The family business of US Senate candidate and friend of Barack Obama, Alexi Giannoulias, is back in the news. The Broadway Bank is about to go belly up and it seems that the event could put up to $15 million is the family's pocket.
A $75-million loss at the struggling lender last year generated tax benefits potentially worth between $12 million and $15 million to Mr. Giannoulias, his two brothers and his mother. As the sole owners of a subchapter S corporation that controls $1.2-billion-asset Broadway, they pay the taxes on the bank's income and reap tax deductions on its losses.
That size of a loss is likely to mean family members will pay no 2009 taxes on income from other sources and will be able to carry the remaining losses back to recover taxes previously paid. What really stinks about this is that in 2007 and 2008 the family took $70 million in dividends out of the Broadway bank. They say they cannot come up with the same amount of cash today to keep the bank solvent.
But the tax refunds won't be nearly enough to keep Broadway solvent. Demetris Giannoulias has said Broadway needs at least $85 million to survive and that the family would be willing to provide 10% to 20% of that total in cash, or $8.5 million to $17 million. Add a $15-million refund to the top end of that range, and the combined $32 million isn't even half the amount Broadway needs.
When the bank fails, as it expected to do in the near future, the FDIC's insurance fund will be on the hook for the losses. The Broadway Bank's connections with various unsavory characters from known members of the mob to convicted political fixer Tony Rezko have been featured in other blog items at AT over the last two years.
Illinois Democrats have already forced the winner of the primary for Lieutenant Governor off the ticket. There are suggestions that despite his status as a hoop playing buddy of Barack Obama, Giannoulias could be next. Things haven't been this chaotic for Illinois Democrats since 1986 when two followers of Lyndon Rouche won the Democrat primaries for Lieutenant Governor and Secretary of State.