Trio of directors for failed bank plead guilty of scheming to fake records to hoodwink regulator

Three former board members of a failed Chicago bank have pleaded guilty to conspiring to falsify bank records to deceive federal regulators, according to the inspector general of the federal bank deposit insurance agency; the directors face up to five years in jail.

The Federal Deposit Insurance Corp.’s (FDIC) Office of Inspector General (OIG) said the trio entered the guilty pleas in Chicago federal court. The OIG said William M. Mahon, 56, of Chicago, and George F. Kozdemba, 73, of Fort Myers, Fla., pleaded guilty to the conspiracy charge during a hearing Monday. Mahon’s guilty plea also included a tax offense for willfully filing false income tax returns. Janice M. Weston, 65, of Orland Park, Ill., last week pleaded guilty to the conspiracy charge, the OIG said.

According to a release from the agency dated Aug. 8 but issued Thursday, the three were members of Washington Federal Savings Bank’s board of directors, with Weston also serving as the bank’s senior vice president and compliance officer.

The bank was closed in 2017 after the Office of the Comptroller of the Currency (OCC) determined it was insolvent and had at least $66 million in nonperforming loans. A federal investigation later led to criminal charges against 16 defendants, including charges against the bank’s chief financial officer, treasurer, and other high-ranking employees, the OIG said, for conspiring to embezzle at least $31 million in bank funds.

Eight defendants have now pleaded guilty or entered into agreements to cooperate with the government.

“When the OCC was evaluating Washington Federal’s loan portfolio prior to its failure, Mahon, Weston, Kozdemba, and others made and caused to be made false entries in bank records and provided them to the OCC with the intent to deceive the agency and obstruct its examination,” the OIG said. “They also falsified records to make it appear that Washington Federal was operating in compliance with banking rules and internal policies and controls.”

The agency said the conspiracy charge is punishable by up to five years in federal prison; the additional tax offense against Mahon is punishable by up to three years.

Three Board Members of Failed Washington Federal Bank in Chicago Guilty of Falsifying Records and Obstructing Regulators