A federal judge in Chicago sentenced real estate developer Marek Matczuk to nearly 13 years in prison for his role in a conspiracy that embezzled millions from the failed Washington Federal Bank for Savings in Chicago.
The bank, located in Chicago's Bridgeport neighborhood, was shut down in 2017 due to insolvency and at least $66 million in nonperforming loans.
Matczuk and his co-conspirators disguised the embezzled funds as real estate development loan disbursements, which they never repaid.
Matczuk was convicted of conspiring to commit embezzlement, falsifying bank records, and aiding and abetting embezzlement by bank employees. He was sentenced to 12 years and eleven months in prison and ordered to pay over $5.9 million in restitution.
The investigation led to criminal charges against 16 defendants, including high-ranking bank employees, for embezzling at least $31 million. Matczuk and three others were convicted after jury trials, while ten defendants pled guilty and two entered deferred prosecution agreements.
https://www.irs.gov/compliance/criminal-investigation/real-estate-developer-sentenced-to-nearly-13-years-in-prison-for-embezzling-millions-from-the-failed-washington-federal-bank-in-chicago
Commentary
Washington Federal Bank for Savings, originally established as Washington Savings and Loan Association of Chicago in 1913, underwent several name and regulatory changes over the years. It became Washington Federal Bank for Savings in 1995. The bank was primarily regulated by the Office of Thrift Supervision until 2011, when oversight shifted to the Office of the Comptroller of the Currency.
The bank failed on December 15, 2017, due to insolvency, with the FDIC appointed as the receiver.
The investigation into the bank's failure revealed significant embezzlement and fraud by high-ranking bank employees and associates, leading to criminal charges against 16 individuals.
Typically, loan fraud occurs when a customer provides information that is relied upon by the bank to issue a loan the customer has no intention of repaying. In the Washington Federal matter, bank employees were involved with the fraud.
Strategies to consider for preventing fraudulent collaboration between employees and customers are:
- Implement Strong Internal Controls: Establish clear procedures for loan approval and disbursement, including multiple levels of authorization. This reduces the risk of a single employee having too much control over the process.
- Conduct Regular Audits: Perform frequent internal and external audits to detect any irregularities. Audits can help identify patterns of collusion between employees and customers.
- Use Advanced Technology: Employ fraud detection software that uses machine learning and artificial intelligence to identify suspicious patterns and anomalies. These systems can flag unusual loan applications or repayment behaviors.
- Educate Employees: Provide regular training on recognizing signs of fraud and the consequences of engaging in fraudulent activities. Employees should be aware of the legal and professional repercussions.
- Encourage Whistleblowing: Create a safe and anonymous way for employees to report suspicious activities. Protect whistleblowers from retaliation to encourage them to come forward.
- Monitor Employee Behavior: Keep an eye on employees' financial activities and lifestyle changes that may indicate involvement in fraud. Sudden unexplained wealth can be a red flag.
- Foster a Culture of Integrity: Promote a workplace culture that values honesty and transparency. Encourage ethical behavior and make it clear that fraud will not be tolerated.
- Collaborate with Other Institutions: Share information about fraud trends and suspicious activities with other financial institutions. This collective intelligence can help detect and prevent fraud more effectively.
