Chicago Sun-Times: All posts by Tim Novak

Chicago City Hall is owed billions of dollars it hasn’t managed to collect

2023-12-01T05:30:00-06:00

Mayor Brandon Johnson’s administration has inherited a massive amount of unpaid fees, fines and other debts — $6.4 billion. That’s money that could have been used to bolster the city’s cash-strapped coffers.

Ashlee Rezin / Sun-Times

With his first budget, Mayor Brandon Johnson could have reopened more mental health clinics, addressed homelessness without pushing for a controversial tax on high-end real estate transactions and hacked a bigger chunk off the city’s mountain of unfunded pension liabilities.

By the city’s accounting, he could have been able to do all of that while taking bigger swings at other campaign promises without breaking a sweat over a projected $538 million budget shortfall — and still had millions to spare for the city’s burgeoning migrant crisis.

There’s just one thing Johnson would have had to do to make this fiscal fantasy come true: Force a generation of debtors to pay up.

The city of Chicago is owed more than $6.4 billion in unpaid fees, fines and other debts that have piled up since 1990, a Chicago Sun-Times analysis has found.

That raises the question of why the perennially cash-strapped city hasn’t gone after late-paying scofflaws harder over the past three decades.

The eye-popping unpaid tab — which could have covered almost 40% of the mayor’s $16.77 billion budget — include outstanding payments from thousands of people, companies and other entities.

And interest is accruing by the day on many of their debts, some dating to former Mayor Richard M. Daley’s first full year in office.

The $6.4 billion in delinquent payments include:

Nearly $2.9 billion in outstanding administrative hearing debt.
More than $2.3 billion in old parking, speed and red-light-camera tickets.
Nearly $723 million in unpaid water bills.

The longstanding money owed amounts to an average debt of almost $3,026 for each adult resident of the city.

But officials say it’s a much smaller group of scofflaws who have sidestepped the most substantial payments — many of them from outside Chicago.

City officials say they can’t provide the full list of debtors, citing litigation with some of the biggest offenders and the burden of tallying up the huge volume of the rest.

Johnson’s city comptroller acknowledges that most of that money is unlikely to ever end up being collected.

But, with budget troubles expected to deepen in years ahead, officials agree more should be done to boost the city’sy collections.

“A lot of good could be done in city government with $6 billion,” says City Hall Inspector General Deborah Witzburg, who says this is “an issue that needs attending to,” though it isn’t one that her watchdog office has evaluated “in a holistic, big-picture way.”

City Hall Inspector General Deborah Witzburg.

Jim Vondruska / Sun-Times

“If city operations are running so ineffectively as to leave enormous amounts of money on the table, then the city’s failing to meet its basic obligations to operate effectively and efficiently in the service of Chicagoans,” Witzburg says. “There are many, many needs of Chicagoans that could be met by better-resourced government programs.”

No ‘blood from a turnip’

Data provided by the city Department of Finance shows the biggest share of unpaid debts are from administrative court hearings — the result of violations issued by police, the Department of Streets and Sanitation and other city agencies — from 1998 through early October. Annual unpaid debts still top $100 million from 19 of those 25 years, a total approaching $2.9 billion.

Unpaid tickets issued to drivers make up the next-biggest chunk of the debt — including $1.6 billion in parking tickets that have been handed out since 1990, $428 million in red-light-camera tickets since 2003 and more than $263 million in speed-camera tickets since 2013. Altogether, that’s nearly $2.3 billion that’s outstanding.

The city has been left high and dry on water bills to the tune of nearly $723 million since 2000, including more than $433 million on accounts still listed as active. Utility customers who have been shut off owe about $289 million.

Outstanding ambulance bills and other miscellaneous overdue costs have built up beyond $415 million since 1993. Tack on another $66 million in outstanding tax debts and $22 million in building inspection fees since 2004, and the scofflaws have collectively shorted the city by over $6.4 billion.

Johnson’s first budget leans on one-time revenue, hopes for federal, state help to avoid tough choices down the road

City Comptroller Chasse Rehwinkel — who worked in the offices of the Illinois comptroller and state treasurer before Johnson tapped him as Chicago’s top accountant — says such debt backlogs are “not totally alien to large municipalities.”

“Collecting really old debt is very difficult,” Rehwinkel says. “A lot of it is a function of entities that don’t exist, companies that have dissolved, people who have left the country, people who were involved in fraud. There’s just no way to claw back some of that money.”

City Comptroller Chasse Rehwinkel.

Pat Nabong / Sun-Times

Some of it is owed by lower-income residents, and you “can’t get blood from a turnip,” he says, so City Hall focuses collection efforts on “first-tier” debts incurred over the past three years, followed by “second-tier” debts up to five years old and then “third-tier” debts dating back 10 years.

“Beyond that, it’s generally sunk costs,” Rehwinkel says.

Suburban scofflaws

That’s why the main recovery targets are “relatively recent scofflaws who owe the city a lot of money and have the means but are skirting responsibility,” he says.

Such debtors — who likely number in the hundreds — are “mostly not from Chicago” and own properties that have racked up debt while the owners have taken advantage of legal mechanisms and loopholes “to skirt responsibility,” according to the comptroller, who won’t name names with city lawsuits pending.

Over the summer, the Illinois Answers Project and Block Club Chicago highlighted the case of a Northbrook real estate investor whose businesses have skipped out on $15 million in rat-related tickets on properties across the South Side and the West Side over several decades.

Before taking anyone to court, the city says it uses “various methods to collect the debt internally,” sending collection notices, seizing vehicles, scrutinizing business licenses and more.

If those actions don’t get people to pay up, the city refers cases to a collections agency that can file liens and garnish wages and bank accounts.

After that, these cases can drag on in courts indefinitely.

“It is frustrating to me,” Rehwinkel says. “If somebody is using all the mechanisms they can think of to get around those fees, they’re hurting the residents of the city of Chicago. We’re making concerted efforts to make sure that number is lowered.”

Ald. Pat Dowell (3rd), who chairs the City Council’s Finance Committee, says, “We really don’t have the luxury of ignoring these people in institutions, companies and organizations that ignore their debt. So we will be making sure that our department aggressively seeks out the city’s money. We can’t afford to leave anything on the table.

“As we are looking for new revenue sources,” Dowell says, “this is definitely an area we cannot overlook.”

Ald. Pat Dowell (3rd).

Pat Nabong / Sun-Times

Bridgeport bank failure probe looking into Chicago city contractor James Bracken III over ties to William Mahon

2023-11-17T05:30:00-06:00

A Brackenbox dumpster on North Cannon Drive in Lincoln Park.

Tyler Pasciak LaRiviere / Sun-Times

When Chicago area businessman James W. Bracken III was going after a $61.7 million city contract from Mayor Rahm Emanuel’s administration in 2016, he placed a high-ranking city official named William M. Mahon at the top of his list of references.

At the time, Mahon was a deputy commissioner with the city Department of Streets and Sanitation.

That was the department that would oversee the contract.

Bracken got the deal.

As City Hall had done for about a decade then, starting under Mayor Richard M. Daley, it leased the ubiquitous orange dumpsters, dubbed Brackenboxes, from the contractor’s Brackenbox business for street sweepers to use to dump the debris they collected.

Now, Mahon — a longtime member of the Daley family’s 11th Ward Regular Democratic Organization — faces up to eight years in prison when he’s sentenced Dec. 11 for his role in the collapse of a crooked Bridgeport bank, Washington Federal Bank for Savings, where he was a board member for nearly two decades.

He’s one of 14 people — including then Ald. Patrick Daley Thompson — convicted so far in the case after pleading guilty in August and admitting he falsified loan documents for years to keep federal regulators from discovering a massive embezzlement scheme.

And Bracken, 51, of Palos Park, has come under scrutiny by federal investigators in the ongoing bank investigation because of his ties to Mahon, the Chicago Sun-Times has learned.

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Bracken hasn’t been charged with any crime.

Two of his business partners recently were indicted in two other cases. One centers on Cook County’s use of federal funding to demolish an abandoned hotel in Harvey. The other involves Riverdale Mayor Lawrence Jackson’s ties with Bracken, whose company was hired to collect garbage for the south suburb.

Riverdale Mayor Lawrence Jackson indicted for perjury, obstruction of justice

Bracken and his companies aren’t identified by name in those two indictments, which sources confirmed refer to them as Individual A and Company B. According to sources and government records obtained by the Sun-Times, Bracken owns the companies that demolished the hotel and hauled Riverdale’s garbage.

Bracken and his attorney Kalia Coleman won’t comment. Mahon and his lawyer Thomas Breen didn’t respond to messages seeking comment.

Brackens’ history with City Hall

Bracken, who grew up in Canaryville, and his wife Kelly L. Farrell Bracken have a history with City Hall that dates to 2001, when the city Department of Transportation leased a dump truck from her company, KLF Trucking. It was one of nearly 200 companies in the city’s Hired Truck Program.

A 2004 Sun-Times investigation of the Hired Truck Program found that Daley spent more than $40 million a year hiring dump trucks for city construction projects but that those trucks did little or no work. Many truck owners paid bribes to get into the program and made campaign contributions to the mayor and other politicians.

Mayor Richard M. Daley at a news conference in 2004, when he responded to new disclosures related to the city’s corruption-riddled Hired Truck Program.

The newspaper’s reporting sparked a federal investigation that spread to include city hiring practices and led to the convictions of 48 people. Among those was Daley patronage director Robert Sorich, who was found to have fixed test scores for clout-heavy job applicants.

Indicted in Bridgeport bank failure case, William M. Mahon is out at Streets and San

Mahon testified about his role in the test-rigging scheme while working for Streets and San and also serving on the bank board. He wasn’t charged in connection with that scheme but was suspended from his City Hall job for 45 days.

He quit his job with the department in January 2022, a month after being indicted on charges that accused him of helping Washington Federal CEO John Gembara carry out the embezzlement scheme.

William M. Mahon walks out of federal court earlier this year after pleading guilty to charges of falsifying loan documents.

Anthony Vazquez / Sun-Times

Bracken’s wife, a registered nurse, wasn’t charged in the Hired Truck case, a scandal that prompted Daley to shut down the program and replace the dump trucks with privately owned dumpsters.

Brackenbox’s first dumpster contract

The Daley administration gave Brackenbox its first dumpster contract with Streets and Sanitation in 2009. Altogether, City Hall has given the company five contracts, totaling $81 million. Brackenbox so far has been paid nearly $50 million. The company’s most recent contracts with the city were issued in June.

Two other Bracken-owned companies — KLF Trucking and Utility Transport — have been given 19 City Hall contracts since 2011 for a total of more than $28 million.

During that time, the Brackens and their companies have made more than $295,000 in political contributions to politicians — including $25,000 to the 2019 mayoral campaign of Daley’s brother Bill Daley and $17,750 to funds controlled by former Ald. Edward M. Burke (14th), who’s now on trial on corruption charges.

Ed Burke’s corruption trial to shift into high gear, jury seated, opening statements to begin soon

The registered agent listed in state records for Bracken’s companies is attorney Michael Synowiecki, a law partner of Mara Georges, Daley’s former top City Hall lawyer. Synowiecki worked as attorney for the Chicago City Council Finance Committee when it was run by Burke. Synowiecki married Meaghan Cleary, who worked for the finance committee and is a great-niece of Anne Burke, the former Illinois Supreme Court justice who’s married to Burke.

Bridgeport bank failure fallout sees owner of home where bank CEO died found guilty of embezzling $6 million

Harvey deal under scrutiny

In February 2018, the Cook County Land Bank Authority, a government agency that works to get tax-delinquent property redeveloped, hired one of the Bracken companies, KLF Enterprises, to demolish a former Holiday Inn at 170th and Halsted streets in Harvey, county records show.

Land bank officials knew the building contained asbestos based on a 2017 survey from Carl Fioravanti, president of Alliance Environmental Control of Lansing. Bracken then hired Fioravanti to remove the asbestos, which would be dumped in a Bracken landfill, records show.

Initially estimated to cost $376,000, the land bank ended up spending nearly $500,000, which included money from the federal Community Development Block Grant program.

About six months later, federal authorities began looking into whether Fioravanti accurately reported how much asbestos he found inside the building and the amount he reported to the landfill operations.

A grand jury indicted Fioravanti on Oct. 19, accusing him of obstruction of justice, saying he gave federal investigators altered records “to reflect a different quantity of asbestos that was removed from the hotel site and delivered to the landfill,” according to prosecutors.

Two weeks later, the same grand jury indicted Jackson for perjury and obstruction of justice, accusing him of lying in a civil suit filed by Tri-State Disposal Inc., which had hauled the suburb’s garbage until the mayor hired a Bracken company.

Jackson testified in a sworn deposition in February 2021 that he didn’t know the owners of the new garbage-hauler. But a federal investigation found that Bracken was helping run Centennial Holdings, a trucking company owned by the mayor and his wife.

Attorneys for Fioravanti and Jackson won’t comment.

Untitled

Click here to read the Sun-Times’ initial investigation of the failure of Washington Federal Bank for Savings.

Brandon Johnson to return $46,500 in banned campaign contributions from Chicago city contractors

2023-11-10T05:30:00-06:00

Mayor Brandon Johnson is returning $46,500 in campaign contributions, blaming an “oversight” for having taken the money despite an executive order imposed by then-Mayor Rahm Emanuel that bars Chicago mayors from accepting campaign money from city contractors.

Tyler Pasciak LaRiviere / Sun-Times

Mayor Brandon Johnson isn’t allowed to take campaign contributions from city contractors under a City Hall ethics rule but has accepted them anyway.

Asked about that, Christian Perry, Johnson’s political director, says taking the money was an “oversight” and that it’s being returned — about $46,500 in all.

“This oversight has been corrected as of over a month ago, and all incorrect donations, which accounted for a small portion of donations received so far, are in the process of being returned,” Perry says.

In some instances, it appears that city contractors were solicited for campaign cash by Johnson’s political fundraisers.

Among those who gave money to Friends of Brandon Johnson despite being city contractors are Michael Tadin Sr., who runs MAT Leasing Inc., and his son Michael Tadin Jr., who runs MAT Construction Leasing Inc.

Both men, who run their businesses from the same South Side location, gave $1,500 checks to Johnson’s campaign fund on Aug. 21 as part of a fundraiser downtown, according to records and interviews. Both have contracts with City Hall, including work worth potentially millions of dollars for leasing heavy equipment to city agencies as needed.

MAT Asphalt wins up to $141M in city contracts after settling pollution complaints

MAT Construction gave $1,500 to Mayor Brandon Johnson’s campaign fund despite being a city contractor.

Illinois State Board of Elections

The elder Tadin says he knew that then-Mayor Rahm Emanuel had issued an executive order in 2011 barring any mayor from taking campaign money from city contractors but says: “I thought it was his order, only for him. ... I wasn’t aware it was on the books.”

Perry says: “In the first several months following the transition, our nationally based compliance team evaluated contributions under the ordinance for city elected officials rather than the executive orders for sitting mayors.”

Johnson’s campaign aides thought it was OK to take money from city contractors as long as the amounts fell below a certain threshold. Actually, though, Johnson was barred from taking any money from them after he was sworn in on May 15.

The executive order issued by then-Mayor Rahm Emanuel bars mayors from taking campaign contributions from city contractors.

City officials say Emanuel’s prohibition remains in effect unless a mayor changes or rescinds it. Mayor Lori Lightfoot, who succeeded Emanuel, left it alone. As has Johnson.

Emanuel’s ban says “It is necessary that public officials and contractors adhere to the highest ethical standards and avoid transactions and circumstances that may compromise or appear to compromise the independence of any city decision.”

A city contract with MAT Leasing.

City Hall records

Says Perry: “The executive orders banning lobbyist and contractor donations to mayors is a sound and necessary policy to ensure a fair government for the people of Chicago.”

He says some Johnson supporters involved in fundraisers might have solicited city contractors for contributions “in the early stages” because of the misinterpretation of the rules. But he says city contractors wouldn’t have been “sought out” for money solely because they were working for City Hall.

“Our financial team caught it, and we’ve been remedying it ever since,” he says. “These contributions were mostly made by individuals who attended fundraiser events.”

Johnson’s campaign “has asked many of those who have had their contributions returned to invest those funds in charities that benefit underserved communities in the city,” according to Perry, who says about 30 contributions are being returned.

Despite ban on lobbyists’ campaign money, Lightfoot took $68K from lobbyist’s companies. Now, she’s giving much of it back.

Some of those didn’t violate the ban but were from city contractors who gave money before Johnson’s inauguration.

Perry won’t identify those getting refunds beyond telling a Chicago Sun-Times reporter they “include the entirety of the companies/people you named.”

Johnson’s campaign also got $1,500 on Aug. 21 from Jimmie Daniels, longtime owner of Total Facility Maintenance Inc. The Wood Dale janitorial business had a contract to clean municipal buildings and other city-owned properties that expired, then was given a $4.3 million, no-bid extension by City Hall on Aug. 11, city procurement records show.

Daniels didn’t return calls seeking comment.

Johnson’s aides didn’t address questions about Daniels and his company.

Nor would they discuss three campaign contributions from Kyla Griggs in October totaling $10,000. She listed 3520 S. Morgan St. as her address. That’s the address of GMA Construction Group, a company started by Cornelius Griggs that’s doing airfield work at city-run O’Hare Airport with Turner Paschen Aviation Partners.

Neither Kyla Griggs nor Cornelius Griggs would comment, and an attorney for GMA wouldn’t discuss their relationship or say whether Kyla Griggs holds any ownership stake in the company.

“Kyla is an independent person who makes her own decisions,” GMA lawyer Erica Kirkwood says. “She’s over 18. We did not ask her to make any donations on behalf of the company. ... We’re not sharing her role inside or outside the company.”

A fundraising solicitation on Mayor Brandon Johnson’s campaign website.

brandonforchicago.com

A political action committee called Leaders for Tomorrow that also lists the Morgan Street address and includes Kirkwood and Cornelius Griggs as officers gave $24,000 to Johnson’s campaign on April 21. That was between his April 4 election and his May 15 inauguration, so it wasn’t subject to the contribution ban.

Four days before Johnson’s inauguration, his campaign fund reported getting contributions from attorneys working for the Texas law firm Linebarger Goggan Blair & Sampson, which specializes in debt collection and has two deals with the city of Chicago, one for collecting money owed for traffic tickets, water bills and other outstanding payments. Ten out-of-state attorneys with the law firm each contributed $1,000, and the firm gave $1,500 on the same date.

David Bonoma, who was an aide to former Mayor Richard M. Daley and now heads the firm’s Chicago office, gave Johnson $500, records show.

David Bonoma.

Illinois secretary of state

The firm’s contributions were part of a campaign fundraiser for Johnson that Bonoma was invited to, sources say.

Bonoma didn’t return calls.

A Linebarger Goggan spokesman says the firm “is active in the civic life of the communities that it serves across the United States. This includes charitable activity as well as political engagement. Political contributions made by the firm and its partners are made in compliance with the law and the ethical standards of our profession.”

Perry says Johnson’s campaign plans to return some contributions made by city contractors after his election but before his inauguration even though it’s not required to do so.

“Since we believe in both the letter and the spirit of the law to ensure good governance, we have also begun a process to return contributions that do not violate the executive order since they were made before the mayor was sworn into office but were made after the election victory,” Perry says.

Other contributions to Johnson’s campaign include:

$2,500 on Aug. 21 from United Service Companies, run by Richard “Rick” Simon, who has long-standing ties to reputed mob figures. His company has no current city contracts.
$2,000 on Sept. 28 from Anthony Bruno, a convicted felon and disbarred lawyer with ties to suburban politicians.
$6,000 on July 24 from executives of Monterrey Security, a contractor for the CTA, which is overseen by the mayor but as a quasi-independent agency isn’t subject to the contribution ban.

Johnson won’t comment on whether he thinks campaign contributions from such City Hall sister agencies should also be included in the ban.

There are no penalties set out for a mayor violating the ban. A contractor or company executive breaking the rules could lose city contracts.

Lightfoot faced similar questions while in office over campaign money she got from businesses associated with a city lobbyist, and she returned thousands of dollars in contributions.

Crooked bank’s client dodged $4M debt, then got loans of millions more

2023-10-27T05:30:00-05:00

Edward H. Gobbo outside his home. His bankruptcy saw him get out of having to pay $4 million he owed on loans from Washington Federal Bank for Savings. One month after getting out of bankruptcy, Gobbo again was getting the first of what ultimately was millions of dollars more in loans from the Bridgeport bank that ended up being shut down for fraud.

Anthony Vazquez / Sun-Times

As the president of a tiny Bridgeport bank was running what ultimately was exposed as a multimillion-dollar embezzlement scheme, one of its biggest customers was getting out of having to repay $4 million he owed the bank by filing for bankruptcy.

But that didn’t stop Washington Federal Bank for Savings from lending even more money to Edward H. Gobbo once his bankruptcy court case was over.

One month later, John F. Gembara — the bank’s president, CEO and chairman of the board — started giving money once more to Gobbo, court records examined by the Chicago Sun-Times show. And Gembara kept on giving the bank’s money to Gobbo — whom former bank employees have described in court as among a group of Gembara insiders who were known as “friends of John” — for five years.

The loans didn’t stop coming until a few months before Gembara, by then suspended from his job as federal regulators unraveled the embezzlement scheme at Washington Federal, was found dead Dec. 3, 2017, in the main bedroom of another bank customer’s home, with a rope around his neck and a stair railing. Park Ridge police and the Cook County medical examiner’s office labeled Gembara’s death a suicide.

Twelve days later, regulators shut down the bank, after finally beginning to piece together a fraud scheme that would see the Federal Deposit Insurance Corporation spend nearly $150 million to pay back customers for money they lost when the bank went bust.

When the bank was shut down, federal bank examiners discovered that Gobbo and his immediate family owed more than $3.8 million on 27 residential loans, some of them years overdue, court records show.

Crooked Bridgeport bank used these people’s CDs to fuel embezzlement scheme — ‘We were all victims’

It’s unclear how much money federal regulators have recovered from the Gobbos, though they have sold some of the properties for which the loans were given.

Gobbo, who a former bank employee has testified showed up at the bank about every other day, hasn’t been charged with any crime. But a source says he remains under investigation by federal agencies still trying to figure out why Gembara looted the bank that previously had been run by his father and grandfather.

The now-defunct Washington Federal Bank for Savings at 2869 S. Archer Ave.

Cook County assessor’s ofice

Sixteen people have been charged with crimes involving the failed bank. They include three former bank board members and six former employees. So far, 14 have been convicted.

Among them is former Ald. Patrick Daley Thompson, a Washington Federal borrower who was found guilty of having lied to regulators about how much he owed the bank. Washington Federal operated in the neighborhood where Thompson’s grandfather, the late Mayor Richard J. Daley, raised his family. Thompson still lives in that neighborhood, which has been the Daley family’s political base for decades. The disgraced Chicago City Council member resigned his seat and went to prison.

Patrick Daley Thompson on prison life: ‘It was horrible, absolutely horrible’

Gobbo’s name has been cited by federal investigators and other witnesses during the trials of three bank customers convicted of embezzling more than $16 million: Robert M. Kowalski, a builder and friend of Gembara, and two men described as having worked as handymen for the bank, Miroslaw Krejza and Marek Matczuk. Gembara was found dead in Matczuk’s Park Ridge home.

“Can you provide us a breakdown of all the Gobbo-related loans and provide us the files for those loans,” federal bank examiner Amanda Whitney Ridges said in an email sent to Gembara on Nov. 13, 2017. Gembara never produced the records.

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

Provided

During Matczuk’s trial, Whitney Ridges told the jury, “We also saw Gobbo as a very common name that kept popping up,” saying authorities were trying to determine whether the bank had committed violations of legal lending limits by giving more money than allowed to Gobbo or any single customer.

At Kowalski’s trial, former loan officer Cathy Torres testified that Gobbo was one of the customers the staff called “Friends of John” because they weren’t being made to make payments on their loans, which were hidden from regulators to make them think the bank had no bad loans. Torres has pleaded guilty for her role in the scheme.

Gobbo, 64, of Niles, declined to comment when a reporter spoke with him briefly at his home.

Peter Nabhani, his real estate attorney, said Gobbo had hired a criminal defense attorney regarding the Gembara loans. He said he’d refer questions to that lawyer, whom he wouldn’t identify.

Four months ago, Gobbo was the real estate agent for his daughter and son-in-law, who paid $12.5 million for a 12,000-square-foot mansion on Lake Michigan in Winnetka. It reportedly was the most expensive house sold in the Chicago area this year.

Gobbo’s daughter Gabriella is married to Jared Smith, co-founder of RxBar, a protein bar company that he and his partner sold to Kellogg’s in 2017 for $600 million.

A graduate of Loyola Academy in Wilmette, Gobbo landed a job as a garage attendant for the Chicago Police Department in 1981 while his mother’s brother, William Hanhardt, was the police department’s chief of detectives. In one of the biggest Chicago police scandals in history, Hanhardt later went to prison after pleading guilty to running a mobbed-up jewelry theft ring that stole millions of dollars — while he worked as a top police official.

William Hanhardt went to prison after being convicted of running a mobbed-up jewelry theft ring while he was a top official in the Chicago Police Department.

Brian Jackson / Sun-Times file

Ex-Chicago top cop, who ran mobbed-up jewelry theft ring, dies

Gobbo was driving a truck for the city of Chicago’s Department of Streets and Sanitation when he and his wife, Michele, got a $93,000 mortgage from Gembara’s bank 30 years ago to buy a small frame house in Bridgeport. That appears to be the bank’s first loan to Gobbo.

Three years later, Gobbo left the city payroll and began buying properties to develop, often with others who also got loans from Gembara’s bank.

In April 2002, Gobbo signed a quit claim deed, turning over a Bucktown property to Thomas Development, a company owned by Boguslaw Kasprowicz, who faces a lengthy prison sentence after pleading guilty to embezzling $14 million from Washington Federal. Kasprowicz has testified that he had to pay $1.7 million worth of bills for Gembara, including credit cards and a loan for a small yacht.

Kasprowicz built a three-story condo building on the property financed by Gembara’s bank. His attorney didn’t return calls seeking comment.

Gobbo set up several small development companies with Alexander S. Pissios, a former Michigan Avenue fur salesman, to build housing around the United Center with millions in loans from Gembara’s bank. Pissios went bankrupt in 2011 and Gobbo in 2012. Both men owed Gembara’s bank millions of dollars, and their attorneys have said those loans never were repaid.

Gobbo continued developing property with money from Gembara, while Pissios went to work for his uncle Nick Mirkopoulos, who was looking to expand his Cinespace movie studio from Toronto to Chicago.

Five years after Pissios’ bankruptcy case ended, federal prosecutors learned that he had failed to disclose a $100,000 loan he received from his uncle. Facing a threat of possible bankruptcy fraud charges, Pissios agreed to become an undercover mole, helping prosecutors build the case that saw longtime Chicago Teamsters union boss John T. Coli Sr. convicted of extorting $325,000 from Cinespace Chicago Film Studios.

Alexander Pissios at Cinespace Chicago Film Studio in 2019.

Ashlee Rezin / Sun-Times

Feds’ mole’s disappearing debt

Gobbo has been involved in real estate deals, including a Bucktown home, with George Bahramis, a certified public accountant from Glenview who went bankrupt in 2012, reporting that he owed Gembara’s bank $443,000. After Bahramis’ bankruptcy case settled, Gembara resumed giving loans to Bahramis, as he did to Gobbo.

Bahramis couldn’t be reached for comment.

Gobbo also had a business relationship with Matczuk. On Sept. 2, 2011, Washington Federal issued a $25,000 check to “Mark M Group/ … Gobbo,’’ according to prosecution documents from Matczuk’s trial. Matczuk owned Mark M Group. Matczuk’s attorney declined to discuss the purpose of the check.

Gembara also gave Gobbo money to buy homes at foreclosure sales and repair them, but did so without putting a lien on the properties that would have allowed the bank to recover its money when the properties were sold, according to sworn testimony that Gembara’s loan servicer Alicia Mandujano gave in an April 2019 deposition with FDIC attorney Stuart Tonkinson.

“So the bank, John, would make the purchase, do the rehab, and Mr. Gobbo didn’t have to pay anything out of pocket,” Mandujano told the FDIC.

“Years ago, he was giving disbursements [to] Mr. Gobbo against his mortgages ... but I said, John, you know Mr. Gobbo hasn’t made payments, you know. And he’s, like, for what? I said, for his mortgages,” Mandujano testified.

“And he would get mad. He’s, like, I didn’t ask about his mortgages. I just told you to make this deposit into his account. But he said it in a mean way, like — he’s, like, I’m the owner of this bank. I’m the one in charge. Do you want to get a paycheck? Do you want to still keep working here? Then, do what I tell you.”

Bridgeport bank president had worker falsely make it look like Patrick Daley Thompson made loan payments: plea

Mandujano has pleaded guilty to conspiracy and faces a possible five-year prison sentence. She has testified against four of Gembara’s customers: Kowalski, Krejza, Matczuk and Thompson.

READ THE ORIGINAL SUN-TIMES INVESTIGATION

Click here to read the first story in the Sun-Times investigation of the failed Bridgeport bank Washington Federal Bank for Savings, published March 4, 2018.

Crooked bank used customers’ CDs to fuel embezzlement scheme in Illinois

2023-10-13T05:30:00-05:00

The now-defunct Washington Federal Bank for Savings at 2869 S. Archer Ave. in Bridgeport.

Cook County assessor’s ofice

For years, a small, politically connected bank in Bridgeport ran newspaper ads offering generous interest rates on certificates of deposit that attracted customers from across the city and suburbs who put in millions of dollars.

They had no idea their cash deposits were fueling an embezzlement scheme overseen by John F. Gembara, who was the president, chief executive officer and biggest shareholder of Washington Federal Bank for Savings — until he was found dead in a customer’s bedroom 12 days before federal regulators shut down the family-run bank in December 2017 after discovering massive fraud.

Most depositors have gotten back all of their money from the Federal Deposit Insurance Corp., which paid $140 million to cover as much as $250,000 for each person on an account.

But four dozen customers — including several who since have died — lost as much as $312,525 each because their accounts exceeded the FDIC’s insurance guarantee limit.

That’s according to records filed in the embezzlement trial of Marek Matczuk, who was found guilty last month of embezzling $6 million. Matczuk owns the Park Ridge home where Gembara was found dead with a rope wrapped around his neck and the railing of a spiral staircase.

Authorities say Gembara killed himself. But his widow, her attorney and others have said they suspected he was killed as federal regulators began unraveling the embezzlement scheme that brought down the bank.

Bridgeport bank failure fallout sees owner of home where bank CEO died found guilty of embezzling $6 million

Among the customers who lost money is a Glencoe physician who worked in the Chicago Medical District on the West Side and says he often ate lunch in Little Italy, where the bank had a branch office offering “really good rates” on certificates of deposit.

The doctor says that, over time, he “was chasing CD rates,” depositing a total of $2.7 million in several CDs at Washington Federal.

Then, he says, he got a call from the bank’s branch manager.

“She told me they were in trouble,” the doctor says. “She told me she thought the guy killed himself. I raced down there. I got the money out, as much as I could.

“She said I was 100% insured. When I went to the FDIC, they said that wasn’t the case. It turns out [the branch manager] didn’t know the FDIC limits and how it works. She apologized to me. But it doesn’t help me get my money back.

“It was a corrupt enterprise. I thought my money was as safe as it could be in a bank.”

Seven days after regulators closed Washington Federal, government records show, the doctor got a check for $2,542,695. He also filed a claim for $174,717 with the FDIC, which has paid him $74,862 as it has continued to work to recover money. He’s still out $104,846.

The Sun-Times isn’t publishing the name of the doctor or any other depositors with pending claims because there’s no indication they knew about the embezzlement scheme that brought down the bank that Gembara’s family ran for three generations.

Records show Gembara had been looting the bank for more than a decade.

John F. Gembara.

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FDIC officials won’t talk about the outstanding claims as the investigation of the failed bank continues.

Fourteen people charged in connection with the bank have been convicted. Among them: former Ald. Patrick Daley Thompson (11th), who was found guilty of lying to regulators about the money he got from Gembara and had to resign his Chicago City Council seat representing his family’s longtime Bridgeport stronghold.

Patrick Daley Thompson on prison life: ‘It was horrible, absolutely horrible’

Two others, including a bank employee, have deferred-prosecution agreements under which the criminal charges against them could be dismissed in exchange for their cooperation with federal authorities.

The FDIC has recovered about $59 million and could get more after U.S. District Judge Virginia Kendall sentences the bank officials, employees and others involved in the embezzlement. They could be ordered to do time in prison and to pay restitution to the FDIC.

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

One of the newspaper ads that Washington Federal Bank for Savings used to bring in customers and their money by offering very competitive interest rates on certificates of deposits.

Bank’s ‘smooth operators’

Any more money the FDIC recovers could be shared with customers who have pending claims.

Those include the estate of a former trade association president from the South Loop who put all of his money in the bank despite his daughter’s suspicions.

“He was originally introduced to them because they advertised in the newspaper that they had higher CD rates,’’ the daughter says. “They would always match other banks’ rates.

“I remember saying to my dad, ‘Doesn’t that raise alarm bells that they are offering so much better rates?’ He said, ‘Don’t worry, I know the president’s sister’” — referring to Janice Weston, a bank vice president who has pleaded guilty in the scheme.

Bridgeport bank failure fallout: Dead CEO’s sister pleads guilty in collapse of Washington Federal Bank for Savings

“I went to the bank with him because I was concerned,” the daughter says. Weston “was the face of the bank to my father. She created that personal relationship with my father. They needed cash. They were smooth operators, and they figured out a model to get that cash from people.

“One day, my dad wakes up, and the FDIC called him on the phone and said, ‘We shut down the bank.’ Almost before he could be worried about it, they replaced [most of] his funds. He kept saying to my husband and I, ‘You kept saying it was too good to be true. And I should have listened to you.’”

Janice Weston, who was vice president of the board of Washington Federal Bank for Savings in Bridgeport, is shown as she heads to court Aug. 2. The daughter of one bank customer who lost money says Weston “was the face of the bank to my father. She created that personal relationship with my father. They needed cash. They were smooth operators, and they figured out a model to get that cash from people.”

Ashlee Rezin / Sun-Times

He got back most of the money but filed a claim with the FDIC because one account exceeded the maximum insurance guarantee by $56,674. His daughter says the bank assured him that the account he had opened with his late wife was fully insured. It wasn’t.

Her father died in June 2020 at age 87. The FDIC has been able to reduce his claim to $34,913. But his daughter isn’t sure the rest will ever be repaid.

“It was worrisome and painful, not just financially but emotionally,” she says. “No one wants to feel they were scammed.”

Ex-city official, second man plead guilty in collapse of Washington Federal Bank for Savings

Gembara was chairman of the bank’s board of directors, which included his sister and three others:

George Kozdemba, a retired electrician with the Metropolitan Water Reclamation District of Greater Chicago.
William M. Mahon, a former high-ranking City Hall official and member of the Daley family’s 11th Ward Regular Democratic Organization.
Lester Stepien, a meatpacking company comptroller who is cooperating with prosecutors.

William Mahon walks out of the Dirksen Federal Building after pleading guilty Aug. 7 to charges in connection with the failure of Washington Federal Bank for Savings.

Anthony Vazquez / Sun-Times

George Kozdemba is seen outside after pleading guilty in connection with the collapse of Bridgeport’s Washington Federal Bank for Savings.

Anthony Vazquez / Sun-Times

Like Weston, Kozdemba and Mahon face possible prison sentences along with five bank employees and four customers, including Robert M. Kowalski, a lawyer and longtime friend and business partner of Gembara who was convicted in March of embezzling $8 million from Washington Federal and concealing more than $560,000 in assets when he went bankrupt.

Robert Kowalski enters the Dirksen Federal Courthouse on March 4.

Ashlee Rezin / Sun-Times

Bank regulators ‘negligent’

About three months before federal regulators shut down the bank, a University of Illinois Chicago professor opened an account at Washington Federal’s Little Italy branch.

“The bank was right down the street from my office,” says the professor, who has since retired. “It was supposed to be a joint account, and instead it was just me. I was trying to straighten that out when the bank closed.”

He got a check for $250,000 — the FDIC’s maximum insurance payment for an individual account holder. He filed a claim for the remaining $106,299. The FDIC has since sent him four payments, reducing his claim to $62,556.

The retired professor says he wouldn’t have had to file that claim if the bank had done what he asked for and created a joint account, which would mean the FDIC would have insured it for up to $500,000.

“I can’t understand why the [regulators] were so negligent,” allowing the scheme to go undetected for years, the former professor says.

The bank’s last federal audit began Oct. 31, 2017. On Nov. 28, 2017, federal regulators directed the bank board to suspend Gembara.

The former Little Italy branch of Washington Federal Bank for Savings.

Cook County assessor

Banker’s relatives got their money

The following day, government records show, Gembara’s relatives began withdrawing their money from the bank.

On Dec. 3, 2017, Gembara was found dead at Matczuk’s home.

On Dec. 15, 2017, regulators closed the bank.

Sixteen days later, records show, Gembara’s wife, Therese Gembara, who hasn’t been implicated in the scheme, got 10 checks totaling $257,186.

Her attorney has said she doubts her husband killed himself.

Government records don’t show any Gembara relatives filing claims with the FDIC.

Another bank customer who did file a claim was a woman, now 83, who lives in a condominium in Portage Park.

“We were all victims,” the woman says of herself and other bank customers. “Wish I never heard of this bank. I wish I never went there. I got to be a customer because I saw an ad in the paper a few months before the bank closed.”

She got a check for $250,000 a month after the bank failed. She also filed a claim with the FDIC for another $143,748 and has collected $60,000 of that.

“I would be delighted if I got more money,” the woman says. “But I would be very surprised.”

Click here to read the first story in the Sun-Times investigation of the failed Bridgeport bank Washington Federal Bank for Savings, published March 4, 2018.

Illinois state Sen. Bob Rita a constant in Chicago corruption trials as a witness

2023-10-13T05:00:00-05:00

State Rep. Bob Rita.

Ashlee Rezin / Sun-Times

Illinoisans have endured a series of corruption trials. Each had its own defendant and circumstances. But three cases over the last six months shared a common element: state Rep. Bob Rita as a prosecution witness.

Rita, D-Blue Island, hasn’t found out yet whether he’ll be asked to testify in a fourth trial — that of former Illinois House Speaker Michael J. Madigan, who Rita said in one court appearance ruled through “fear and intimidation.”

Unlike some witnesses in the trials, Rita has neither been charged with any crime nor compelled to testify under a grant of immunity from prosecution. He has been subpoenaed to testify at the request of federal prosecutors about the Illinois General Assembly’s inner workings and Madigan’s inner circle.

Rita was Madigan’s longtime legislative point person on gambling matters. Following his appearances at recent corruption trials, he says he plans to run for re-election in 2024, though the March 19 Democratic primary coincides closely with Madigan’s April trial date on racketeering and bribery charges.

“I plan on staying,” he said in a brief interview, “and running for reelection.”

In August, Rita took the stand at the perjury and obstruction of justice trial of longtime Madigan aide Tim Mapes, who was found guilty of lying to investigators looking into Madigan and Michael McClain, the speaker’s confidant.

Michael McClain, a longtime confidant to former Illinois House Speaker Michael J. Madigan, walks into the Dirksen Federal Courthouse.

Ashlee Rezin / Sun-Times

In June, Rita testified at the trial of businessman James T. Weiss, who was convicted of bribing two former legislators while trying to get “sweepstakes” gambling machines legalized.

In March, Rita testified in the case against former ComEd officials who were convicted of conspiring to bribe Madigan over a number of years to sway him on legislation favorable to the electric utility.

Rita’s lawyer, Nancy DePodesta, says Rita “received a non-target letter from the U.S. attorney’s office in 2020” and “has not been accused of any criminal wrongdoing.”

“Unlike other witnesses who took the stand, he did not provide testimony as part of a cooperation agreement with the government and did not require immunity in order to testify,” she says. “He was asked to provide truthful information, and he did. When Rep. Rita was called upon to testify, the choice was clear: Do the right thing in the public’s interest.”

Rita’s political committee has spent more than $130,000 since 2020 on legal fees to DePodesta’s law firm, Saul Ewing LLP, to help the lawmaker with his role as a witness in recent cases and with other unrelated matters, according to records and interviews.

At the Mapes trial, Rita explained how Madigan tapped him in 2013 to be the House’s point person on gambling expansion. Rita said Madigan told him he had an unspecified conflict of interest on the issue.

Tim Mapes, former chief of staff for ex-Illinois House Speaker Michael J. Madigan, leaves the Dirksen Federal Building after he was found guilty of perjury and attempted obstruction of justice.

Anthony Vazquez / Sun-Times

McClain was convicted in the ComEd trial and also separately charged in Madigan’s pending racketeering case. Rita testified that McClain gave him “advice and guidance” for years behind the scenes at Madigan’s behest on legislation that eventually led to an explosion of legal gambling in Illinois.

Legislation from 2019 backed by Rita paved the way for an array of new casinos, including one in Chicago, and the legalization of sports betting.

“And what, if any, guidance did Speaker Madigan give you about what your interactions would be with Mr. McClain going forward?” a prosecutor asked Rita at Mapes’ trial.

“He indicated that Mike McClain would guide me and assist me with the legislation,” Rita said.

“Did you then understand that Mr. McClain’s guidance would be in line with the speaker’s expectations?” the prosecutor asked.

“Yes,” Rita said.

“After that conversation you had with Speaker Madigan, would you meet with Mr. McClain about the gaming legislation?” the prosecutor asked.

Rita said, “Yes.”

Rita told the Sun-Times he still doesn’t know what Madigan’s alleged conflict of interest was, and Madigan’s legal team won’t comment.

James T. Weiss walks out of the Dirksen Federal Building with his lawyers after being found guilty of bribery in June.

Anthony Vazquez / Sun-Times

At the ComEd trial, Rita also testified that McClain, who had been a ComEd lobbyist, guided him on legislation benefitting the utility.

Rita said at that trial that Madigan ruled his chamber “through fear and intimidation.” Above all, Rita testified, Madigan valued “loyalty” from lawmakers.

Madigan was hit with racketeering and bribery charges last year “for allegedly using his official position to corruptly solicit and receive personal financial rewards for himself and his associates,” according to prosecutors.

Rita remains chairman of the House’s powerful Executive Committee, where many important issues land. He said he also remains the House’s point person on gambling matters.

Rita continues to accept campaign contributions from the gaming industry, including $2,500 last month from Gold Rush Amusements, run by video gaming magnate Rick Heidner, state campaign finance records show.

Rita, first elected in 2002, has accepted more than $100,000 in campaign donations since the beginning of 2022 from companies, executives, lobbyists and others associated with gaming, records show.

Such donations were asked about in the Weiss trial, which centered on Weiss’ efforts to get his unregulated gambling devices known as “sweepstakes machines” legalized.

A transcript showing state Rep. Bob Rita under questioning by an attorney for James T. Weiss in June.

Provided

One of Weiss’ lawyers asked Rita why he had accepted campaign donations from Weiss’ sweepstakes firm, even though the Blue Island Democrat opposed legislation that would benefit Weiss. The lawyer also asked Rita about donations he has accepted from Heidner, who was opposed to the expansion of sweepstakes machines that would likely cut into his highly regulated and lucrative area of gaming.

Between 2017 and 2023, Gold Rush donated $26,000 to Rita’s campaign funds, records show.

Referring to the sweepstakes industry, Weiss’ lawyer asked Rita at the trial, “Is it ethical to take money from something that you believe is illegal?”

Rita replied, “All in the contents.”

“OK,” the lawyer responded. “Is it ethical to take money from both sides?”

“Yes,” Rita said.

“Right, and then support one side but not support the other?” the lawyer asked.

“By just taking money from one side, you’re predetermined what your outcome is,” Rita said.

“Oh, so you just take both moneys and play the game, right?” the lawyer asked.

“If people are willing to donate, yes,” Rita said.

A Gold Rush competitor, Accel Entertainment, donated $5,000 to Rita in December. One of Accel’s lobbying firms is run by Michael Kasper, an attorney who worked for years for Madigan in the House and the Illinois Democratic Party that Madigan also ran. Last month, Kasper’s firm donated $1,000 to Rita.

From 2004 to 2018, political groups run by Madigan donated more than $150,000 to Rita’s political funds, often by paying salaries for campaign workers. Madigan resigned from the House in 2021.

DePodesta says Rita “receives contributions from a wide range of interests on varying sides of an issue. He does not base his policymaking decisions on who does or does not contribute to his campaign fund.”

Bridgeport bank failure fallout sees Marek Matczuk, owner of home where bank CEO died, found guilty of embezzling $6 million

2023-09-22T18:49:02.348-05:00

Marek Matczuk.

Ashlee Rezin / Sun-Times

More than five years after the president of a politically connected Bridgeport bank was found dead in a customer’s Park Ridge house, a federal jury convicted the homeowner Friday of embezzling $6 million from the bank.

Marek Matczuk — who said he did odd jobs for tiny Washington Federal Bank for Savings and its employees — was given the money between 2007 and 2017 at the direction of the late John F. Gembara, who was the chief executive officer and majority shareholder of the bank, founded by Polish immigrants to serve their community more than a century ago.

Jurors had been told Gembara died but not that he was found dead in the main bedroom of Matczuk’s million-dollar home on Dec. 3, 2017, with a rope wrapped around his neck and around the railing of a spiral staircase.

Twelve days later, federal regulators closed the bank.

Bridgeport bank failure fallout: Ex-city official, second man plead guilty in collapse of Washington Federal Bank for Savings

Gembara’s death was ruled a suicide. But his widow, her attorney and others have said they suspected he was killed as federal regulators began unraveling the massive embezzlement scheme that brought down the bank.

The collapse exposed Gembara’s ties to the Daley family:

William Mahon — a former high-ranking City Hall official under three former mayors who was part of the Daleys’ 11th Ward Regular Democratic Organization — was on the bank’s board for nearly 20 years, until it collapsed.
Shortly before the bank closed, Gembara gave the ward organization a loan to repair its Bridgeport headquarters.
Patrick Daley Thompson, a grandson of the late Mayor Richard J. Daley and nephew of former Mayor Richard M. Daley, got $219,000 from Gembara and had to resign his seat on the Chicago City Council last year after being convicted of cheating on his taxes and lying to bank regulators about how much money he got from the bank.

Patrick Daley Thompson on prison life: ‘It was horrible, absolutely horrible’

Prosecutors have charged 16 people in the wake of the bank failure. Four have been convicted in three trials. The others pleaded guilty, including three bank board members and six bank employees. Most await sentencing by U.S. District Judge Virginia Kendall.

But the investigation of the failed bank continues as officials try to recover more of the nearly $140 million the Federal Deposit Insurance Corp. spent to cover the bank’s losses. So far, the FDIC has recovered about $60 million.

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

Testifying against the advice of his attorneys, Matczuk told jurors he never embezzled money from the bank, saying Gembara paid him $3 million over a decade for doing various jobs at the bank, at Gembara’s home and at his daughters’ schools, though he never submitted invoices for any of that.

“I was receiving the money he owed me. It was always too little,” Matczuk told jurors, saying he “never had enough money to finish” building two homes financed by Gembara’s bank. “I never paid any money or kickbacks to John Gembara.”

The jury also convicted co-defendant Miroslaw Krejza, another handyman, who got $2.6 million from the bank. Matczuk and Krejza face sentences of up to 35 years in prison. Matczuk was immediately taken into custody after prosecutors said they fear he might flee to Poland.

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

Both men had gotten millions in loans from Gembara to build a few homes on the North Side. Some of those houses sat unfinished for years as Gembara paid the property taxes and kept adding that cost to their outstanding loans.

Like other preferred customers described in Washington Federal Bank trials as “Friends of John,” Matczuk and Krejza made no payments on their loans, which kept growing with each check they got.

Prosecutors Brian Netols, Michelle Petersen, Kristin Pinkston and Jeffrey Snell showed the jury records detailing how the men spent money, on trips to Poland, vacations and cars. Matczuk also spent hundreds of thousands of dollars playing slot machines at casinos, according to testimony.

Gembara’s relationship with the men dated to the early 1990s. His longtime friend and business partner Robert M. Kowalski, a Chicago lawyer, introduced him to Boguslaw Kasprowicz, a contractor who got loans to build million-dollar homes in Bucktown and Wicker Park.

Robert M. Kowalski guilty of all charges

Kowalski was found guilty of embezzling $8 million from the bank.

Kasprowicz has pleaded guilty to embezzling about $14 million, spending about $1.7 million to pay Gembara’s bills.

Kasprowicz introduced Gembara to Matczuk and Krejza, who wanted loans to build homes. Kasprowicz and Krejza are brothers-in-law. Kasprowicz’s and Matczuk’s wives went to the same high school.

It’s unclear why Gembara showered the men with money without requiring them to repay the loans or foreclosing on their property.

“I don’t know why he gave me the money,” Kasprowicz testified about Gembara during questioning from Krejza’s attorney Lisa Wood. “You’d have to ask him.”

Besides building a few homes, the three men ended up doing odd jobs around the bank, such as landscaping and painting, and at Gembara’s Palos Hills home. Kasprowicz helped move Gembara’s daughters to out-of-state colleges and, according to testimony, was ordered to pay some of Gembara’s credit-card bills and monthly payments on a small yacht he bought with Kowalski and his brother William Kowalski, who also is charged in the embezzlement scheme but is cooperating with investigators.

On Nov. 28, 2017, Gembara was suspended by the bank board, which included his sister Janice Weston, at the direction of federal regulators.

He turned to Kasprowicz for help and then Matczuk, who offered a place to “hide,” Pinkston told the jury.

Matczuk testified he never told the Park Ridge police Gembara wanted a place to hide.

Gembara called Kasprowicz, who testified he didn’t get the call because he was flying to Los Angeles — where he owns a home bought with money embezzled from the bank.

He told jurors that, when he landed, he called Matczuk and was told Gembara was asleep at Matczuk’s home.

The Chicago Sun-Times has reported that Matczuk told the Park Ridge police he got several calls on Dec. 1, 2017, from Gembara, saying “that he is in ‘trouble’ with his bank and needed a place to stay” for the weekend.

According to police reports, Matczuk said he met Gembara that evening in Wicker Park at a house the contractor was building with a loan from the bank, Gembara parked his car in the garage, and Matczuk drove them to his Park Ridge home, where he and his family still live.

Matczuk told police he and his wife let Gembara stay in their bedroom while they slept in the living room. The next afternoon, Matczuk’s son told the police, he drove Gembara to a Home Depot in Niles to buy a green rope to hang Christmas decorations at his home in Palos Hills.

Matczuk and his family said they checked on him the next day and found him in a chair with the rope around his neck and the railing of a spiral staircase.

Matczuk “related he does not know where the rope came from and he has never seen it before,” according to a Park Ridge police report. “He denied having any knowledge about Mr. Gembara’s suicide or being complicit in the suicide.”

Untitled

Click here to read the Sun-Times’ initial investigation of the failure of Washington Federal Bank for Savings.

Metropolitan Water Reclamation District of Greater Chicago official John Sudduth found to be double-dipping during COVID pandemic

2023-09-15T06:20:49.258-05:00

During the pandemic, John Sudduth held chief information officer jobs at both the Metropolitan Water Reclamation District of Greater Chicago and a medical board, double-dipping that went undetected.

Pat Nabong / Sun-Times

For 2 ¹⁄₂ months during the COVID-19 pandemic, the chief information officer for Cook County’s sewage-treatment agency supplemented his $270,000-a-year government job with a second full-time gig, working for a not-for-profit that certifies doctors.

Both jobs required John Sudduth to work full time Monday through Friday, generally during the same hours.

Due to the pandemic, though, neither job required Sudduth to be in the office every day, allowing him to hold dual full-time jobs, apparently without the knowledge of his bosses.

But it all blew up for Sudduth when one of his colleagues at the Metropolitan Water Reclamation District of Greater Chicago — the sewage treatment agency for most of Cook County — came across a news release issued last Dec. 12 by the American Board of Medical Specialties announcing Sudduth had been hired as its chief information officer.

Sudduth started the second job Oct. 24, 2022, according to the water reclamation district.

Double dipping during the pandemic became tougher to spot with the transition to remote work during the pandemic, making it harder for employers to monitor whether workers were secretly working a second job.

“Anecdotally, we know this occurred during COVID,” says Colleen Madden Blumenfeld of Challenger, Gray & Christmas, a Chicago outplacement firm. “It becomes more difficult the more high profile the position in the company, especially if the position manages teams. This would be very difficult to juggle.”

The medical board didn’t know Sudduth remained on the government agency’s payroll as it heralded his hiring.

“Mr. Sudduth previously served as CIO for a public utility, where he had oversight of the utility’s information technology as it related to strategy, policy, support and operations,” the board said in its Dec. 12 announcement. “In addition, he served on the executive team, which was responsible for developing and executing the organization’s information technology strategic plan.”

Water reclamation district officials confronted Sudduth, who hadn’t been given permission to work a second job, and asked Cook County’s inspector general’s office to investigate.

Under questioning, Sudduth said he accepted the second job but hadn’t been given a start date, according to an April 14 report from Steven Cyranoski, the county’s interim inspector general.

But an attorney for the medical board told the inspector general Sudduth had been hired months earlier and had been working remotely because its Chicago office was closed due to the pandemic.

The medical board’s general counsel told Cyranoski’s staff Sudduth was required to work 40 hours a week, from 8:30 a.m. to 4:30 p.m. Monday through Friday — nearly identical to his hours with the water reclamation district.

According to the inspector general’s report, the medical board’s attorney said: “It was not possible for him to perform his duties during the evening hours since he had a myriad of responsibilities in his role as CIO and was a regular participant in executive management meetings at the firm, which were always convened during normal business hours.”

Cyranoski’s report says his staff didn’t find “any evidence that [Sudduth] had worked after regular hours at either” job.

He also wrote that, when the medical board interviewed Sudduth, he “denied he had been previously questioned by MWRD. ... During the interview [Sudduth], attempted to convince the executive management team that although he was still on the payroll at the MWRD, he was focusing his efforts on his duties” for the medical board.

Sudduth, who had worked for the Metropolitan Water Reclamation District since April 2015, resigned from the agency Jan. 3 — the day he was supposed to be interviewed by the inspector general.

Water reclamation district admits it’s long rented out land at bargain prices

Because Sudduth quit, he couldn’t face any disciplinary action for violating rules that bar employees from working other jobs while on the clock for the district.

Agency records show his final paycheck totaled $31,331, which included $15,573 for unused sick days and $13,682 for unused vacation days.

Sudduth, 49, also resigned from the medical board.

Asked his situation, Sudduth said, “I’m not at liberty to talk about that.”

A representative of the medical board declined to comment.

Asked about how the pandemic and working from home played into what happened, Brian Perkovich, the water reclamation district’s executive director, who was Sudduth’s supervisor, says, “This should not have occurred before or after COVID.”

Banned by City Hall for lying on construction contracts, company is still getting government work

Bally’s Medinah Temple temporary casino landlord Albert Friedman will hit $20 million jackpot under 4-year lease

2023-09-08T15:00:00-05:00

Bally’s temporary casino at the historic Medinah Temple is owned by clout-heavy developer Albert M. Friedman, referred to by some as the mayor of River North.

Ashlee Rezin / Sun-Times

Chicago’s first casino is newly open to the public this weekend, but already someone has hit a jackpot topping $20 million.

It’s Albert M. Friedman, the clout-heavy developer whose tenants have included three mayors — Brandon Johnson, Lori Lightfoot and Rahm Emanuel.

Friedman owns the historic but long-vacant Medinah Temple building about a mile north of City Hall that he’s leasing to Bally’s for a temporary casino until it builds a planned gambling emporium at the riverfront site of the Chicago Tribune’s printing plant.

Bally’s has to pay Friedman more than $16.5 million in rent plus a management fee of $330,000, under the terms of its four-year lease, obtained by the Chicago Sun-Times.

Bally’s also must pay Medinah Temple’s Cook County property taxes — a bill that has topped $1.1 million a year.

These are some of the people in line to profit from Lightfoot’s Bally’s casino deal

If Bally’s decides to extend the lease for another two years, Friedman would get an additional $9.6 million in rent and management fees, and the casino operator would keep paying the property taxes.

The 80-page lease spells out how much money Friedman will collect from Bally’s.

It doesn’t explain Bally’s switching the location of the temporary gambling hall to the vacant building that long hosted the Shrine Circus before Friedman converted it into a furniture store for Bloomingdale’s with financing from City Hall. Bloomingdale’s moved out in October 2020, during the first year of the COVID-19 pandemic.

Bally’s temporary casino at Medinah Temple opens Saturday

Developer Albert Friedman

Friedman Properties

Bally’s and Friedman didn’t return messages seeking comment.

For more than five months after Bally’s announced its casino bid in 2021, leaders of the publicly traded corporation said in public pitches that they wanted to build the temporary casino on the Tribune property, just north of the printing facility where the permanent casino is planned.

Those plans changed only days before Lightfoot chose Bally’s to operate the long-sought Chicago casino over competing bids from Hard Rock International and Rivers Casino chairman Neil Bluhm in May 2022.

Bally’s chairman Soo Kim said at the time that, despite his preference for putting the temporary casino at the Tribune site, city officials told him that plans to replace the nearby Chicago Avenue bridge would complicate doing that and urged him to go with Medinah Temple instead. Kim said the switch came a few days before the Bally’s selection became official.

Firm that brought Bally’s to Chicago casino deal stood to profit from another Bally’s deal

Representatives of Lightfoot have said she had “no involvement” in the Medinah Temple selection.

But Samir Mayekar, who was her deputy mayor, exchanged emails with Friedman regarding Medinah Temple a few months before Lightfoot picked Bally’s, the Sun-Times has learned.

A month after that email exchange, Lightfoot’s administration narrowed the field of five competing casino bids to three with an evaluation report that revealed each developer was asked to consider using a hotel or vacant property for a temporary site “to help support ongoing pandemic recovery efforts.”

The city floated Medinah Temple and the Sheraton Grand Chicago as alternative sites because of their “proximity to major transit and retail/hospitality corridors as well as their ability to assist in the city’s post-COVID revitalization.”

The 111-year-old Medinah Temple, long the headquarters of the Shriners fraternal organization, has since been outfitted with about 750 slot machines and 50 table games. Bally’s is expected to operate there for three years while its permanent $1.7 billion River West casino is built.

Medinah Temple, the River North site of Bally’s temporary casino.

Ashlee Rezin / Sun-Times

Bally’s held two practice gaming sessions in recent days at Medinah Temple under the eyes of state gambling regulators — the company’s final test before Marcus Fruchter, the Illinois Gaming Board’s administrator, dealt them a temporary operating permit on Friday.

That gave Bally’s — which already runs another casino in far western Illinois, among more than a dozen nationwide — permission to open Medinah’s doors to the betting public Saturday morning.

Bally’s executives have said they expect to turn a monthly profit at Medinah of $3.5 million to $5 million through the end of this year and up to $60 million with a full year of gambling in 2024.

City officials are banking on eventually getting as much as $55 million in yearly tax revenue from the temporary casino and nearly $200 million a year from the permanent casino, which is expected to open in 2026. That 3,400-slot facility is projected to take in more than $800 million a year by 2028.

Medinah Temple is among many historic River North buildings owned and restored by Friedman and his Friedman Properties. Referred to by some as the mayor of River North, Friedman says on his website that the company has redeveloped 12 city blocks. Several of those buildings were rehabilitated with government funding.

Albert Friedman in 2000.

Bob Black / Sun-Times file

His tenants have included some of Chicago’s best-known restaurants, including Frontera Grill, as well as campaign offices for Johnson, Lightfoot and Emanuel. Lightfoot’s campaign and political action committee spent more than $196,000 leasing office space from Friedman between 2019 and 2023, according to campaign finance records.

After Johnson was elected mayor, his transition team worked out of Friedman’s Reid Murdoch Center along the Chicago River.

Over the last few decades, Friedman, 74, and his company have given hundreds of thousands of dollars to the political campaign funds of government officials, including former Mayor Richard M. Daley and Cook County Board President Toni Preckwinkle.

Like most commercial landowners, Friedman frequently seeks to cut his property tax bills and often has hired the law firm of former Illinois House Speaker Michael J. Madigan to challenge the Cook County assessor’s office’s estimation of how much his buildings are worth.

Madigan’s law firm filed the most recent appeal on Medinah, attaching a copy of Friedman’s lease with Bally’s to persuade Assessor Fritz Kaegi to slash his estimation of the value of the building on the grounds that it was vacant until Dec. 1, 2022, when the casino lease began.

The lease shows that Bally’s is actually subletting Medinah Temple under the lease Friedman signed with Bloomingdale’s in April 2001.

Under the four-year lease, Bally’s is to pay Friedman a total of $16,593,891 in rent, and the company has two, one-year options that could extend the lease until Feb. 3, 2029. If Bally’s exercises those options, Friedman will have collected more than $26 million in rent.

Bally’s is responsible for the utilities, insurance, security and exterior landscaping, but it also has to pay Friedman a management fee equal to 2% of the rent.

A Friedman Properties sign hangs near the entrance of the River North casino.

Tyler Pasciak LaRiviere / Sun-Times

Those management fees will cost Bally’s $331,879 over the course of the four-year lease and another $189,867 if the casino ends up staying for six years by exercising its rental options. State gambling law allows the company to operate from the temporary facility for up to three years.

The lease says that, as the owner of Medinah Temple, Friedman “shall use commercially reasonable efforts to reduce the real estate taxes in each year.” But Bally’s will have to pay the annual real estate taxes.

Since Bloomingdale’s left Medinah three years ago, Friedman has been able to cut his property taxes by retaining Madigan’s law firm to persuade the county assessor’s office to repeatedly lower his assessed value of the property — resulting in lower taxes — because it was vacant.

Last year, Kaegi sent Friedman a notice that Medinah Temple’s value had jumped to $27.2 million — a 20% increase that would have caused a significant hike in this year’s yet-to-be-calculated real estate tax bill.

Madigan’s firm appealed, arguing that the building’s value had fallen to $18.8 million because it was vacant nearly all of last year — until Bally’s began paying rent in December.

Kaegi eventually lowered his assessment, setting the building’s value at $23.4 million, a figure later affirmed by the Cook County Board of Review, which rejected Madigan’s efforts to further lower the assessment.

So Medinah Temple’s real estate taxes will likely top last year’s bill of $1,138,660, though the exact figure won’t be known for several weeks.

Whatever this year’s property tax bill ends up coming to, 96% of the money will go to the Ohio/Wabash Tax Increment Financing District that the Daley administration created in 2000 to repay $20 million in loans City Hall arranged so Friedman could rehabilitate Medinah Temple for Bloomingdale’s.

According to a city official, those loans should be repaid by the end of 2024, when the TIF district expires. Neither Bally’s nor Friedman got any TIF money to build the casino, the official said.

State regulators approve Medinah Temple landlord of proposed temporary Chicago casino

Rick Heidner, Illinois video gambling mogul, leased space for years to crooked bingo scheme in Northlake

2023-08-18T05:30:00-05:00

Rick Heidner.

Jessica Reilly / Telegraph Herald via AP

Years before Rick Heidner became a major force in video gambling in Illinois, he was the landlord of a west suburban bingo palace whose operators went to federal prison for skimming $2.9 million in profits from veterans charities.

Federal agents busted the operation in Northlake, and 10 men were indicted in 2002 on charges of racketeering, operating an illegal gambling business and money-laundering.

Heidner, who wasn’t charged with any crime, says he had no involvement in the bingo operation.

“I was just the landlord,” he says.

Heidner did stand to collect $594,000 in rent, though, from the crooked bingo operation, according to the five-year lease signed in December 1993.

Rick Heidner, Illinois video gambling mogul, and his wife owe $5 million in income tax, IRS says

Two former investigators in the case say they don’t remember whether investigators interviewed Heidner or whether he testified before the grand jury.

Heidner’s spokesman won’t talk about that.

And Illinois Gaming Board officials won’t say whether they were aware of the illegal operation that leased from Heidner when the state agency gave him a license in February 2012 allowing him to operate video gambling machines in bars, gas stations and restaurants.

“We cannot speculate on whether the [board] knew about this criminal matter and related building ownership issues,’’ gaming board spokeswoman Beth Kaufman says. “Materials submitted, reviewed or considered by the [board] in connection with its investigation, consideration and determination of an applicant’s suitability for licensure . . . are confidential under Section 6(d) of the Illinois Gambling Act.”

Heidner’s Gold Rush Amusements is the third-largest video gambling terminal operator in Illinois. It has 4,000 machines placed in 748 businesses across the suburbs and downstate. People placed more than $3 billion in bets during the past year on Gold Rush machines, state records show. Heidner’s machines raised $275 million in net income that state law requires him to split with businesses that have Gold Rush machines.

Video gaming is banned by the city of Chicago, though Mayor Brandon Johnson has said he would support lifting the ban. That potentially could provide a windfall for City Hall, from its share of taxes, and for licensed video gaming operators including Heidner, who has given $25,000 to Johnson’s campaign since he was elected in April.

Video poker in Chicago? Vallas and Johnson say deal us in

Former Ald. Richard Mell, Heidner’s lobbyist, says he has spoken with Johnson but only to urge the mayor to crack down on sweepstakes machines. Those are similar to video gambling terminals but aren’t allowed to legally provide payouts.

Johnson’s office didn’t respond to questions regarding Heidner.

The Grand Palace bingo parlor at 121 E. Grand in Northlake in April 2002.

Richard A. Chapman / Sun-Times file

Heidner still owns the building at 121 E. Grand Ave., Northlake, where the crooked bingo parlor operated. He now leases space in the building to Celine’s Cafe, and Gold Rush has a deal with its operators to provide six video gambling machines. Over the past year, gamblers wagered more than $2 million on those six machines, generating more than $191,000 in net terminal income for Heidner to split with Celine’s.

Rick Heidner’s building at 121 Grand Ave. in Northlake today. He leases space there to Celine’s Cafe, to which his Gold Rush Amusements provides six video gambling terminals.

Ashlee Rezin / Sun-Times

Now 60 and living in Barrington Hills, Heidner was 27 and living in Elmwood Park when he bought the Grand Avenue property, a former grocery store, in July 1988. He paid $150,000, according to documents filed with the Cook County clerk’s office.

Heidner landed a tenant on Dec. 16, 1993, when Laura Dostal, president of The Grand Palace Inc., signed a five-year lease to host bingo games on the property. Her stepmother Anna Shlifka also served as an officer of the company, according to court records.

William Shlifka (center).

Sun Times file

The bingo scheme, according to federal court records, was the “brainchild” of Dostal’s father William B. Shlifka, who once served as the Republican Party’s 33rd Ward committeeman in Chicago. According to court records, William Shlifka had teamed with Phillip Cozzo, whose father Vincent Cozzo was a reputed Chicago mobster, to organize the scheme in which 11 posts of the Italian American War Veterans hosted weekly bingo games in Heidner’s building.

Dostal died last month in a motorcycle accident. Her father and Cozzo died several years ago.

Under the lease, Grand Palace had to give Heidner a $17,000 security deposit and start paying rent on March 1, 1994.

“As landlord of the property, Mr. Heidner entered into an arm’s-length, market-rate lease 30 years ago with individuals he had no pre-existing relationship with,” Heidner spokesman Randall Samborn says.

He says Heidner had no role in the bingo operation.

In June 1995, Grand Palace transferred 98% of its stock to Fuat “Frank” Useni, who started as a kitchen employee and then helped run the bingo games. Useni also assumed the lease for Heidner’s building. Useni couldn’t be reached for comment.

Soon after Useni took majority ownership of Grand Palace, federal prosecutors charged William Shlifka with holding a ghost payroll job on the Chicago City Council’s traffic committee.

At the time Shlifka was charged, he was on disability leave from his job as chief of investigations for the Illinois Department of Professional Regulation. Shlifka pleaded guilty in September 1995 and was sentenced to six months of home confinement thanks to his cooperation with ghost-payrolling investigations while his bingo scam continued.

On May 31, 1996, Useni sublet Heidner’s property to the Italian American War Veterans, operating as Bingo Partners Inc. The sublease included non-compete agreements with Useni and Cozzo, who were to “continue to be paid,” court records show. Heidner consented to the sublease, the records show.

A week later, federal investigators began looking into the bingo games at Heidner’s building, according to court records.

Six years later, on April 25, 2002, a grand jury indicted Cozzo, Shlifka, Useni and seven other men connected with the veterans’ posts, charging them with running the illegal gambling operation between 1994 and 1999.

Shlifka died a few days before the indictment came out.

Cozzo and Useni were convicted and sentenced to prison, and six others also pleaded guilty. Prosecutors dropped the charges against another defendant who died before facing trial.

Cozzo, Useni and most of the defendants were ordered to pay a total of $2.9 million in restitution to the veterans. But most of that money never was recovered.

Ater the criminal case was resolved, Heidner sued the Italian American War Veterans, saying they moved out in 2008 after failing to pay rent for several months. They agreed to settle the civil case in 2012, with the veterans group agreeing to pay Heidner $107,000 plus interest — but only if they received restitution from those found guilty in the scheme.

So Heidner ended up losing out, according to Samborn, who says: “Mr. Heidner was also a financial victim of his tenant at this Northlake property. After four years of incurring attorney fees, the case was settled in 2012, but Mr. Heidner received only a fraction of the rent he was owed.”

Click here to read the Sun-Times’ July 16 Watchdogs report.

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