Crooked Bridgeport bank official gets a year in prison over embezzlement scheme

While helping run the massive embezzlement scheme that caused a clout-heavy Bridgeport bank to fail seven years ago, vice president James Crotty was secretly stealing money from the bank, claiming he spent it on postage, prosecutors say.

Crotty, who pleaded guilty in the bank embezzlement, was sentenced Tuesday to a year in prison. It’s one of the stiffest sentences Chief U.S. District Judge Virginia Kendall has imposed upon any of the employees or officials of the tiny bank, including Gembara’s sister Janice Weston, another vice president who served three months in prison.

Crotty stole $13,000 before he was fired in spring 2017 a few months before federal regulators discovered that the president, chairman and CEO of Washington Federal Bank for Savings, John Gembara, had been running a decade-long embezzlement scheme with Crotty’s help.

“You cannot engage in lies to regulators … altering documents … and covering up what will be the ultimate collapse of the bank with each little lie,” Kendall told Crotty.

The judge also ordered Crotty to forfeit 10% of his future wages to help repay $27.9 million to the Federal Deposit Insurance Corp., which is trying to recover $90 million it spent covering the bank’s losses.

“I take full ownership for my actions,” Crotty told Kendall. “I lied, cheated and stole. I’m truly sorry for this and all the people it impacted.”

Crotty was facing five years in prison, but federal prosecutor Michelle Petersen suggested a sentence of 40 months, noting Crotty eventually cooperated with investigators.

Crotty “repeatedly assisted with altering documents to hide the fraudulent loan practices — multiple times a year, year after year,” Petersen wrote in a sentencing memo. “Although he had direct contact with examiners during the periodic exams, he did not notify the examiners about the wrongdoing at the bank. He instead chose to continue to fabricate and alter records to keep the scheme hidden… He left only when he was fired for his unrelated theft scheme.”

All the while, Petersen noted that Crotty’s brother-in-law was a U.S. Secret Service agent in Miami “investigating the very types of crimes” Crotty and Gembara were committing.

Crotty’s attorney, Terence Campbell, asked that Crotty be confined to his Tinley Park home so he could help support his wife and two daughters, a sentence that would be similar to those Kendall recently gave three other bank employees. One more employee, Alicia Mandujano, awaits sentencing.

Kendall said she gave Crotty a stiffer sentence because he interacted with federal regulators, providing them with falsified records while he was also serving on the bank’s loan committee along with Gembara. She noted that many customers lost money when the bank failed, including one who filed for bankruptcy.

Campbell countered that the bank employees, including Crotty, were just following orders from Gembara, who gave out loans without collateral to several customers who weren’t expected to repay the money, and then altered paperwork to conceal the scheme from regulators.

“Jim Crotty was just one of many employees at WFB whom John Gembara manipulated to his purposes — often using an unpredictable mix of supposed fatherly affection one minute, and explosions of anger well beyond what the situation called for the next,” Campbell wrote in a sentencing memo.

“Jim Crotty was the object of both strategies, sometimes getting attention from Gembara, and sometimes getting berated for minor mistakes. Indeed, when Crotty made a mistake, Gembara would often make Crotty hold out his hand like a child so Gembara could physically slap him.”

Gembara’s scheme fell apart in November 2017 during a federal examination when Mandujano told regulators she had been falsifying records at Gembara’s request. Regulators ordered the board to suspend Gembara. A few days later, he was found dead sitting in a chair with a rope around his neck inside the Park Ridge bedroom of a customer, Marek Matczuk, who was later convicted of embezzling millions. Matczuk recently died in prison.

The bank failure led to criminal charges against 16 bank officials, employees and customers, including William Mahon, a former top Chicago city official who was a member of the 11th Ward Regular Democratic Organization run by the Daley family for decades. Mahon, who served on the bank’s loan committee with Crotty, was sentenced to 18 months in prison.

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, who was convicted of lying to federal regulator about the money he owed the bank and cheating on his taxes.