With Chicago-area homicides, carjackings and expressway shootings all up in 2021, billionaire investment tycoon Kenneth Griffin minced no words last fall when he singled out one man, Democratic Gov. JB Pritzker, for not confronting the crime scourge terrorizing the region.
But while Griffin was deriding Pritzker’s response as a “disgrace,” Griffin’s $46 billion hedge fund — Citadel — and its corporate cousin had investments and holdings in gun and ammunition manufacturing companies, federal securities records show.
In fact, Chicago police data analyzed by WBEZ show that nearly one out of every four guns recovered from city homicides in the past five years came off the assembly lines of companies in which Citadel held shares — weapons that have played a role in the same, worsening crime wave that Griffin blames on the governor.
Griffin’s activism and bank account are shaping the Illinois Republican Party in this year’s election cycle as the GOP looks for big gains in Springfield. Griffin and his favored gubernatorial candidate, Aurora Mayor Richard Irvin, are focusing on crime as a defining issue to deprive the Democratic governor of a second term.
All told, Citadel’s hedge fund arm and its related market-maker firm, Citadel Securities, reported investments and holdings in gun and ammunition manufacturing companies that exceeded $86 million at the end of 2021, according to federal securities disclosures.
But a company spokesperson told WBEZ that Griffin doesn’t have a role in stock choices or the stocks it avoids, and there is no correlation between Chicago’s wave of violent crime and the company’s investments and holdings.
“These investments make up less than .01% of our portfolio,” Citadel spokesperson Zia Ahmed said, calling any links between the companies’ positions and violent crime in Chicago “quite a stretch.”
Citadel’s hedge fund reported $8.7 million in year-end investments in gun and ammunition-related stocks, a position Ahmed characterized as “infinitesimal in light of the size of our firm.” But to put that number into some context, it’s just short of what Griffin donated to the University of Chicago Crime Lab. The university described the 2018 grant as “transformative.”
Ahmed said the vast majority of Citadel’s positions in gun and ammunition companies are equities held by Citadel Securities, the market-maker company that he said does not make direct investments but instead owns blocs of stocks that individuals buy and sell through third-party retail brokerages.
Griffin is Illinois’ wealthiest individual, ranking 61st on the Forbes real-time list of most prosperous Americans as of Friday morning with a net worth estimated at $25.2 billion. That’s seven times larger than the estimated $3.6 billion fortune that Forbes attaches to Pritzker.
The two are epic political nemeses, with Griffin pledging an “all-in” effort to block Pritzker’s reelection. Griffin pumped $36 million into the losing campaign of Pritzker’s GOP rival in 2018, incumbent Gov. Bruce Rauner. And in 2020, Griffin spent nearly $54 million to defeat Pritzker’s bid to change the state constitution to establish a graduated income tax that would make wealthy Illinoisans pay more to Springfield.
Last week, Griffin contributed $20 million to Irvin, who is in a potential five-way Republican gubernatorial primary set for June. Two days earlier, Irvin blasted Pritzker on Twitter for having a “sit back and relax” approach to Chicago’s generationally high homicide rate.
Griffin says Pritzker’s response on crime “a disgrace”
Strip out the politics, and crime is an undeniable and worsening blemish on the city and state landscape.
Last month, the Cook County Medical Examiner’s office reported it handled 1,087 homicides during 2021, the largest number of killings since 1994. The Illinois State Police disclosed that expressway shootings last year were six times greater than three years earlier. Chicago police data showed carjackings in the city topped 2,100 last year, the highest level in at least 20 years.
Pritzker has focused on criminal justice issues during his tenure, though he has not been a frequent advocate for penalty enhancements for those convicted of crimes.
In his budget address this month, Pritzker called it “cynical and counterproductive to simply shout ‘lock them up’” without investing in crime prevention. One exception with regard to penalty enhancements is his push for tougher sentences for those convicted of murdering state child-welfare workers.
Overall on crime, Pritzker enacted a criminal justice package last year that mandated police body cameras by 2025 and will end cash bail in 2023; beefed up State Police patrols on Chicago expressways; and deployed the Illinois National Guard in 2020 at Mayor Lori Lightfoot’s request to respond to civil unrest and looting in Chicago after the murder of George Floyd in Minneapolis. This month, Pritzker proposed funding what he said would be the largest class of new State Police cadets in a single year.
But Griffin has poked holes in that record, with his criticism reaching a zenith last October when he spoke at the Economic Club of Chicago after an eight-year hiatus. Griffin needled Pritzker for allowing violence-prone Chicago to descend into “Afghanistan on a good day.”
“Since I last spoke in 2013, 25,000 of my fellow Chicagoans have been shot. And it is a disgrace that our governor will not insert himself into the challenge of addressing crime in our city,” Griffin said to applause. “It is a disgrace.”
The timespan Griffin cited between 2013 and 2021 included two other governors, Democrat Pat Quinn and Rauner. In his speech, Griffin did not criticize either previous governor for crime in Chicago, reserving his criticism for only Pritzker.
Former regulator says gun stocks are “a choice they’re making”
At the same time Griffin was ridiculing Pritzker, Citadel and Citadel Securities held shares in five gun and ammunition manufacturing companies with a combined value of more than $103 million as of September 2021, according to a company disclosure with the federal Securities and Exchange Commission.
A new SEC filing submitted last week showed Citadel and Citadel Securities held $86 million worth of shares in the gun and ammunition sector as of Dec. 31, 2021.
That latest disclosure showed investments and holdings in Smith & Wesson Brands Inc. stock valued at nearly $13.7 million and another $21.2 million in Sturm, Ruger & Co. Inc. stock.
Citadel and Citadel Securities had another $51.2 million in investments and holdings in companies that make ammunition, including Olin Corp., Ammo Inc., and Vista Outdoor, the filing showed.
Citadel said ammunition manufacturers should not be included in WBEZ’s reporting.
Citadel also insisted that the majority of the holdings the company reported to the SEC weren’t investments controlled by the company’s multibillion-dollar hedge fund but instead were securities associated with Griffin-owned Citadel Securities.
“Citadel Securities (the market making company) is separate from Citadel (the hedge fund business),” Ahmed said. “It does not make ‘investments’ in [Smith & Wesson and Sturm, Ruger]. It holds them and tens of thousands of other securities so investors can buy and sell them as their investments.”
Citadel Securities works as a New York Stock Exchange-registered “market maker” that purchases big swathes of securities and makes them available to investors to buy or sell at a moment’s notice, often through online brokerages like Robinhood or Charles Schwab.
In a written statement, Ahmed said that Citadel Securities is compelled to have holdings in gun and ammunition stocks.
“As a designated market maker at the [New York Stock Exchange], we are obligated to provide a quote in the stocks that they decide to list on the exchange,” he said. “More generally, our clients (retail brokerages such as Fidelity, Vanguard, Schwab, etc.) expect us to provide liquidity in all stocks so their clients (individual investors like me and you) can buy/sell whatever company they want.”
As such, Ahmed objected to including Citadel Securities’ holdings in WBEZ’s reporting.
But those holdings were reported alongside the hedge fund investments in the same single Citadel filing with the SEC, which dictates the rules over how and when companies report their stock holdings.
Several securities lawyers interviewed by WBEZ said they knew of no regulations requiring a financial behemoth like Citadel Securities to trade in the weapons sector. The company has the clout to avoid it entirely if it wanted to, they said.
“I think they have the economic leverage that they could tell the New York Stock Exchange what they’re going to do, and the New York Stock Exchange has no alternative because there really isn’t an alternative right now to Citadel,” said Columbia University law professor John C. Coffee, Jr., one of the nation’s leading experts on securities law and director of the Center on Corporate Governance at Columbia Law School in New York City.
Duke University law professor James D. Cox, another leading expert in securities law, also was skeptical of the Citadel explanation.
“I’m not aware of any … requirement that market makers have to hold themselves out to represent all possible securities that can be traded. They usually do it selectively,” he said. “There’s no requirement that all God’s children have to be represented by each market maker.”
Coffee and Cox have co-authored textbooks that law school students use to study securities laws and regulations.
And a top investor advocate and former federal regulator said there is little reason to disregard the holdings from Citadel’s market maker.
“Based on their holdings, it appears that they have pretty significant engagement and exposure to the sector, and that’s a choice they’re making whether for their hedge fund or their market maker,” said Tyler Gellasch, a former SEC lawyer and executive director of Healthy Markets Association, a Washington, D.C.-based nonprofit investor advocacy group.
“Those are securities they own,” he said. “I think it’s fair to say if they own the securities, they own the securities.”
Pfleger says gun investments “absolutely hypocritical”
In Chicago, anti-violence advocates interviewed by WBEZ were surprised to learn of Citadel’s investments and holdings and were critical of them considering Griffin’s outspokenness on crime and the frequency of gunfire in neighborhoods throughout the city.
“You absolutely cannot be a voice about crime and murder or shootings on our streets when your company is a major investor in gun manufacturers. It’s absolutely hypocritical,” said the Rev. Michael Pfleger, pastor of Faith Community of St. Sabina Church in the city’s Auburn Gresham neighborhood and an ardent gun-control advocate.
“Guns have become part of America’s wardrobe and … become the major instrument in the violence that has grown across the nation, but particularly in Chicago, where we’ve had the most homicides in 27 years,” Pfleger said. “So how do you speak out about that while you were investing in this industry that is making guns accessible?”
Ahmed said Griffin himself was unaware of his hedge fund’s investments or Citadel Securities’ holdings in gun and ammunition manufacturers.
“Ken neither has made nor is he aware of these investments, which are smaller than infinitesimal in light of the size of our firm,” he said.
“Citadel Securities is agnostic on these companies,” Ahmed said. “This is not a business selection issue, and regulators themselves recognize the difference between the positions [Citadel Securities] holds and the separate positions Citadel holds.”
Citadel turned down multiple requests to interview Griffin after WBEZ raised the issue of the investments and holdings.
While some of Griffin’s philanthropic endeavors have been immense — he steered $125 million to the vaunted Department of Economics at the University of Chicago in 2017 — Crain’s Chicago Business reported last October that only a “sliver” of his private giving goes to anti-violence and policing initiatives. One notable example was his $10 million grant to the University of Chicago Crime Lab and Education Lab in 2018.
“Like gifts from our other philanthropic funders, Ken Griffin’s gift has enabled the Crime Lab to advance our mission as an independent research organization that works with the public sector and nonprofits to design, test and scale data-driven solutions that address the dual crises of gun violence and America’s broken criminal justice system,” said Roseanna Ander, the Crime Lab’s executive director.
Money from Griffin’s Crime Lab grant has funded programs for at-risk youth; creation of an online dashboard which allows Chicago’s city agencies and dozens of community-based providers to coordinate violence reduction strategies; and police training on use of unnecessary force, among other things, she said.
In the Crime Lab grant announcement and his Economic Club speech, Griffin spoke broadly about the impact of violent crime on Chicago but did not address the role guns play in rising crime trends or where the weapons are coming from.
Ahmed did make a point of noting that Smith & Wesson and Sturm, Ruger manufacture guns used by police, including in Chicago. Those companies also manufacture products that don’t reside exclusively in the holsters of Chicago police.
Irvin says Griffin “free to invest” as he chooses
Through an open-records request, WBEZ sought five years worth of data from the Chicago Police Department about the brands of guns most commonly recovered from violent crime scenes in the city — homicides, carjackings and criminal sexual assaults, among others.
CPD provided WBEZ data on 4,647 firearms recovered in violent criminal incidents between Jan. 1, 2017, and mid-January of this year. For 302 of those guns, a manufacturer was not identified in police records.
Among recovered guns with known manufacturers, police records showed Smith & Wesson firearms were the second most commonly recovered gun tied to homicides during the five-year period, accounting for nearly 17% of all guns recovered for that violent crime.
Sturm, Ruger guns were the fourth most recovered guns by Chicago police for homicides included in the data the police provided. That accounted for 8% of recovered weapons.
Neither company responded to WBEZ for this report.
Smith & Wesson guns have been used in some of the worst crimes in Chicago and the collar counties in recent memory.
Federal court records show Chicago police recovered a Smith & Wesson gun that was linked through ballistic tests to more than a dozen bullet casings inside an Englewood home, where 13 people were shot while commemorating the life of a young Chicago man who was killed during a carjacking attempt.
The December 2019 Englewood crime is regarded as one of the biggest mass shootings in the city.
Earlier that year, a Smith & Wesson firearm was used by a gunman in the February 2019 mass shooting at the Henry Pratt manufacturing plant in Aurora, where five company employees were fatally shot and five police officers injured.
Irvin was mayor of Aurora at the time of the shooting, and a campaign aide told WBEZ Irvin does not take issue with Citadel’s investments and holdings.
“Mayor Irvin is a supporter of the Second Amendment, owns two licensed firearms and believes that Mr. Griffin, like everyone else in this country, is free to invest in whatever industry he chooses,” Irvin spokesperson Eleni Demertzis said.
Citadel says tying gun stocks to crime “quite a stretch”
A Northeastern Illinois University researcher and expert on Chicago street gangs and violence said there is a connection between violent crimes and the guns used to commit those crimes and the upstream investments in firearms and ammunition manufacturers.
The push for disinvestment in the weapons sector has flared with successively worse mass shootings.
In 2013, shortly after the Sandy Hook massacre that left 20 children and six adults dead in Newtown, Conn., the California Public Employees’ Retirement System, the nation’s largest public pension system, voted to clear its portfolio of Smith & Wesson and Sturm, Ruger stock.
Similar action occurred in New York City and in Chicago, where former Chicago Mayor Rahm Emanuel called on city pension boards to sever ties with firearms manufacturers. The Chicago Teachers’ Pension Fund and Municipal Employees Annuity and Benefit Fund voted to do so.
Despite backing from Emanuel, the Chicago Teachers Union and Cook County, a push in Springfield to require state pension systems to divest their holdings in firearm and ammunition companies failed in 2013.
Still, the Illinois State Board of Investment, which oversees pension funds for current and retired state workers, judges and legislators, has not held stocks in the sector since 2018, according to the system’s annual reports published online.
A spokeswoman for Democratic state Treasurer Michael Frerichs said there are no state funds invested in any of the gun and ammunition manufacturing companies identified in Citadel’s filing.
The spokeswoman said a portfolio in the Bright Directions College Savings Program holds shares of Vista Outdoor.
And the state Teachers’ Retirement System has a nearly $1.1 million stake currently in the sector, though those holdings are part of “passive” index accounts designed to mirror the movement of the market.
“We [invest] in the account, and the account manager picks the specific commitments,” TRS spokesman Dave Urbanek said.
Pritzker’s 2021 state financial disclosure form does not show any holdings in gun or ammunition companies.
However, Irvin’s campaign noted that a 2017 state financial disclosure by Pritzker showed his investment in a hedge fund called Elliott Associates LP, which held a stake in the Cabela’s retail sporting goods chain. The retailer specializes in hunting and fishing gear and sells guns and ammunition.
A Pritzker campaign spokeswoman said the governor sold his interest in Elliott in 2015.
Citadel’s SEC filing last week showed nearly $93 million in investments and holdings in a retail sporting goods chain called Academy Sports & Outdoors, which also sells guns and ammunition.
Ahmed declined comment when asked whether Citadel intends to maintain or add to its holdings in gun and ammunition companies.
“As a matter of longstanding practice, we and other alternative asset managers do not disclose this information as other market participants may act on it,” he said.
Ahmed insisted that Citadel’s activity in the sector in no way undercuts Griffin’s credibility as a voice of criticism toward Pritzker for his response to violent crime.
“Gov. Pritzker has the responsibility to address violent crime. Trying to tie our tiny, tiny holdings to somehow contributing to violent crime in Chicago is, respectfully, quite a stretch.”
But Pfleger sees it differently.
“How do you talk about what the governor is doing about crime when you are a major investor to the very industry and the gun manufacturers that are the major contributors to the crime and the violence in our cities,” Pfleger said. “How hypocritical is that?”
Dave McKinney covers Illinois politics and government for WBEZ. Follow him on Twitter @davemckinney. Criminal justice reporter Chip Mitchell contributed to this report. Follow him on Twitter @ChipMitchell1.
Editor’s note: Chicago Public Media receives philanthropic support from the Pritzker Foundation and the Pritzker Traubert Foundation. Gov. JB Pritzker is not involved with either group.