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