Former attorney sentenced to 25 years in federal prison on embezzlement and fraud charges in connection with collapse of Washington Federal Bank

Date: Aug. 14, 2024

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CHICAGO - A former attorney has been sentenced to 25 years in federal prison for embezzlement and fraud in connection with the failure of Washington Federal Bank for Savings in Chicago.

Robert M. Kowalski served a key role in an embezzlement scheme at Washington Federal. The bank, which was based in Chicago's Bridgeport neighborhood, was shut down in 2017 after the Office of the Comptroller of the Currency determined that it was insolvent and had at least $66 million in nonperforming loans. Much of the money was transferred to Kowalski, who at the time was a licensed attorney, and two real estate developers without all of the required documentation and often without any documentation whatsoever. The embezzled funds were falsely identified in the bank's records as loan disbursements, even though the bank never required Kowalski to repay the money.

After the collapse of the bank, the Federal Deposit Insurance Corp. attempted to collect the money and properties that Kowalski obtained as part of the embezzlement scheme. Kowalski responded by filing a fraudulent bankruptcy case, in which he attempted to conceal his possession of numerous assets. To substantiate numerous misrepresentations in his bankruptcy filings and avoid paying taxes, Kowalski filed false corporate and personal tax returns for several years. He also failed to file any returns at all for two years.

Kowalski, of Robbins, Ill., was convicted last year of embezzlement, bankruptcy fraud, and tax fraud charges. In addition to the prison term, U.S. District Chief Judge Virginia M. Kendall on Tuesday ordered Kowalski to pay restitution of $7.2 million to the FDIC and $424,047 to the IRS.

The sentence was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois; Ramsey E. Covington, Acting Special Agent-in-Charge of IRS Criminal Investigation (IRS CI) Chicago Field Office; Vincent R. Zehme, Special Agent-in-Charge of the Chicago Region of the FDIC's Office of Inspector General; Machelle L. Jindra, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development's Office of Inspector General in Chicago; Korey Brinkman, Special Agent-in-Charge of the Central Region of the Federal Housing Finance Agency, Office of Inspector General; Douglas S. DePodesta, Special Agent-in-Charge of the Chicago Field Office of the FBI; Andrea Peacock, Special Agent-in-Charge of the Department of the Treasury, Office of Inspector General; Deborah Witzburg, City of Chicago Inspector General; and Kathryn B. Richards, Chicago Housing Authority Inspector General. Valuable assistance was provided by the U.S. Trustee Program. The government was represented by Assistant U.S. Attorneys Michelle Petersen, Kristin Pinkston, and Jeffrey Snell, and Special Assistant U.S. Attorney Brian Netols.

The federal criminal investigation into the bank's collapse led to charges against a total of 16 defendants, including the bank's Chief Financial Officer, Treasurer, and other high-ranking employees. Four defendants were convicted after jury trials, while ten defendants pleaded guilty and two entered into deferred prosecution agreements.

Robert Kowalski's sister, Jan R. Kowalski, also formerly an attorney, pleaded guilty and is serving a two-and-a-half-year prison sentence for fraudulently enabling her brother to conceal more than $357,000 from creditors and the trustee in his bankruptcy case.

CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.