Attorney Sentenced to 25 Years for a Loan Fraud Scheme that Led to a Bank Collapse – Fraud Friday

August 23, 2024

Delaney Sexton
Contributing Editor

Attorney Sentenced to 25 Years for a Loan Fraud Scheme that Led to a Bank Collapse – Fraud Friday

Washington Federal Bank for Savings, a family-run financial institution, was shut down in 2017 after the Office of the Comptroller of the Currency determined it had at least $66 million in nonperforming loans. Eventually, the FDIC spent almost $140 million covering the bank’s losses. The bank’s collapse was brought on by a fraud scheme involving the bank’s Chief Financial Officer, Treasurer, other high-ranking bank employees, and other individuals. In total, 16 individuals were charged including Robert Kowalski.

Robert Kowalski, a former attorney, played a significant role in the embezzlement scheme. A great portion of the money involved in the fraud was transferred to Kowalski and two real estate developers. This money was sent without any documentation. Although the embezzled funds appeared to be loan disbursements in bank records, Kowalski was never required to pay back any of the money.

In 2011, a previous CFO had blown the whistle on the scheme after discovering a significant balance on a loan owed by Robert Kowalski which contradicted bank records. The bank was maintaining falsified loan records that showed millions of dollars in outstanding loans were paid off. This led to the CFO informing two of the bank’s board members and writing to the U.S. Attorney’s Office. Her warnings were later proven to be true once a federal audit in 2017 uncovered the fraud.

After the bank collapsed, the FDIC made an effort to recover money and properties that Kowalski obtained from the scheme. In response, Kowalski filed a fraudulent bankruptcy case. He concealed numerous assets in the bankruptcy case with the help of his sister. To support the claims in his bankruptcy filings and to avoid paying taxes, he had been filing false corporate and personal tax returns for years. Kowalski also failed to file any returns for two years. Currently, he owes $424,047 to the IRS.

Upon receiving his 25-year prison sentence, he yelled at Judge Virginia Kendall saying: “It’s too much for me. I’ll die before then.” In addition to a quarter of a century in prison, Kowalski was sentenced to $7.2 million in restitution after being found guilty of embezzlement, bankruptcy fraud, and tax fraud charges last year.

Authorities are still working to recover as much of the $140 million spent on the bad loans as possible. The FDIC has successfully recovered $50 million so far.

Sources:
U.S. Attorney’s Press Release
Chicago Sun-Times Article – Sentencing
Chicago Sun-Times Article – Former CFO