UPDATE (3/9): Alexi Giannoulias' campaign issued a statement following the Crain's Chicago Business story that the Giannoulias family could make millions if the bank closes.
Read the statement here:
MYTH: The Giannoulias' expected tax refund comes on top of $70 million in dividends.
TRUTH: The potential refund is not "on top of" previous years' dividends. The majority of those dividends were used to pay taxes -- the same taxes that were overpaid and will now possibly be refunded.
MYTH: The Giannoulias family stands to benefit millions if Broadway Bank fails.
TRUTH: The idea that the Giannoulias family will benefit in any way if the bank fails is absolutely false. Like the millions of Americans who overpay their income taxes each year, the family is owed tax refunds. They are actively pursuing a refund of this money as a way to help save the bank. They would not profit in any way if the bank fails. Alexi has said repeatedly that he will do whatever he can give to save the bank, which includes using any tax refund he might get on his 3.6% share to recapitalize the bank. If the bank does indeed fail, the Giannoulias family, who are sole shareholders, will bear the full brunt of the loss.
While Broadway Bank is "quite likely" to collapse before November, U.S. Senate candidate Alexi Giannoulias and his family stand to make millions in tax refunds from its losses, according to Crain's Chicago Business.
The Giannoulias family bank, where Alexi served as senior loan officer until 2006, is on a Federal Deposit Insurance Corporation "watch list." It needs $85 million in cash in order to avoid closure.
It seems unlikely that the family will be able to come up with the money by the April 24th deadline set by the FDIC. But as the bank falls further in debt, the family that owns it will receive nearly $15 million in tax refunds.
Broadway Bank is what's known as a "subchapter S" corporation, and the Giannoulias family -- Alexi, his two brothers, and his mother -- are its only shareholders. In these kinds of corporations, the shareholders pay taxes on the income the company makes. But when the company loses money, as Broadway has done in spades, the shareholders earn tax refunds.
The money won't be nearly enough to cover the bank's needs, which means that the likely end result will be the family walking away with the money. Meanwhile, the FDIC (a corporation funded by its member banks, not taxpayers) will absorb the bank's losses.
This is sure to be a politically unpopular outcome, as Giannoulias has already taken considerable flak from his opponent, Republican Mark Kirk, about his role at the bank. Giannoulias spent much of last week trying to defuse the Broadway Bank issue, which continues to cloud his campaign.