Broadway Bank had already lent millions to Michael Giorango when he and a new business partner, Demitri Stavropoulos, came to the bank in mid-2004. Although both men were preparing to serve federal prison terms, the bank embarked on a series of loans to them.
Broadway is now suing to recover millions of the pair's delinquent loans as the bank struggles to avoid a federal takeover. While Broadway lawyers now criticize Giorango's business practices, the newspaper's examination of court files, land records and public bank documents raises questions about the bank's decisions to make loans to men with criminal histories.
"Banks are not supposed to be doing business with criminals," said banking consultant and former Texas Banking Commissioner Catherine Ghiglieri. "The onus is on the bank to make sure they know who they are dealing with."
Public records do not show which bank officials negotiated or approved any of the loans. Giannoulias declined to be interviewed by the Tribune or to review public records outlining the bank's loans.
In a written statement from his campaign, Giannoulias said he did not play a central role in the loans. "In retrospect, I think the added security of a background check would have been good, and I believe that many more banks — including Broadway — now include such checks as part of the loan-making process," he added.
Stavropoulos in 2005 began a two-year sentence following a felony conviction for running a multistate bookmaking ring, while Giorango would serve six months intermittent confinement on a felony for promoting a nationwide prostitution scheme as Broadway financed their land deals from downtown Chicago to Florida, California and South Carolina.
In the most complete examination yet of Broadway's loans to the pair, the Tribune found more than $27 million worth of mortgages to Giorango and his land trusts and companies since 1999. Stavropoulos took part in many of those deals. Broadway officials have cited privacy laws in declining to document the full extent of their business with the men. The new figures exceed reported totals by about $7 million.
Shortly after Broadway began lending money to a Chicago firm the pair formed, Giorango and Stavropoulos used that company to launch their own lending business and make more than 40 short-term loans to borrowers who might not qualify for traditional bank financing, the Tribune found. Such so-called hard-money loans are typically riskier than long-term mortgages offered by banks.
Broadway officials say they were unaware of the pair's lending operation and believe the bank's loans were used solely to fund real estate purchases. They acknowledged they did not inspect or audit the company's business records, though Broadway's loan provisions allowed the bank to do so.
In a two-hour interview this week with the Tribune, Giannoulias' older brother, Demetris Giannoulias, the bank's president and CEO, said he established Broadway's relationship with Giorango in the mid-1990s. Giorango began investing in Chicago properties after completing two federal prison stints for running bookmaking schemes.
Demetris Giannoulias described Giorango as an account holder who at first used relatively small loans for real estate ventures that proved successful. As those ventures grew more ambitious, Broadway advanced more than $6 million to Giorango or his land trusts and companies between 1999 and mid-2004, land records show.
In part because those loans "performed," Demetris Giannoulias said, the bank felt comfortable launching the spate of new financing beginning in mid-2004.
Alexi Giannoulias, who started his professional career at the bank in 2002, said in his statement that he was "one of" the senior loan officers at the bank and was not a member of the loan committee that approved the financing for Giorango.
Alexi Giannoulias' role was limited to "getting the appraisals ordered, getting the loan documents prepared, coordinating with attorneys, getting commitment letters prepared. All that kind of stuff," Demetris Giannoulias said.
Demetris Giannoulias said the bank learned of Giorango's bookmaking and prostitution promotion convictions from a spring 2004 Tribune report detailing those cases.
"But we're a relationship bank," he said. "So somebody comes in and in all his dealings with the bank seem to be on the level, everything makes sense, nothing seems illicit or untoward. Just because somebody gets a bad article written about them there's no reason to say, ‘Hey, listen, I'm going to kick you out the door because you don't win a popularity contest.' We didn't think he was doing anything illegal."
He said he asked Giorango about the convictions and Giorango said, "It's in the past. I don't do that anymore."