Alexi Giannoulias insists that he left his family’s bank in 2005 as he began his campaign for treasurer in Illinois, a convenient time as many of the decisions that sent Broadway Bank into receivership took place at that point and after. However, Giannoulias told the IRS a slightly different story — and got a tax break as a result. The Democratic nominee for Senate claimed at least 500 hours worth of work at the bank in 2006 in order to gain a $2.7 million deduction last year as the FDIC started watching the bank for collapse:
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. …
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.
The issue isn’t tax evasion or fraud. Apparently, the deduction is legitimate if Giannoulias worked at the bank in 2006, although it’s not clear exactly how working more than 500 hours for Broadway in 2006 gets someone off the hook for that much in taxes. That goes far beyond my paltry experience in tax law, and unless someone shows this analysis by the Chicago Tribune as faulty, I’ll assume that they have the legal implications correct.
But it’s not the legal implications that matter; it’s the political implications of offering one story publicly and another to the IRS. The issue is one of honesty. If Giannoulias insisted he stopped working at Broadway in 2005, and it turns out that he was fairly involved in 2006, one has to wonder why he didn’t just use 2006 as the cutoff date. The Tribune explains that rather well; Giannoulias was the loan officer for the bank before his departure, and the bank gave loans to some very shady characters like Mike “Jaws” Giordano, a mob figure with a felony record who wanted to build floating casinos with the money, and Tony Rezko, who just got convicted of political corruption.
Giannoulias doesn’t want the subject of Broadway Bank’s loans and ultimate failure to become an issue in this election, even though it cost taxpayers hundreds of millions of dollars to rescue the bank shortly after his family took out almost $70 million in capital. Instead of addressing the issue honestly, Giannoulias tried a little deception, pocketing his tax deduction for work he pretended not to have done in 2006. That kind of dishonesty doesn’t belong in the Senate.