FDIC settles for $2.5M with accountants for Bridgeport bank closed for fraud after CEO’s death
Bansley & Kiener agreed to the payout, which didn’t involve any admission of wrongdoing. Washington Federal Bank for Savings’ failure remains under investigation.
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In the summer of 2017, a Chicago accounting firm
with political connections gave Washington Federal Bank for Savings in Bridgeport a clean bill of health in the yearly audit required by federal bank regulators.Five months later, the bank’s CEO was found hanged in the master bedroom of a Washington Federal customer’s Park Ridge home, and federal regulators had shut down the clout-heavy, family-owned bank for what they later described as massive fraud.
They ultimately found more than $82 million in suspicious loans — some made without collateral or even any paperwork.
One of Washington Federal’s biggest clients, attorney Robert Kowalski, and four former top bank employees have since been charged with fraud.
Now, the accounting firm Bansley & Kiener has agreed to pay a $2.5 million settlement to the Federal Deposit Insurance Corp., the government agency that took over the bank after regulators closed it on Dec. 15, 2017, 12 days after bank CEO John Gembara was found dead in what was ruled a suicide.
The FDIC “has asserted claims” against the accounting firm, which “denies liability for the claims” but agreed to settle, according to the settlement signed Aug. 28, which says the agreement “is not an admission or evidence of liability or infirmity.”
It was signed by Bansley & Kiener partner Robert Hannigan, who couldn’t be reached for comment, and the FDIC.
Bansley & Kiener initially refused to comply with a government subpoena for its records on Washington Federal. A federal judge ordered the accountants to produce the subpoenaed records.
The FDIC — which still could seek restitution from Bansley & Kiener — earlier had gotten a $3 million settlement from the insurance company representing the bank’s board of directors and $1.25 million from the insurer for the bank.
The accounting firm, formerly based in Bridgeport, has long ties to the neighborhood’s version of royalty — the family of former Mayors Richard J. Daley and Richard M. Daley.
Bansley & Kiener has done auditing work for the Daley family’s political funds, handling the finances for the 11th Ward Regular Democratic Organization, and has contributed to Daley-controlled campaigns. The firm also has made millions of dollars from City Hall deals, primarily from auditing tax-increment financing districts.
The U.S. attorney’s office in Chicago continues to investigate the failure of the bank, which also had ties to the 11th Ward Regular Democratic Organization.
A few months before the bank closed, Gembara gave an $80,000 loan to the party organization — which the Daley family has run for decades — for repairs to its headquarters at 3659 S. Halsted St. That loan, arranged by Ald. Patrick Daley Thompson (11th) — grandson of the first Mayor Daley and nephew of the second — wasn’t secured by any collateral at the time regulators shut down Washington Federal.
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The loan has since been rewritten by Royal Savings Bank, which the government brought in to take over deposits and some loans from the failed bank’s portfolio.
When Washington Federal was shut down, its board included William M. Mahon, a deputy commissioner for the city of Chicago’s Department of Streets and Sanitation who once was suspended for 45 days for helping to rig test scores so the Daley administration could hire politically connected job applicants.
Mahon’s brother-in-law Michael Huels is an accountant who once audited the bank when he worked for Bansley & Kiener. Huels is a first cousin of Patrick Huels, the former 11th Ward alderman who resigned in 1997 after the Chicago Sun-Times revealed he’d gotten a $1.25 million loan from a city contractor.
Mahon was on the bank’s board since 2001, according to records he filed with City Hall. Since 1993, he got 24 loans totaling more than $4.3 million from Gembara’s bank — including three unpaid mortgages totaling more than $1 million on a three-flat he built in Bridgeport, according to records filed with the Cook County recorder of deeds.
Mahon, who is part of the 11th Ward organization, has been questioned by federal banking regulators, his attorney has said. Mahon was involved in approving the bank’s loans.
Washington Federal was founded in 1913 by Gembara’s grandfather to serve his fellow Polish immigrants. It focused on residential mortgages, with a few commercial loans. Its main office was in Bridgeport, at 2869 S. Archer Ave., with a branch at 1410 W. Taylor St. in Little Italy.
Gembara, who also was the bank’s majority owner, was found dead Dec. 3, 2017, inside the million-dollar home of a contractor, Marek Matczuk, a friend and bank customer who had five outstanding loans from Washington Federal totaling about $1.8 million. U.S. Bank, which holds the first mortgage, has been trying to foreclose on Matczuk’s house for the past two years.
Read Sun-Times’ initial investigation
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I wonder if accountants even looked at the business records. Aren't CPA's licensed by the state?
ReplyDeleteThe State of Illinois?? and that would matter why??????
DeleteWhat happened to Washington Federal is symbolic of what's going to happen to Chicago. Where there's a pile of money, you are going to attract crooks, just like bees to honey.
ReplyDeleteThese scams happen all the time a corrupt Loan Officer will approve all these big loans for a cut of the money then you just go bankrupt a year a later hiding the cash.
ReplyDeleteIt takes a loan committee to approve anything but the smallest loan. A loan officer basically gathers information and sends it to the loan committee for further action.
Delete