Failed Harvey bank drained for lux life and legal bills, feds say
BY NATASHA KORECKI Federal Courts Reporter nkorecki@suntimes.com October 31, 2011 4:44PM
Updated: December 2, 2011 8:19AM
Federal regulators have alleged that directors of the once politically-connected Mutual Bank of Harvey “wasted corporate assets” and “drained bank capital” with extravagant and improper spending — including one director with ties to the Blagojevich family improperly using nearly half a million dollars to bankroll his wife’s criminal defense.
The Federal Deposit Insurance Corporation said in a lawsuit that the alleged improprieties — including spending $250,000 on a wedding and $300,000 on a Monte Carlo board meeting — helped plunge the bank into its 2009 failure.
Amrish Mahajan was the bank’s president, chief executive officer and on the board of directors. Allegations in the lawsuit claim that Mahajan authorized $495,000 in a series of “advances” and “bonuses” to himself. The money was used to cover criminal defense costs of his wife, Anita Mahajan, who was indicted on Medicaid fraud charges in Cook County in 2007 after allegedly bilking taxpayers out of $2.1 million by overbilling on state contracts, the complaint says. When federal regulators learned of the Amrish Mahajan bank arrangement, according to the complaint, he returned $202,560 that came out of the bank’s holding company, leaving $292,440 unpaid.
“Directors and officers are not permitted to use their positions to profit personally at the bank’s expense,” the complaint said.
Anita Mahajan eventually pleaded guilty to a narrow charge and was given probation. Her husband had contributed $10,000 to Rod Blagojevich’s campaign fund, and the couple was involved in property deals in which the former governor’s wife, Patti Blagojevich, got $113,000 in real estate commissions.
Mutual was the same bank that financed the loan involving a piece of land abutting Barack Obama’s Kenwood home that was purchased by Rita Rezko, the wife of convicted businessman Tony Rezko.
The lawsuit targets directors as well as the family that owned the bank — the Veluchamys.
The bank failed in 2009 with assets of $1.7 billion, leaving the FDIC with a $775 million loss, according to the lawsuit filed last week.
The FDIC said there was no backstopping: “the entire audit function was suspect,” according to the lawsuit.
The lawsuit singled out 12 loans worth $115 million that the bank allegedly approved even though the bank took on virtually all the risk, according to the complaint.
Attorneys for the Mahajans and the Veluchamys could not be reached for comment Monday.
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