An ex-lawyer in Illinois has been sentenced to 25 years in prison for his role
Robert M. Kowalski, 62, was convicted of embezzlement, bankruptcy fraud and tax fraud for actions taken to swindle tens of millions of dollars from
Kowalski was one of 16 individuals charged in the scheme, which saw at least $66 million of bank funds transferred out of the bank under the guise of loans. Regulators discovered the fraud — which bank executives had been concealing with falsified records — in the fall of 2017 and forced the bank to recognize the losses.
The bank became insolvent and was shuttered by the Office of the Comptroller of the Currency on December 15, 2017.
Most of the fake loans issued by the bank went to Kowalski along with two real estate developers, according to a press release from the U.S. Department of Justice. The scheme was perpetrated with the assistance of the bank's chief financial officer, treasurer and other high-ranking employees.
Kowalski and others obtained loans with insufficient documentation or sometimes no documentation at all, according to federal prosecutors. Meanwhile, a bank official had been falsifying payment information for these loans,
Another Chicago-based depository, Royal Savings Bank, acquired Washington Federal's $166 million of assets shortly after its failure. But the deal did not cover the failed bank's uninsured deposits, which totaled more than $11 million. It also resulted in a loss of $82.6 million for the Deposit Insurance Fund.
The bank had also maintained a composite CAMELS score — the system by which regulators assess a bank's capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risk — of 1, the best score possible, since 2011, according to the Treasury OIG's post-failure report. It was downgraded to the lowest possible score of 5 in all categories after the fraud was discovered.
After the bank failed, the Federal Deposit Insurance Corp. went after Kowalski to recoup funds and liquidate ill-gotten property he acquired through the scheme. To avoid this, prosecutors say he filed for bankruptcy under false pretenses, attempting to conceal his ownership of "numerous assets." Kowalski also filed false personal and business tax returns for several years in an attempt to substantiate his false bankruptcy claims.
In addition to his jail sentence, Kowalski must pay $7.2 million in restitution to the FDIC, plus another $424,000 to the Internal Revenue Service.
Along with Kowalski, 15 others were charged with crimes related to the embezzlement scheme at Washington Federal, including his sister, Jan R. Kowalski, who was also a former lawyer. She is serving a two-and-a-half-year prison sentence for helping her brother conceal more than $357,000 from creditors and trustees in his bankruptcy case.
Four individuals were convicted in jury trials, 10 took plea deals and two entered into deferred prosecution agreements, in which charges are suspended so long as the defendant abides by certain requirements.
