The old Washington Federal Bank for Savings, 2869 S. Archer Ave., which was shut down in December 2017 for “unsafe or unsound practices” days after John F. Gembara, its president and chief executive officer, was found dead at a bank customer’s home. A federal audit uncovered massive fraud at the bank.

The old Washington Federal Bank for Savings, 2869 S. Archer Ave., which was shut down in December 2017 for “unsafe or unsound practices” days after John F. Gembara, its president and chief executive officer, was found dead at a bank customer’s home. A federal audit uncovered massive fraud at the bank.

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Bridgeport bank failure cost millions more than feds have said: Where did all the money go?

Authorities say they’ve recovered $59 million toward the money lost when they shut down Washington Federal Bank for Savings, but they’re still out another $81 million, records show.

It’s been more than five years since federal regulators shut down a tiny bank in Chicago, in the process exposing deep connections to the Daley family and its political army.

Federal officials still haven’t been able to account for all of the money that they’ve said was looted from Washington Federal Bank for Savings, the century-old Bridgeport institution that the Gembara family ran for three generations.

That figure, records show, turns out to have been far higher than previously has been revealed. Now, for the first time, the Federal Deposit Insurance Corp. says it spent nearly $139.8 million to cover the bank’s losses after regulators closed the bank on Dec. 15, 2017. That’s about $50 million more than previously was disclosed in court documents.

The bank’s shutdown came 12 days after John F. Gembara, its board chairman, president and chief executive officer, was found dead with a rope wrapped around his neck in the main bedroom of a bank customer’s million-dollar home in Park Ridge — a mini-mansion that federal prosecutors suspect might have been built with money embezzled from the bank.

Authorities ruled that Gembara killed himself, but his wife’s attorney says the family has questioned whether someone killed him and at one point considered exhuming his body.

So far, the FDIC has recovered about $59 million from insurance companies for the bank and its auditors as well as from the sale of 135 loans and repayments of delinquent loans. Among those: $219,000 from former Ald. Patrick Daley Thompson (11th), who went to prison for cheating on his income taxes and lying to bank regulators about how much he owed Gembara’s bank.

The FDIC is still out about $81 million, and it can’t say how much more it might still be able to recover.

“We can’t speculate on future payments,’’ FDIC spokeswoman Carroll U. Kim says. “We can’t speculate on future litigation” to recover money from bank customers and employees.

Some restitution is expected to come from 14 people who have been indicted on charges that accused them of looting the bank. One customer, Robert M. Kowalski, has been convicted of embezzling $8 million. Three others and five bank employees have admitted their guilt and are cooperating with investigators. Three bank board members, including a member of the Daley family’s political organization, and two customers are set to face trial in September.

Robert M. Kowalski walking in to the Dirksen Federal Building on March 4.

Robert M. Kowalski walking into the Dirksen Federal Building on March 4, 2021.

Ashlee Rezin / Sun-Times file

It’s possible other customers might still face criminal charges, according to sources.

“It’s like this money just evaporated or disappeared,” said an attorney whose client has pleaded guilty in the scheme. “I would guess there’s more people out there who benefited but haven’t been charged. Are they cooperating with the federal prosecutors?”

And then there are the victims who lost money they had on deposit at the bank. Prosecutors have told a judge that “at least 10” people but “many” more lost money when the bank collapsed because each had bank accounts at Washington Federal that topped $250,000, the FDIC’s guaranteed insurance payout.

Altogether, those victims lost more than $2.3 million when the bank was closed after the embezzlement scheme was discovered, according to the FDIC. Those losses have been reduced to $1.3 million as the FDIC has recovered more money.

The names of those victims have been withheld by federal officials, but sources say they include a Chicago firefighter’s widow and a retired teacher. Their stories might be made public when prosecutors ask the judge to order the bank officials, employees and customers to make restitution to the FDIC.

Here’s a look at the money that was looted from Washington Federal and how much has been recovered.

The Gembara family

Thirteen months after federal regulators closed Washington Federal, the FDIC filed a claim against Gembara’s estate, seeking $14.5 million to recover cash advances he gave four customers on top of their combined 29 loans for a total of $61.5 million. Three of those customers have been charged with embezzling money from the bank.

In its claim filed Jan. 29, 2019, the FDIC said Gembara doled out those advances without approval from the bank’s board or loan committee. The FDIC also said the bank CEO didn’t require the four customers to sign any documents promising to repay the money or pledge any collateral the bank could seize to recover the money.

The FDIC withdrew the claim a year later after it became clear the 56-year-old banker didn’t leave his widow Therese Gembara much money. His 23,440 shares of bank stock were worthless. Gembara left his widow with $63,618.61 — not enough to pay his credit-card bills or even all of his burial expenses, court records show.

The couple’s 5,300-square-foot home in Palos Hills was held in a trust that wasn’t part of his estate. His widow sold the home for $600,000.

Authorities haven’t said why Gembara looted the bank that previously was run by his father Emil Gembara and his grandfather Joseph Gembara. According to court filings, the scheme was well underway when he assured his customers the bank was a safe place to keep their money.

“Our bank is financially secure and we have never engaged in risking lending practices,” Gembara wrote on the bank’s website Oct. 16, 2008. “For 95 years, we have been conservative and consistent in our business practices and we will continue to in the years to come.”

John F. Gembara, who was chief executive officer, president and chief shareholder of Washington Federal Bank for Savings in Bridgeport.

John F. Gembara, who was CEO, president and chief shareholder of Washington Federal Bank for Savings in Bridgeport.

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Gembara was an auto mechanic in the late 1980s when his father made him vice president of Washington Federal, which had been founded in 1913 as a building and loan association for Polish immigrants.

The Gembaras had a long history with the bank, starting with Joseph Gembara, a tavern owner who became a board member a few years after the institution opened. His son Emil eventually rose to president and CEO. Another son, Eugene “Herman” Gembara, served on the bank board as he ran his father’s Prohibition-era tavern and worked as a precinct captain for the Daleys’ 11th Ward Regular Democratic Organization that’s ruled Bridgeport for generations.

Emil Gembara’s four children had stock in the bank. His only daughter, Janice Weston, was a vice president, and his grandchildren have worked at the bank. John Gembara’s wife was the human resources manager when the bank closed.

It’s unclear when the looting began. Sources say it was after he replaced his father as president and CEO in 1997. According to court testimony, the scheme was underway in 2005 when he replaced his father as chairman of the board.

The scheme fell apart in 2017 after Gembara fired an employee who alerted the federal regulators who repeatedly had given the bank a clean bill of health, until then unaware that Gembara and his staff had been concealing millions of dollars in delinquent loans that borrowers were given as loans they weren’t required to repay.

Federal regulators pushed Gembara’s sister and the other bank board members to suspend him on Nov. 29, 2017. Five days later, Gembara was found dead, sitting in a chair with a rope around his neck, the other end wrapped around a spiral staircase inside the main bedroom of a million-dollar Park Ridge home owned by Marek Matczuk. The grand jury has charged Matczuk with embezzling $6.1 million from the bank, much of it spent gambling at local casinos.

Washington Federal’s board

Three of the bank’s four remaining board members have been indicted:

  • Janice Weston, 65, of Orland Park.
  • George Kozdemba, 72, a retired electrician for the Metropolitan Water Reclamation District whose father once served on the bank board. He lives in Fort Myers, Florida.
  • William M. Mahon, 56, a retired deputy commissioner for the Chicago Department of Streets and Sanitation who’s part of the Daley political organization.

The three board members are set to stand trial Sept. 5 on charges they falsified bank records by hiding delinquent loans from regulators or signing loan documents long after Gembara already had lent money to several still-unidentified customers.

Mahon also is accused of giving regulators two inaccurate loan applications for his Bridgeport home, omitting a $130,000 loan from Gembara and his wife.

Another board member, Lester Stepien, who’s the comptroller of a meatpacking company, is cooperating with federal investigators and hasn’t been charged.

The FDIC collected a $3 million settlement in July 2020 from the board’s insurance company, but each board member also could be ordered to make restitution.

The FDIC also got a $1.25 million settlement from the bank’s insurance company and a $2.5 million settlement from the bank’s accounting firm Bansley & Kiener and could seek restitution from the bank and the firm.

For several decades, Bansley & Kiener also served as accountants for the Daleys’ 11th Ward political organization and audited City Hall’s tax-increment financing districts under Mayor Richard M. Daley. The accounting firm also prepared federal income-tax returns for Thompson, who claimed tax breaks for interest payments on the money he got from the bank even though he never paid the interest.

Former Ald. Patrick Daley Thompson leaves the Dirksen Federal Courthouse on Feb. 14, 2022, after being found guilty of cheating on his tax returns for five years and lying about how much money he got from a crooked Bridgeport bank.

Former Ald. Patrick Daley Thompson leaves the Dirksen Federal Courthouse on Feb. 14, 2022, after being found guilty of cheating on his tax returns for five years and lying about how much money he got from a crooked Bridgeport bank.

Ashlee Rezin / Sun-Times file

One of the accountants who Bansley & Kiener assigned to audit Washington Federal was Mahon’s brother-in-law Michael Huels, a first cousin of former Ald. Patrick M. Huels.

Mahon, a son of a Chicago police officer with close ties to the late Mayor Richard J. Daley, had no college degree or financial experience when was named a member of the bank board, and he was on the board for 16 years, until it went out of business. It’s unclear who appointed Mahon or why.

While on the bank board, Mahon also worked for Streets and Sanitation. He was involved in the hiring scheme that led to a criminal conviction for Daley’s patronage director Robert Sorich, who went to prison in 2006 after being convicted of rigging test scores for political workers. At the time Sorich was sentenced, he had a mortgage from Washington Federal.

William M. Mahon.

William M. Mahon.

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Mahon wasn’t charged in the hiring scheme, but City Hall’s inspector general wanted the Daley administration to fire him. Instead, the family’s political soldier was handed a 45-day suspension, which he served over several months so he wouldn’t go without a paycheck.

Mahon resigned as deputy Streets and San commissioner in January 2022, a month after he was charged with embezzling from the bank. He’s now collecting a city pension of $98,879 a year.

Mahon got two dozen mortgages totaling $4.8 million from Washington Federal since 1993, most of them after becoming a board member.

According to the indictment, Gembara had employees alter documents to inflate appraisals on two mortgages for Mahon, who praised the bank president’s leadership in a 2013 book published to mark Washington Federal’s 100th anniversary.

“John is a hands-on executive who would never ask someone to do something that he wouldn’t do himself,” Mahon wrote. “John pours his heart and soul into the business and it shows.”

Gembara’s employees

Five bank employees, who have pleaded guilty and admitted they repeatedly falsified records submitted to regulators, will have to pay restitution, according to their plea agreements.

How much each one will have to pay will be determined when they are sentenced by a judge once they finish cooperating with federal investigators.

The employees are: Chief Financial Officer Rosallie C. Corvite; Vice President James R. Crotty, who was fired seven months before the bank was closed; corporate secretary Jane V. Iriondo; loan servicer Alicia Mandujano; and loan processor Cathy M. Torres.

Alicia Mandujano walking out of the Dirksen Federal Courthouse on March 4, 2021.

Alicia Mandujano walks out of the Dirksen Federal Courthouse on March 4, 2021.

Ashlee Rezin / Sun-Times file

Other than their salaries, sources say the five employees didn’t receive any of the money stolen from the bank. At least two did get loans from the bank.

Gembara’s customers

Three months after the bank collapsed, Kowalski — Gembara’s longtime friend and customer — filed for bankruptcy. The FDIC quickly filed a claim against Kowalski, saying he owed $21.9 million on mortgages from the bank.

A court-appointed trustee has been selling Kowalski’s assets, including 21 homes with mortgages from Washington Federal, many leased to tenants with Section 8 vouchers from the Chicago Housing Authority. The trustee has sold more than $6.2 million of Kowalski’s assets, but the FDIC has gotten less than $1.6 million. The trustee — who says his legal fees have topped $2 million because of numerous legal battles with Kowalski — hopes to collect more than $350,000 from Byline Bank, where testimony and records show Kowalski bought several cashier’s checks to hide his assets. It’s uncertain how much more money the FDIC will get.

Kowalski’s ex-wife Martha Padilla ended up with their million-dollar home in Little Italy and other homes as part of a settlement with the bankruptcy trustee.

A father of five, Kowalski, 61, is now in jail, awaiting sentencing after being found guilty in March of embezzling $8 million. His sister Janice Kowalski, 59, is awaiting sentencing after pleading guilty to helping her brother hide assets from the bankruptcy court.

Their brother William Kowalski, who once developed real estate with Robert Kowalski, has a deal with prosecutors and could see all criminal charges against him dropped in exchange for his cooperation. William Kowalski, 57, has agreed to pay the FDIC $190,000, the amount he, his brother and Gembara embezzled from the bank in 2007 to buy a small yacht.

Mayor Richard M. Daley’s son Patrick Daley struck a deal in 1999 to buy a three-flat from Robert Kowalski for $200,000 with financing from Gembara’s bank. The deal fizzled when the mayor learned that Kowalski’s mentor, the late Oscar D’Angelo, had obtained equipment from the University of Illinois Chicago to help rehab the building. D’Angelo, a godfather to Kowalski’s son, once had a close relationship with the Daleys, which then fizzled.

Another Gembara friend, Boguslaw Kasprowicz, has pleaded guilty, admitting he embezzled $14.3 million, often funneled through his Thomas Development Co., which built million-dollar homes in Bucktown and Wicker Park. Gembara didn’t require Kasprowicz to repay all of the construction loans, court records show, and kept giving the contractor money after the homes were sold.

Kasprowicz has testified he spent the money on “life.” He:

  • Bought six Audis.
  • Sent more than $750,000 to his son, a physician, and daughter who both live in Poland.
  • Bought a bungalow in Burbank, California, for $720,000 and paid for another son’s acting lessons at the University of Southern California. The son has had roles in TV shows, including “Modern Family.”

Kasprowicz, 65, faces 15 years in prison, and the judge could order him to pay restitution.

His brother-in-law, Miroslaw Kreja, 63, is set to stand trial with the board members on charges he embezzled $2.8 million from 2004 until the bank closed.

Marek Matczuk, who owns the home where Gembara was found dead, is also set to go on trial in September on charges he embezzled $6.1 million while often working as a handyman at the bank and Gembara’s house. Sources have told the Sun-Times that Matczuk, 60, spent at least $1 million gambling at casinos, including $182,000 at Rivers Casino.

At the time of Gembara’s death, Matczuk had more than $13 million in delinquent loans from Washington Federal. He and his wife were facing a foreclosure lawsuit from another bank that was trying to collect on a $1 million mortgage on the Park Ridge home.

Shortly after Mayor Daley retired, his nephew Patrick Daley Thompson, then a commissioner for the Metropolitan Water Reclamation District of Chicago, met Gembara at a golf outing in July 2011. Thompson soon became a Washington Federal customer, getting a $110,000 loan to pay for his partnership contribution with the law firm Burke, Warren, MacKay & Serritella.

Over the next six years, Thompson, who won a Chicago City Council seat representing his family’s 11th Ward power base, got another $109,000 from the bank, while unsuccessfully pressing Gembara for an additional loan to refinance the Bridgeport bungalow once owned by his grandfather, Mayor Richard J. Daley. He was still pressing Gembara to refinance the bungalow when regulators closed the bank. He later was convicted of lying to regulators about his bank debts.

Thompson, 53, never got a mortgage for his home, but, a few weeks before the bank closed, he got Gembara to loan $80,000 to the 11th Ward Regular Democratic Organization for building repairs. The loan has since been renegotiated with another bank.

Gembara’s other customers

When the bank was closed, federal investigators found that Gembara had lent money to 11th Ward residents who worked at City Hall and other government agencies. Some of them were also part of Daley’s scandal-plagued Hired Truck Program.

The grand jury also subpoenaed records for some customers, whose outstanding loans were part of the evidence at Kowalski’s recent trial.

Patrick T. Fegan got nearly $1 million in advances on top of his $1.2 million bank loan, which was delinquent when the bank was shut down. Fegan owned Paddy O’Fegan’s, a restaurant and bar in the 200 block of North Halsted Street that was sold and torn down after the bank closed.

City Hall records listed Kowalski’s late father Andrew Kowalski as the masonry contractor for Fegan’s bar, though Kowalski says his late father didn’t do the work.

Fegan, 62, managed the campaign for Kowalski’s then-wife in 2007 when she lost her bid to oust then-Ald. Danny Solis (25th) from the City Council.

Fegan was among the delinquent customers whose loan values were adjusted up or down on Gembara’s orders, Iriondo testified.

She said Gembara also ordered adjustments on delinquent loans that had been issued to Edward Gobbo and Alexander S. Pissios, business partners who got multiple loans from Washington Federal to build housing around the United Center. Both went bankrupt, stiffing the bank on the loans, yet Gobbo kept getting more money from the bank.

When Pissios went bankrupt in 2011, he reported owing the bank $400,000. Federal prosecutors later learned that Pissios failed to disclose a $100,000 loan from his uncle, who wanted Pissios to create Cinespace Chicago Film Studio. The prosecutors threatened to charge Pissios with bankruptcy fraud, and he agreed to work undercover for them as a government mole to bring criminal charges against longtime Chicago Teamsters boss John T. Coli Sr. for shaking down Cinespace.

Pissios was given an unusual “non-prosecution” agreement. Prosecutors promised he wouldn’t be charged as long as he told the truth. They struck that deal before the bank collapsed. It’s unclear whether it extends to any dealings Pissios had with Gembara.

Gobbo, a former Streets and Sanitation employee, is a nephew of the late William Hanhardt, who went to prison after being convicted of operating a jewelry theft ring for the mob during the time he was chief of detectives for the Chicago Police Department.

When the bank closed, Gobbo had 13 delinquent loans totaling more than $3.6 million, according to records prosecutors presented at Kowalski’s trial.

Gobbo was among the few customers who praised Washington Federal in its 100th anniversary book: “I bank [here] because the people who work in this institution care about people and are extremely professional and helpful at all times.”

WHERE DID FAILED BANK’S MONEY GO?

WHERE DID FAILED BANK’S MONEY GO?


After federal regulators shut down Bridgeport’s Washington Federal Bank for Savings, the Federal Deposit Insurance Corp. has now revealed it spent $139.8 million to cover the bank’s losses. The FDIC has recovered about 42% of that. Here’s where some of it came from:
  • $15.8 million — sale of 135 loans to other lenders.
  • $3 million — settlement with the bank board’s insurance company.
  • $2.5 million — settlement with the bank’s accounting firm Bansley & Kiener.
  • $1,584,531 — bankruptcy sale of assets from Robert M. Kowalski, an attorney and developer.
  • $1.25 million — settlement with the bank’s insurance company.
  • $212,000 — repayment of loans from former Ald. Patrick Daley Thompson.
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Click here to read the Sun-Times’ initial investigation of the failure of Washington Federal Bank for Savings.

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