Calling a Bridgeport bank that was shut down over a multimillion-dollar embezzlement scandal a “rat’s nest,” a federal judge sentenced a former bank board member to prison Thursday for repeatedly falsifying documents to fool federal regulators, allowing the scheme to continue for years.
George Kozdemba, a retired manager for the Metropolitan Water Reclamation District of Greater Chicago, spent 20 years on the board of Washington Federal Bank for Savings — until government regulators shut it down in December 2017 because it was being looted in a scheme involving bank CEO John Gembara, who was found dead days before the bank was closed.
“I can’t minimize the significance of the criminal activity that caused that bank collapse,” U.S. District Judge Virginia Kendall told Kozdemba as she ordered him to spend a year and a day in prison and pay a $25,000 fine.
While noting that the 74-year-old grandfather had been “hard-working” and “admirable in his family life,” Kendall said he also was part of “what really is a rat’s nest of people who are operating a community bank as if it were their piggy bank.”
Kozdemba was the second board member Kendall has sent to prison. Earlier this year, she sentenced former City Hall official William Mahon, a close ally of the Daley family, to 18 months. A third board member, Gembara’s sister Janice Weston, faces sentencing May 16.
Lester Stepien, the only other member of the bank’s board, has been cooperating with federal investigators and hasn’t been charged in the collapse of the bank, over which the Federal Deposit Insurance Corp. paid $140 million to cover the bank’s losses. About $50 million has been recovered.
Sixteen people have been charged in the bank’s collapse, including six employees and five customers.
Among the customers charged was then-Ald. Patrick Daley Thompson, a grandson of the late Mayor Richard J. Daley and nephew of former Mayor Richard M. Daley. Thompson was found guilty of lying to regulators about his debts to the bank and cheating on his federal taxes.
Many of the bank’s customers had ties to the Daley family’s 11th Ward political operation. Some had government jobs. Others were contractors in Daley’s Hired Truck Program, which the mayor shut down following a Chicago Sun-Times investigation two decades ago.
Kozdemba, whose late father served on the board of the bank the Gembara family ran for three generations, admitted he signed a couple of dozen loan documents that were backdated so regulators wouldn’t know the paperwork was completed after customers already had been given the money.
Kozdemba also falsified minutes of board meetings, according to Assistant U.S. Attorney Jeff Snell, who said:. “He knew he was creating fabricated documents every month. It went on for a number of years. It was month after month.”
Snell pointed out that Kozemba and Weston took no action in May 2011 when the bank’s chief financial officer Barbara Glusak told them she suspected the bank gave its auditors from the firm Bansley & Kiener falsified records showing Gembara’s friend Robert Kowalski had repaid two loans even though he hadn’t. Kowalski has since been convicted of embezzling $8 million.
Glusak testified that Bansley’s audit was led by Mahon brother-in-law Michael Huels, a cousin of former Ald. Patrick Huels, whose relatives were customers of the bank.
Glusak, a high school friend of Gembara’s wife and the godmother of the Gembaras’ oldest daughter, said she resigned from the bank on her lawyer’s advice. She also sent a letter to federal prosecutors, saying, “Certain wrongdoing did come to my attention . . . I am not an attorney and I offer no conclusion regarding whether crimes were committed.”
Then-U.S. Attorney Patrick Fitzgerald forwarded the letter to Robert Grant, who ran the FBI’s Chicago office. Glusak said no one ever contacted her about her letter, and the bank scheme went on for more than six years.
Kozdemba’s attorney Steven Fine said the Vietnam veteran would likely lose his disability benefits if he spends more than 60 days in prison and unsuccessully argues for probation.
Kozdemba, who grew up in Bridgeport, told the judge: “I want to start out by apologizing to the people and families of Bridgeport. You placed your faith in an institution whose directors were reckless.
“I must take full responsibility for signing documents in a careless manner. Now, I hang my head in shame.”
READ THE ORIGINAL SUN-TIMES INVESTIGATION
Read the first story in the Sun-Times investigation of the failed Bridgeport bank Washington Federal Bank for Savings, published March 4, 2018.
