Whistleblower at crooked Bridgeport bank joins a long line of people trying to keep institutions honest

It took more than six years for a routine audit to finally confirm what a whistleblower at a family-run Bridgeport bank had warned about in 2011: falsified loan records that fraudulently showed millions in outstanding loans had been paid off.

Barbara Glusak not only warned two of five board members at Washington Federal Bank for Savings about the fraud, she also wrote to the U.S. attorney’s office. Her letter was later forwarded to the FBI. Finally, in 2017, a federal audit confirmed what Glusak, who by then had long ago quit as the bank’s chief financial officer, had warned about — and the fraud scheme began to unravel, eventually leading to criminal charges against over a dozen people, including a member of Chicago’s powerful Daley family.

On Wednesday, Glusak is expected to testify in federal court at a sentencing hearing for two of those convicted in the embezzlement scheme. It’s unclear what role Glusak’s information played in the investigation, but Glusak has been cooperating with prosecutors, as Tim Novak reports in the latest installment of the Sun-Times’ Watchdogs series on the Washington Federal Bank corruption case.

And this, at least, is clear: Glusak deserves kudos for stepping forward and sounding the alarm. How was she to know that the two board members she initially warned, Janice Weston and George Kozdemba, would eventually be convicted in the scheme — and that she would be called on, fittingly, to testify at their sentencing?

It all goes to show the important role whistleblowers can play in keeping our government and other institutions honest, a point the U.S. Department of Justice made clear with its March announcement of a new pilot program to offer financial rewards to whistleblowers whose information uncovers significant corporate or financial misconduct.

Taxpayers left on the hook

Had the Washington Federal fraud been uncovered earlier, maybe dozens of former bank customers wouldn’t have become victims, losing tens of thousands of dollars invested in the bank’s certificates of deposit — whose high interest rates, some victims believe, were clearly designed to lure investors whose money could be used to finance the fraud. Maybe taxpayers wouldn’t have become victims either, since the Federal Deposit Insurance Corp. paid $140 million to reimburse former customers up to the FDIC’s insurance limits.

Without whistleblowers, maybe the massive accounting fraud that brought down Enron and WorldCom in the early 2000s would have remained hidden, as the National Whistleblower Center points out. The two women who sounded the alarm, and a third woman — an FBI agent who had warned early on about a Sept. 11 terrorist — were together named TIME magazine’s Persons of the Year in 2002.

Without a whistleblower, would the U.S. government have discovered the secret offshore accounts held in Switzerland by U.S. citizens, allowing them to eventually recoup billions in unpaid taxes and forcing a change in Switzerland’s tax treaty with the U.S.?

Without a whistleblower, would the public know the full story about the health risks of nicotine in cigarettes, a story that eventually inspired an Academy Award-nominated movie “The Insider?”

The Washington Federal saga, as we wrote last year, has enough twists and turns to maybe inspire a Netflix series, if not a big-budget film with A-list stars. If so, highlight Glusak’s role — and the fact that one of those she warned initially, Weston, was once the bank’s vice president and is the sister of the bank’s president and CEO John Gembara. Gembara, readers will recall, comitted suicide — in the home of a man who owed the bank millions — days after regulators shut down the bank in 2017.

In all, 15 people have been charged in the corruption scheme. Patrick Daley Thompson, a former alderman and a nephew of Mayor Richard M. Daley, was one of them.

If you’re having trouble keeping all the characters straight, no surprise. Check out the Watchdog series at chicago.suntimes.com/bridgeport-bank.

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