How corrupt are the Democrats? Beyond imagination

Family bank good for Giannoulias' taxes, bad for his campaign

U.S. Senate hopeful tells voters he was gone from the ailing institution by late 2005 — but he told the IRS something else

By John Chase, Tribune reporter

1U.S. Senate candidate Alexi Giannoulias tells voters he was gone from his troubled family bank by late 2005, but that's not what he told the Internal Revenue Service.

Giannoulias was able to take a $2.7 million tax deduction last year because he reported working hundreds of hours at Broadway Bank in 2006.

Giannoulias says there's no contradiction, and in fact there is no suggestion the Democratic state treasurer took a tax break he didn't deserve. Rather, the issue highlights the fine line Giannoulias walks on the campaign trail in explaining exactly what he did at Broadway and when he did it.

The bank was at the top of his résumé when he was a 30-year-old first-time statewide candidate in 2006 with few professional highlights. But in his tight Senate race against Republican Mark Kirk, his tenure as a senior loan officer at Broadway is a bull's-eye for critics who hit him for the bank's loans to mob figures as well as troubled lending that contributed to Broadway's collapse earlier this year.

Saying he left in 2005 gives Giannoulias maximum distance from the bank's questionable lending practices, the April takeover by federal regulators and other controversies such as a loan by the bank to convicted influence peddler Antoin "Tony" Rezko in early 2006.

But by reporting that he worked at least 500 hours at Broadway in 2006, Giannoulias was able to get a break that helped him avoid paying federal income tax for 2009.

Giannoulias said he has been clear that he left the "day-to-day" operations of the bank in September 2005 to prepare his first run for public office, but was on paid leave until May 2006 when he left completely to campaign full time for treasurer.

That 2006 work consisted of roughly 30 hours a week closing out his responsibilities before quitting as a bank officer, and didn't involve making new loans, Giannoulias explained in a recent interview. It was more than enough to qualify him for the tax break, he said.

IRS regulations allow taxpayers to deduct business losses from certain types of corporations if they've logged significant hours there for five of the last 10 years. Giannoulias started at the bank in 2002, so working at least 500 hours in 2006 qualifies Giannoulias for the tax break.

Before leaving day-to-day operations in September 2005, "I was there, I think I worked seven days a week," Giannoulias said.

Asked what he was doing at the bank in early 2006, Giannoulias said, "I think the biggest difference is I wasn't taking on new customers. I was just finishing up what I needed to do, so I don't know how the hours worked out, but it wasn't a full-time job.

"I was campaigning," he said. "I'm a hard worker. … (The campaign office) was right next door. Most campaign events are at night anyway. … You go to events and you spend your weekends traveling downstate."

Giannoulias' Senate campaign Web site offers a less nuanced description of his departure from the bank his father started.

"It was because my father instilled in his sons the importance of helping others that I decided to leave the bank in 2005 to pursue public service," Giannoulias says in a statement on the campaign site. "At the time I left, according to every independent analysis, the bank was one of the best performing in Illinois."

In numerous quotes during the past months, the candidate or his representatives have stated he left the bank's "day-to-day operations" in 2005.

Giannoulias, who ran for state treasurer by touting his financial experience, has said that when he left Broadway, it was in sound fiscal shape. He also said he had very little to do with $20 million in controversial loans the bank approved between 2004 and September 2005 to a pair of men with criminal histories while he was a senior loan officer at Broadway.

Most recently, Kirk criticized Giannoulias for trying to claim he wasn't involved in the bank when Broadway approved a controversial loan for a project headed by Rezko, who was convicted in the federal corruption probe of former Gov. Rod Blagojevich's administration. Giannoulias' answer has been that he wasn't involved in the bank when the loan was approved in February 2006.

In the recent interview, Giannoulias acknowledged that while he was still at Broadway when that loan was approved, he was only involved in closing out his existing accounts and knew nothing about any new loans.

"For loans like the one you're talking about (Rezko) where I had nothing to do with or my name was never on it, I don't think there's any inconsistencies," he said.