The federal government has settled its lawsuit against the defunct Broadway Bank, a politically connected financial institution whose board of directors, including former Chicago Bears quarterback Jim McMahon, were accused of making several bad loans that cost taxpayers more than $104 million.
Broadway’s former directors and the Federal Deposit Insurance Corp. reached a $5 million settlement on Dec. 22, ending the litigation that began in March 2012, about two years after regulators closed the bank founded by the late father of Alexi Giannoulias, the former Illinois state treasurer.
The settlement was confirmed by the FDIC and McMahon’s attorney, Scott Frost. Neither the FDIC nor McMahon’s attorney would say if any of the board members were personally responsible for the $5 million settlement.
“Mr. McMahon is extraordinarily happy with the results and the resolution of the case,” Frost said.
McMahon joined the bank board in 2003. He resigned from the board on Dec. 22, 2008, after federal bank regulators began questioning Broadway’s lending practices. The FDIC lawsuit said that McMahon had missed many of the bank’s board meetings.
McMahon had only voted to approve one of the 17 bad loans cited in the FDIC lawsuit, a $28 million, two-year, interest-only loan for a condo project in Miami Beach. The bank lost $19.5 million on that loan.
Besides McMahon, the FDIC sued eight other bank directors, including the former treasurer’s older brothers, Demetris and George Giannoulias, and Sean Conlon, a prominent real estate developer. Alexi Giannoulias, the former state treasurer who once worked for his family’s bank, was not sued by the FDIC.
Before McMahon joined Broadway’s board, the bank had loaned $4 million to restaurateur Constantine “George” Cappas for construction of a Northbrook restaurant that bore McMahon’s name. McMahon was merely an investor in the restaurant, which opened in May 2002 and shut down a year later. Broadway Bank ended up with the property.