For Immediate Release
U.S. Senate Candidate Involved in $250 Million Ponzi Scheme
The Committee on Public Integrity, in a joint investigation withIntegrity in the Courts Finds that Alexi Giannoulias, U. S. Senate Candidate in Illinois, Failed to Reveal That His Family’s Broadway Bank Paid Kick Backs in Mortgage Fraud Deals with Financial Ponzi Scheme Operators
The Senate Candidate Also Failed to Reveal that the Giannoulias Family Bank Paid a Settlement Valued at $6 Million to End the Lawsuit by U.S. Department of Justice and Securities and Exchange Commission
As part of its continuing full disclosure by federal candidates program, The Committee on Public Integrity and Integrity in the Courts has discovered that Alexi Giannoulias, Democratic candidate for US Senate from Illinois has misrepresented the record of Broadway Bank, the Chicago bank owned by his family. The actual facts as revealed in litigation brought by the US Justice Department and the Securities and Exchange Commission reveal that Broadway Bank engaged in fraudulent loans with Wextrust, a finance company. Broadway Bank was subsequently seized by the SEC, and the chief officers of Wextrust are in jail.
During the last debate with Congressman Mark Kirk, Alexi Giannoulias was asked to comment on the activities of Broadway Bank, the main business asset of his family. Giannoulias said, “And let’s be clear, no one has ever suggested that the bank has ever done anything illegal, illicit, or improper. Never." He continued, "I will always tell you the truth. And that's what we need now more than ever. People are sick and tired of Washington, D.C. politics as usual." Information is now coming to light that shows that Broadway Bank engaged in kick-backs and other lucrative deals with Ponzi scheme operators, who are now in jail.
Beginning in 2006, when Alexi Giannoulias was a loan officer at Broadway, the bank entered into a series of commercial loans in joint ventures with Wextrust Capital, a Chicago based lending company. Wextrust provided so-called “hard money” loans to developers, who could not find standard financing from banks. Hard money loans are provided at very high interest rates, up to 18-20% when the costs of so-called origination and finders fees are added.
Under the deals between Wextrust and Broadway Bank, evidence has been discovered showing that borrowers paid the bank high interest charges (12-14%), and then Broadway Bank kicked back 2-3% of the payments received to Broadway as part of a so-called loan servicing contract. Also, it’s been established that throughout its years of operation, Wextrust was insolvent, making all of its mortgage deals void and fraudulent. That meant that all the joint mortgage deals marketed byBroadway Bank and Wextrust were illegal, illicit and improper.
Wextrust was seized and placed in control of a federal receiver by the US Securities and Exchange Commission in August 2008 for operating a $250 MM Ponzi scheme. The SEC found that Wextrust operated a massive Ponzi-type scheme from 2004 that raised approximately $255 million from approximately 1,200 investors in the US and other countries. The Receiver confirmed that Wextrust diverted, co-mingled and misappropriated those funds, in a series of unauthorized transactions. The US Department of Justice filed criminal complaints against Wextrust's principal officers who were immediately arrested, and who remain in custody. The company president, Steven Byers, entered a guilty plea in April 2010, and is awaiting sentencing.
Broadway Bank was a partner with Wextrust in the series of fraudulent loans. Alexi Giannoulias was a loan officer when Wextrust began its dealings with Broadway Bank. Evidence has been uncovered by the SEC showing that Alexi’s brother, Demetri, personally handled these mortgage loans with Wextrust.
In April 2010, just before being seized by the Illinois and US banking authorities, Broadway Bankagreed to forgo $5 million in claims and to pay up to $800,000 in cash to settle litigation with the federal Receiver of Wextrust. This Settlement clearly reflected a payment by Broadway Bank to settle claims by the Securities and Exchange Commission and avoid liability for illegal actions in connection with its financing transactions with Wextrust.
For additional information please contact: John T. Whitely at 202-374-3680
About The Committee on Public Integrity
The Committee On Public Integrity reviews both past and present cases to provide an independent assessment and analysis of the facts. With respect to past cases, the committee will hear from persons who maintain that they have been treated unfairly and unjustly. As part of its efforts, the committee is actively seeking documentation and analysis of various issues. Committee members include individuals who through their personal and professional lives have established a reputation of responsibility and fairness.
For Detailed Information to Referenced Documentation, See Below:
NY Lawyers Arrange "Justice" for Chicago Ponzi Scheme
The $250 Million Ponzi Scheme "Settlement"
Transcript of April 2010 Guilty Plea
August 2010 - 7th Interim Report of Receiver
Response to Objections to the Receiver's Report
Civil Lawsuit: SEC v Byer, et al.