At crooked Chicago bank, Washington Federal Bank for Savings CFO blew the whistle, but no one did a thing
As chief financial officer of a tiny bank in Bridgeport with ties to the Daley family, Barbara Glusak knew something was very wrong in the spring of 2011.
There was a “significant balance’’ on a loan owed by Robert Kowalski a close friend of John Gembara, the president, chief executive officer and chairman of the board of Washington Federal Bank for Savings, according to federal court records.
Yet bank employees gave an independent auditor documents showing Kowalski’s loan had been paid off.
Glusak suspected that those records had been falsified. So she blew the whistle, alerting two of the bank’s five board members: Gembara’s sister Janice Weston, who was the bank’s vice president, and George Kozdemba, whose late father had served on the board of the family-owned bank the Gembaras had run for three generations.
But nothing happened.
Glusak “abruptly quit, leaving her keys in the mailbox,” according to court records.
But that didn't stop her from continuing to sound the alarm. She also wrote to the U.S. attorney’s office, which had a long history of prosecuting Chicago’s crooked politicians and business people. Her letter was eventually forwarded to the FBI.
Still, nothing happened.
Six and a half years later, a routine audit of the bank by federal regulators found that Washington Federal had been falsifying records, just as Glusak suspected.
The regulators found that Gembara and his employees had been operating “a loan fraud scheme,” which led the board to suspend Gembara on Nov. 29, 2017.
Five days later, Gembara was found dead, a rope around his neck, sitting in a chair in the Park Ridge bedroom of a customer who owed the bank millions.
On Dec. 15, 2017, federal regulators shut down the bank after discovering that Gembara had doled out millions of dollars to certain favored customers who weren’t expected to pay back any of the money.
The Federal Deposit Insurance Corp. ended up spending $140 million to cover the bank’s losses and reimburse customers. Officials are still trying to find and get back what they say were the millions of dollars lost to fraud. But only about $50 million has been recovered. The federal investigation continues.
Gembara’s favored customers — who years later were described in court as “friends of John” — included Kowalski, who filed for bankruptcy as the FDIC went after him, saying he owed more than $21.9 million on his Washington Federal loans. Kowalski is awaiting sentencing after being convicted of embezzling more than $8 million.
Prosecutors also charged 15 others — three bank officials, six employees and five customers, including then-Ald. Patrick Daley Thompson, a grandson of the late Mayor Richard J. Daley and a nephew of former Mayor Richard M. Daley. Thompson ended up going to prison for lying about the money he owed the bank and cheating on his income taxes.
Ex-banker cooperating with investigators
Glusak — who worked for the bank from 2008 until 2011 and isn't charged with any crime — has been cooperating with federal investigators. They've never revealed that she was a whistleblower nor that her concerns apparently were ignored as Gembara and his staff continued to loot the bank.
Her whistleblower acts have come out only in recent prosecution filings asking for prison time for Weston and Kozdemba, who apparently ignored her warnings.
Glusak’s replacement as chief financial officer, Rosallie Corvite, is also among those who have pleaded guilty in the case.
It’s unclear whether Glusak’s letter prompted either the U.S. attorney’s office or the FBI to investigate the bank or whether they passed her letter on to the federal agencies that regulated the bank — the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
The U.S. attorney’s office didn’t respond to questions regarding Glusak and her letter. The FBI won't comment, citing the ongoing investigation.
Glusak, 63, is set to testify Wednesday before U.S. District Judge Virginia Kendall at the sentencing hearing for Weston and Kozdemba.
Both pleaded guilty to falsifying bank records. Their lawyers are asking that they not get any prison time, saying Weston and Kozdemba didn’t profit from the scheme.
Prosecutors want Weston and Kozdemba to each go to prison for a year and a day. They say that, had the two heeded Glusak’s warning 13 years ago, that could have curtailed the embezzlement and meant fewer losses for the FDIC and the bank’s customers.
“Kozdemba disclaims any responsibility for his failure — as a board member — to take any action in response to the CFO’s detailed warnings to him about irregularities concerning certain loan numbers affiliated with Robert Kowalski,’’ prosecutors say in a sentencing memo.
They pushed back against Kozdemba’s argument that he shouldn’t be punished for ignoring Glusak’s warning because, he says, federal officials ignored it, too.
According to prosecutors, Kozdemba’s lawyer in court filings says that “any argument George’s negligence allowed the scheme to continue is misplaced in light of [Glusak’s] correspondence to the United States attorney on May 16, 2011. The United States attorney forwarded the correspondence to the Federal Bureau of Investigation on June 14, 2011.
“Although the government was aware in 2011 of suspicious activity at the bank, investigators took no action. George’s response to [Glusak’s] ‘red flag’ mirrors the government’s response. Still, ironically, the government suggests that George’s negligence and failure to detect the embezzlement scheme allowed the scheme to continue for years.”
Prosecutors say they have no evidence that Weston “knew of the scope of the embezzlement" but that she ignored Glusak’s warning about Kowalski’s loan and “avoided” even discussing it with her.
“Weston told [Glusak] that Weston had to go to a meeting but would talk to [Glusak] afterwards. Instead, Weston avoided [Glusak] that day and the following day,” prosecutors say. Glusak “then quit, leaving her keys in the mailbox. Weston did not follow up with [Glusak] to learn more about what caused [Glusak] to be so concerned that [Glusak] quit and never returned. Nor did Weston notify the auditors that their report may be based on inaccurate information about loans.”
A warning from another bank employee
Glusak’s warning wasn’t the only one Weston ignored, prosecutors say. Two years earlier, they say, Weston spoke with another bank employee, James Crotty, regarding loans to Marek Matczuk, a contractor who owns the home where Gembara was found dead.
A jury convicted Matczuk last year of embezzling $6 million from the bank. Crotty has pleaded guilty and is cooperating with investigators.
In the spring of 2017, a few months before banking regulators uncovered the embezzlement scheme, Weston wanted her brother to fire Crotty for stealing postage stamps from the bank, according to court records.
The day before he left the bank, Crotty "wrote a note that said, ‘I know about John’s bad loans’ and brought it to Weston, saying he had found an anonymous note,” prosecutors say in a court filing. “Again, this was an opportunity for Weston to dig deeper and follow a red flag, and she did not.”