Sister, Can You Conceal Some Assets?

The Illinois Administrator has filed a complaint arising from an attorney’s conviction for concealing assets in her brother’s bankruptcy

On March 3, 2022, Respondent appeared before Judge Kendall in docket number 19 CR 226-2 and voluntarily pled guilty to Count Fifteen of the Fourth Superseding Indictment which charged Respondent with concealing assets from a bankruptcy trustee in violation of Title 18, United States Code, Section 152(1). In pleading guilty, Respondent admitted the following facts:
a) On or about March 29, 2018, Robert M. Kowalski filed a petition under Title 11 of the United States Code initiating a Chapter 11 bankruptcy case, In re Robert M. Kowalski, docket number 18-09130, in the United States Bankruptcy Court for the Northern District of Illinois (the Kowalski Bankruptcy Case).
b) As a debtor in bankruptcy, Robert M. Kowalski was required to appear at a Meeting of Creditors and to testify under oath concerning his financial affairs.
c) Respondent was aware that Robert M. Kowalski had filed a Chapter 11 bankruptcy no later than on or about May 24, 2018, when Respondent was present at Robert M. Kowalski’s Meeting of Creditors.
d) As Respondent knew, Robert M. Kowalski’s filing of a bankruptcy petition created a bankruptcy estate that included all legal and equitable interests of debtor Robert M. Kowalski in property as of the commencement of the case.
e) Respondent had previously filed her own bankruptcy, a Chapter 13, In re Jan R. Kowalski McDonald, 08-27573, and thus understood that all of Robert M. Kowalski’s interests in property became his bankruptcy estate.
f) By filing a Chapter 11 bankruptcy petition, Robert M. Kowalski became a “debtor-in-possession” and was charged with certain obligations and responsibilities as if the debtor was a trustee.
g) As a debtor-in-possession, Robert M. Kowalski was a fiduciary for his creditors, and his obligations included being accountable for all estate property.
h) Respondent understood that Robert M. Kowalski had a fiduciary obligation to his creditors.
i) On or about August 7, 2018, the Bankruptcy Court issued an order removing Robert M. Kowalski as the debtor-in possession and appointing a trustee to administer the Kowalski Bankruptcy Case (the Trustee).
j) On or about November 26, 2018, Respondent filed an appearance on behalf of Robert M. Kowalski in the Kowalski Bankruptcy Case and continued to represent Robert M. Kowalski through at least in or around January 2019.
k) During the pendency of the Kowalski Bankruptcy Case, Respondent used her attorney trust account both to conceal approximately $364,600 in cash equivalents which she knew were property of Robert M. Kowalski’s bankruptcy estate from Robert M. Kowalski’s creditors and the Trustee and to engage in transactions with funds which were property of Robert M. Kowalski’s bankruptcy estate for the purpose of concealing the bankruptcy estate’s interest in those funds and in property acquired with those concealed funds.
l) From in or around August through October 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee approximately $352,100 in cashier’s checks for which Robert M. Kowalski was both the remitter and the payee, by depositing the cashier’s checks into her attorney trust account.
m) In or around September through October 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee approximately $3,400 in rent checks payable to Robert M. Kowalski by causing the checks to be deposited into her attorney trust account.
n) In or around June, July, and October 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee approximately $96,600, including funds which Respondent had concealed in her attorney trust account, by using those funds, as described below, to purchase 6821 West 96th Street, Oak Lawn, Illinois (the Oak Lawn Property), in the name of a nominee for Robert M. Kowalski.
o) On or about October 12, 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee approximately $75,600, causing these funds to be wired to a title company account to fund the purchase of the Oak Lawn Property.
p) On or about September 13, 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee approximately $2,500 which Respondent had concealed in her attorney trust account by using the funds as earnest money in an attempt to purchase 9441 South Indiana Avenue, Chicago, Illinois, in the name of a fictitious trust of which Robert M. Kowalski was the beneficiary.
q) In or around September through October 2018, Respondent concealed from Robert M. Kowalski’s creditors and the Trustee funds that had been concealed in her attorney trust account by purchasing approximately $350,300 in cashier’s checks payable to or for the benefit of Robert M. Kowalski.
r) In or around October through December 2018, Respondent concealed funds from Robert M. Kowalski’s creditors and the Trustee by depositing into her attorney trust account approximately $325,900 of the cashier’s checks that Respondent had purchased as described above.
s) In or around October through December 2018, Respondent concealed funds from Robert M. Kowalski’s creditors and the Trustee through Respondent’s withdrawal of approximately $241,800 in United States currency from her attorney trust account.
t) On or about January 9, 2019, Respondent filed and caused to be filed a Combined Response to Trustee’s Motion For Accounting and Turnover of Estate Funds Against Jan Kowalski and Rule to Show Cause Against Jan Kowalski and Debtor (Combined Response), in the Kowalski Bankruptcy Case, in which Respondent falsely represented that the approximately $364,600, including cashier’s checks for which Robert M. Kowalski was both the remitter and the payee and checks payable to Robert M. Kowalski, deposited into Respondent’s attorney trust account were not property of Robert M. Kowalski’s bankruptcy estate.
u) On or about January 14, 2019, Respondent testified under oath during a hearing in the Kowalski Bankruptcy Case and made numerous false statements designed and intended to deceive creditors and the Trustee, including testimony that the hundreds of thousands of dollars in cashier’s checks in which Robert M. Kowalski was both the remitter and the payee which Respondent deposited in her attorney trust account were not property of the estate and were attorney’s fees, and that these hundreds of thousands of dollars in attorney’s fees became due and payable to Respondent upon execution of retention agreements with Indomitable LLC, Piorun Properties LLC, and Burros Blancas.
v) Respondent further provided to the Bankruptcy Court, creditors, and Trustee purported IOLTA trust account client ledgers and retention agreements which she knew were false, after-created, and back-dated to support her false testimony; and that from on or about March 29, 2018, through in or around June 2020, at Chicago, in the Northern District of Illinois, Eastern Division, Respondent knowingly and fraudulently concealed from a trustee charged with the control and custody of property and, in connection with a case under Title 11, namely, In re Robert M. Kowalski, docket number 18-09130, from creditors and the United States Trustee, property belonging to the estate of a debtor Robert Kowalski in the amount of approximately $364,600 in violation of Title 18, United States Code, Section 152(1).

On June 27, 2023, Judge Kendall sentenced Respondent to 37 months in prison and ordered Respondent to pay $357,492.92 in restitution.

The Chicago Sun Times reported on the conviction

The sister of a man at the center of a politically connected Bridgeport bank’s collapse was sentenced Tuesday to more than three years in prison for helping him hide hundreds of thousands of dollars after the bank was shut down.

Jan Kowalski pleaded guilty last year to concealing assets from a bankruptcy trustee. She helped her brother, Robert Kowalski, hide more than $357,000 while representing him as an attorney in bankruptcy court.

U.S. District Judge Virginia Kendall criticized Jan Kowalski for abusing her trust as an attorney as she handed down the sentence.

Jan Kowalski told the judge that, “My mother and father had three children, and all three of us are indicted and probably going to jail.”

Prosecutors had asked the judge to give Jan Kowalski as many as nearly four years in prison. She once ran for Cook County Clerk.

Earlier this year, a federal jury convicted Robert Kowalski of embezzling $8 million from Washington Federal Bank for Savings and concealing more than $560,000 in assets when he went bankrupt. He was a longtime friend, customer and business partner of the late John F. Gembara, the bank’s president, chief executive officer and major shareholder.

Washington Federal was shut down in December 2017 amid allegations of massive fraud, days after Gembara was found dead in a bank customer’s $1 million home. Fifteen people, including Robert and Jan Kowalski, have since faced federal criminal charges connected to fraud at the bank. Their brother, William Kowalski, was also charged and struck a deal with prosecutors in which he admitted embezzling money from the bank.

However, the charges against Jan Kowalski revolved primarily around the bankruptcy fraud involving her brother. Her attorney, William Stanton, wrote in a court memo that she did not speak to Robert Kowalski from 1980 until 2015. Stanton wrote that she “inopportunely ran into him at the Daley Center in 2015” and agreed to do some work for him. 

“When Bob filed for bankruptcy, he eventually enlisted Jan to hide money for him, and she agreed,” Stanton wrote. “She knows that concealing those funds was improper, and regrets her poor decision to help her brother. She has lost her law license, and incurred much shame.”

Kendall noted during Tuesday’s hearing that none of the hidden money had been recovered, and a bankruptcy trustee spent more than $300,000 looking for it.

(Mike Frisch)