Crossroads GPS Stretches The Truth, Outright Lies To Smear Giannoulias

October 25, 2010 8:11 pm ET

The Karl Rove-associated Crossroads GPS has released yet another deceptive campaign ad, this time targeting Illinois Senate candidate Alexi Giannoulias (D) over his involvement with Illinois' Bright Start program and his family's Broadway Bank. The ad omits important details to accuse Giannoulias of a "fishy tax dodge" and "squandering money families saved for college" while overseeing the Bright Start program, and pushes the misleading claim that Giannoulias made loans to "criminals, felons, and mob figures." In reality, there was no evidence that Giannoulias took an improper tax break, and Bright Start's losses were the result of an investment by the program's manager, OppenheimerFunds, that went awry. Furthermore, there is no evidence that Giannoulias personally approved any loans to criminals. 

Crossroads GPS: "Known"

[Interviewer:] "Did you know that there were crime figures that your bank was loaning money to?" [Giannoulias:] "As I said, we didn't know the extent of that activity." [Announcer:] A damning non-denial of loans to criminals, felons, and mob figures. [Giannoulias:] "As I said, we didn't know the extent of..." [Announcer:] Spinning different stories about his fishy tax dodge. [Giannoulias:] "I've been consistent from the very beginning." [Announcer:] And squandering money families saved for college. His excuses change, but the facts don't. Alexi Giannoulias can't be trusted. Crossroads GPS is responsible for the content of this advertising.

No Evidence Giannoulias Took Improper Tax Break

Chicago Tribune: "There Is No Suggestion" Giannoulias "Took A Tax Break He Didn't Deserve." From the Chicago Tribune: "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." [Chicago Tribune9/29/10]

Giannoulias Donated Tax Relief To Charity. From the Chicago Tribune:

Democratic U.S. Senate candidate Alexi Giannoulias didn't have to pay any state or federal income taxes last year because of big losses tied to his family's failed Broadway Bank, according to his campaign and tax returns released Friday.

The wealthy state treasurer stands to collect about $30,000 in refunds, but immediately announced he would donate the money to charities. Giannoulias sought to avoid having his tax situation become a campaign issue that could anger voters who make less money, pay their taxes and don't have much sympathy for a rich guy getting a break.

Giannoulias reported $2.7 million in losses last year. That represents the 3.6 percent of Broadway Bank he owned in non-voting shares, said campaign spokeswoman Kathleen Strand.


Giannoulias was paid $135,669 last year as treasurer. He paid $4,512 in state and $25,459 in federal income taxes withheld from his paychecks. The refund of those taxes is what he said he'll send to charities.

Giannoulias' campaign pointed to Senate economic disclosures that showed Giannoulias' net worth has dropped by approximately half in just a year.

[Chicago Tribune7/2/10]

OppenheimerFunds, Not Giannoulias, Devastated Bright Start Savings

Bright Start Program Managed By OppenheimerFunds, Whose Investment Went Wrong. According to "Here's what happened: the Bright Start 529 plan is managed by OppenheimerFunds, as are those of several other states. Oppenheimer put some of the money that individuals had invested in the 529s into its own Core Bond fund. Bond funds are normally prudent and relatively safe investments. But in this case, things went wrong. ... Core Bond was just one of 21 funds that Bright Start owned, so most of the money in the 529 was not affected." [, 7/9/10]

Illinois — With Giannoulias As State Treasurer — Was The First State To Notice Problems With Core Bond Fund. According to's examination of another political ad attacking Giannoulias over his involvement with Bright Start:

The ad charges that Giannoulias, who is state treasurer, "fell asleep at the wheel" while overseeing the Illinois Bright Start 529 college investment plan. On screen there's a mock highway sign with the quote "bad investment choices...leading to outsized losses" and a citation to the Chicago Sun-Times. It's a reference to losses in one of the funds the plan owns, the Oppenheimer Core Bond fund, in 2008.

The words in the ad indeed appeared in a Chicago Sun-Times story last year. But they were used in reference to the Core Bond fund's managers, not to Giannoulias. Those managers, as the Morningstar investment research firm put it, "gained exposure to the battered commercial mortgage-backed securities market through derivatives that had a leveraging effect on the fund, amplifying losses." Remember credit default swaps?

And a Giannoulias spokesman said that Illinois was the first state to notice problems with the fund and investigate. Of the approximately $150 million of investors' money that was lost in the Core fund (one of 21 funds owned by Bright Start, which is a $2 billion program), Giannoulias reached a settlement with Oppenheimer to recover $77 million. [, 10/1/10, emphasis added]

Giannoulias Reached A Settlement With Oppenheimer To Recover $77 Million Of The Investors' Money. As reported by the Chicago Tribune: "The $77 million settlement with OppenheimerFunds Inc., announced Tuesday by Treasurer Alexi Giannoulias and state Attorney General Lisa Madigan, would partially reimburse about 65,000 account holders." [Chicago Tribune, 12/23/09]

Even Giannoulias' Opponent Initially Acknowledged Oppenheimer — Not Giannoulias — Was To Blame For The Fund Going Awry. The Chicago Tribune reported: "But rather than criticize the first-term Democratic state treasurer, Kirk went after 'a state bureaucrat that has a bad record.' Asked by a reporter who that bureaucrat was, Kirk replied it was the person who ran the Oppenheimer 'core plus' fund-who is not a state employee. That's the argument that Giannoulias has been making in trying to recover the funds." [Chicago Tribune10/12/09]

"Criminals, Felons, And Mob Figures"

The ad's insinuation that Giannoulias was involved in loans to "criminals, felons, and mob figures" stems from an investigation by the Chicago Tribune, which revealed that his family's Broadway Bank had loaned Michael "Jaws" Giorango and his partner, Demitri Stavropoulos, approximately $20 million while he was a senior loan officer.

Giorango's Relationship With Broadway Bank Long Predated Giannoulias' Time At The Bank. From

Let's start with Michael "Jaws" Giorango. He was convicted in 1991 of federal bookmaking charges in Chicago. His business with Broadway Bank began long before Giannoulias joined the bank as vice president and a senior loan officer, a job he held from 2002 to 2006.


In an interview with the Chicago Tribune, Giannoulias' older brother, Demetris Giannoulias, the bank's president and CEO, said he established Broadway's relationship with Giorango in the mid 1990s. And Alexi Giannoulias maintains that throughout his association with the bank, the client relationship with Giorango was managed by Alexi's father and brother. [, 6/30/10]

Giannoulias Was In Law School At The Time The Loans Involving D'Arco Were Granted. From

D'Arco -- convicted of federal corruption charges -- came into play because his name appeared in legal documents in connection with a Giorango company that purchased the Lorraine Hotel in Miami Beach. According to a 2006 story in Crain's Chicago Business, however, Broadway Bank released a statement saying that D'Arco's name does not appear on mortgage papers, "has never been a loan applicant, recipient, co-signer, guarantor or customer" of Broadway, and does not hold an ownership share in the hotel deal.

According to Giannoulias' spokesman McGrath, "the Giorango loans included money that went to the purchase of the Lorraine Hotel in Miami in 2001, a land deal which state Sen. John D'Arco was involved in with Giorango." Giannoulias, however, "joined the bank in 2002 after graduating from law school, so this transaction predated his time there." [, 6/30/10]

Lev And Boris Stratievsky "Had No Criminal Background At The Time Of The Loans." From

More importantly, McGrath correctly noted, Lev and Boris "Half Dollar" Stratievsky had no criminal background at the time of the loans. Boris Stratievsky pleaded guilty in May 2008 to federal money-laundering charges, and Lev has since died. "Even a criminal background check wouldn't have turned anything up," McGrath said. So it would be incorrect to say, as the ad did, that Stratievsky was a "convicted mobster" when Broadway Bank made him a loan. [, 6/30/10]