John F. Gembara, the late president and CEO of a failed Bridgeport bank who was found dead in a customer’s bedroom five years ago, took center stage Tuesday as federal prosecutors described an elaborate embezzlement scheme they said caused the shutdown of Washington Federal Bank for Savings.
That was the picture they painted as they laid out their case against Gembara’s longtime friend Robert M. Kowalski, a lawyer, real estate developer and Washington Federal borrower who is on trial on charges that accuse him of stealing $8 million from the bank, a tiny but politically well-connected operation that had 30 employees who oversaw 400 loans.
Kowalski “worked with the bank president to get money and property from the bank,” Assistant U.S. Attorney Jeremy Daniel told jurors during opening statements of Kowalski’s trial at the Dirksen Federal Building. “He didn’t sign any notes. He didn’t make any promises to repay.
“The case is about the defendant’s pockets and how he lined them,” Daniel told the jury. “You will see emails where the defendant kept John Gembara apprised of the embezzlement.”
He said the scheme included 13 vacant lots on Fulton Street between Halsted and Green streets that Kowalski bought for $1.7 million nearly 20 years ago, shortly before the Fulton Market District became one of Chicago’s hottest neighborhoods for developers, Daniel said. Kowalski later lost that land in a foreclosure lawsuit.
Daniel also told jurors Kowalski would call homeowners who had fallen behind on mortgages they got from Gembara’s bank. To avoid foreclosure, he said some of them agreed to settle their loans by surrendering their homes to the bank, a process known as deed in lieu of foreclosure.
But the prosecutor said the homeowners weren’t aware that their mortgages were never closed by Gembara, who instead allowed their homes to be transferred into a land trust controlled by Kowalski, not Washington Federal, which authorities didn’t discover until federal regulators ordered the bank closed in December 2017 over what they have described as a massive fraud scheme.
Some of those homeowners didn’t know that their mortgages remained on the books until they were contacted by banking regulators after Washington Federal was closed.
In his own opening statement, Kowalski, 60, who is defending himself, laid the blame for the bank’s collapse on Gembara and Boguslaw Kasprowicz, a developer who has pleaded guilty to embezzlement charges, could testify for the prosecution and, according to Kowalski, hid cash in the Cayman Islands.
“John didn’t start out to be a bad man, but he started embezzling with a man who buried money in the Cayman Islands,” Kowalski told the jury. “The government doesn’t want to tell you about the Cayman Islands. There’s a clear trail of this money going to the Cayman Islands. He is the pink elephant in the room. He buried a lot of money.”
Kowalski told jurors that Gembara had gone to the Cayman Islands days before he was found dead on Dec. 3, 2017, seated in a chair, a rope around his neck, in the main bedroom of the $1 million Park Ridge home of Marek Matczuk, a contractor who has been charged with embezzling money from the bank and is awaiting trial.
“I wasn’t doing anything illegal,” Kowalski told the jury. “I’m a builder. The problem was Mr. Gembara.”
According to Kowalski, his signature was forged on bank documents by Gembara employees who have pleaded guilty and will testify for the prosecution.
Kowalski also is charged with bankruptcy fraud, accused of failing to disclose all of his assets when he filed for bankruptcy protection soon after the bank was shut down as federal regulators began seizing real estate in an effort to recover as much as possible of the $90 million the Federal Deposit Insurance Corporation had to pay to cover the bank’s initial losses.
Authorities have sold 21 properties Kowalski owned, but some of Kowalski’s assets have yet to be recovered.
Kowalski also is accused of failing to file some federal tax returns and cheating on others.
Kowalski is among 14 people charged with having a role in the bank’s collapse. Eight people, including five who worked for the bank, have pleaded guilty or admitted having a role in the embezzlement. Five others are awaiting trial, including bank board members Janice Weston, a sister of Gembara’s who was vice president of the board, and William M. Mahon, a member of the Daley family’s 11th Ward Regular Democratic Organization who was a deputy commissioner in the city of Chicago Department of Streets and Sanitation when the bank was closed.
The bank collapse also led to criminal charges against then-Ald. Patrick Daley Thompson, who was among customers who owed the bank money when it was shut down. Thompson was convicted of lying to federal regulators about $219,000 he borrowed from the bank and cheating on his income taxes by claiming interest deductions for interest he never paid.
