Ex-board member at crooked Bridgeport bank sentenced to year and a day in prison

Calling a Bridgeport bank that succumbed to a multi-million dollar embezzlement scandal a “rat’s nest,” a federal judge sentenced a former bank board member to prison Thursday for repeatedly falsifying documents to fool federal regulators, enabling the scheme to go on for years.

George Kozdemba, a retired manager for the Metropolitan Water Reclamation District of Greater Chicago, spent 20 years on the board of Washington Federal Bank for Savings until regulators shut it down in December 2017 because it was being looted by its president, CEO and board chairman, John Gembara. He was found dead days before the bank closed.

“I can’t minimize the significance of the criminal activity that caused that bank collapse,” U.S. District Judge Virginia Kendall told Kozdemba as she ordered him to spend a year and a day in prison and pay a $25,000 fine.

While noting that the 74-year-old grandfather had been “hard-working” and “admirable in his family life,” Kendall said “but then on a monthly basis going into what really is a rat’s nest of people who are operating a community bank as if it were their piggy bank.”

Kozdemba is the second board member Kendall has sent to prison. Earlier this year, she sent former City Hall official William Mahon, a close ally of the Daley family, to prison for 18 months. A third board member, Gembara’s sister Janice Weston, faces sentencing May 16.

The only other board member, Lester Stepien, has been cooperating with federal investigators and hasn’t been charged in the collapse of the bank that cost the Federal Deposit Insurance Corp. $140 million to cover the bank losses. About $50 million has been recovered.

Altogether, 16 people have been charged in the bank scandal, including six employees and five customers. Among the customers charged was then-Ald. Patrick Daley Thompson, a grandson of the late Mayor Richard J. Daley and nephew of former Mayor Richard M. Daley. Thompson was found guilty of lying to regulators about his debts to the bank and cheating on his federal taxes.

Many bank customers had deep connections to the Daley family’s 11th Ward political operation. Some had government jobs. Others were contractors in Daley’s Hired Truck program, which was shut down following a Chicago Sun-Times investigation two decades ago.

Kozdemba, whose late father served on the board of the bank the Gembara family had run for three generations, admitted signing a couple dozen loan documents that were backdated so regulators wouldn’t know the paperwork was completed after the customers got the money.

Kozdemba also falsified the board’s minutes, according to prosecutor Jeff Snell. “He knew he was creating fabricated documents every month. It went on for a number of years, it was month after month.”

Snell pointed out that Kozemba and Weston took no action in May 2011 when the bank’s chief financial officer Barbara Glusak told them she suspected the bank gave its auditors at Bansley & Kiener falsified records showing Gembara’s friend, Robert Kowalski, had repaid two loans when he hadn’t done so. Kowalski has since been convicted of embezzling $8 million.

Glusak testified Bansley’s audit was led by Mahon’s brother-in-law, Michael Huels, a cousin of former Ald. Patrick Huels, whose relatives were customers of the bank.

Glusak, a high school friend of Gembara’s wife and the godmother of the Gembaras' oldest daughter, said she resigned from the bank upon the advice of her attorney. She also sent a letter to federal prosecutors, saying, “Certain wrongdoing did come to my attention . . . I am not an attorney and I offer no conclusion regarding whether crimes were committed.”

Then-U.S. Attorney Patrick Fitzgerald forwarded the letter to Robert Grant, who ran the FBI’s Chicago office. Glusak said no one ever contacted her about her letter, and the bank scheme went on for more than six years.

Kozdemba’s attorney Steven Fine said the Vietnam veteran would likely lose his disability benefits if he spends more than 60 days in prison, and urged Kendall to place Kozdemba on probation.

Kozdemba, who grew up in Bridgeport, apologized for his part in the scheme.

“I want to start out by apologizing to the people and families of Bridgeport,” he told the court. “You placed your faith in an institution whose directors were reckless.

“I must take full responsibility for signing documents in a careless manner," Kozdemba continued. "Now I hang my head in shame.”