adds Davidson.

Davidson lobbied for the creation of the chief security officer role in 2001. She has an ethical hacking team that reports to her that works to crack flaws in Oracle software. She saw the need to have a policy maker who would lead security issues.

"Security goes right back to the founding of Oracle," she says. "Oracle's first assignment was to build a relational data base application for the Central Intelligence Agency."

No word from Niemiec if ex-Chicagoan and Oracle founder Larry Ellison will make a surprise appearance. Niemiec did land high-flying Oracle aerobatic pilot Sean Tucker. After speaking Friday at UIC, Tucker takes to the air to perform at this weekend's Air and Water Show.

 

Michael Krauss is a Chicago-area tech writer and consultant.

 

 

 ©2005 Marion Consulting Partners