Former Illinois governor Dan Walker pleaded guilty in federal court in Chicago yesterday to three felony charges in connection with a scheme in which he fraudulently obtained hundreds of thousands of dollars in loans from a savings and loan he headed in order to pay his business and personal expenses, including maintaining his 80-foot-yacht, "The Governor's Lady."
Walker, a Democrat who was governor from 1973 to 1977, also admitted filing false financial statements that failed to disclose at least $1 million in liabilities in order to obtain more than $1.1 million in loans from five financial institutions in Illinois, Florida and Arkansas.
Walker, 64, is the former chairman of the board and chief executive officer of First American Savings and Loan in Oak Brook, Ill., which was declared insolvent in April 1986 by the Federal Home Loan Bank Board.
Walker received national attention when, as a prominent Chicago lawyer, he chaired the commission that investigated the confrontation between Chicago police and antiwar demonstrators at the 1968 Democratic National Convention. His report criticizing Mayor Richard J. Daley and the city police force launched his political career. He was elected governor four years later after a highly publicized walk across Illinois.
Appearing yesterday before U.S. District Court Judge Ann C. Williams, Walker pleaded guilty to charges of bank fraud, misapplication of bank funds and perjury. He promised to cooperate with a continuing investigation of bank fraud in the Chicago area.
"I have broken the law and pleaded guilty," Walker read from a statement. "I have deep regrets and no excuses." He could face up to 15 years in prison and a $505,000 fine.
Under the terms of the guilty plea, Walker admitted fraudulently obtaining loans from First American through his son, Daniel Walker Jr., and Robert T. McCarthy, a close friend and business associate to whom he owed money. The elder Walker, who was barred from obtaining loans or credit at First American, concealed the fact that he used almost $240,000 of the approximately $280,000 in loans to pay his expenses.
For example, in January 1986, according to the criminal information filed gainst Walker, he instructed McCarthy to obtain a $75,000 unsecured loan from First American. Walker then used about $44,000 of the loan to pay debts incurred in operating his yacht, and wrote McCarthy a $45,000 promissory note.
Walker also acknowledged lying to the Federal Home Loan Bank Board in April 1986, when he denied under oath that he had not received proceeds of any First American loans to family members. In fact, he received about half the proceeds of a $14,000 loan to his son in July 1983.
In addition, he admitted submitting false financial statements to other financial institutions that prosecutors said "grossly" overstated the assets of himself and his wife and understated their liabilities. They obtained loans totaling more than $1,175,000 from the thrifts and banks.
In court yesterday, Walker disputed prosecutors' assessment of the amount by which he allegedly understated his assets.
He said the government intended to make it appear that he had profited from the transactions related to the bank-fraud section of the charges.
"In fact," he said, "I'm in very serious financial difficulty and I did not personally profit."
Last July, Walker denied any wrongdoing in funding the expansion of Butler-Walker Inc., his chain of quick-oil-change franchises, through the savings and loan association. The Chicago Sun-Times had reported that Walker and his wife used more than $10 million from the savings and loan to buy and develop sites for the business.
U.S. Attorney Anton R. Valukas said yesterday the Walker case "shows first of all that this office is paying as much attention in scrutinizing the financial criminal area as we are the political corruption area."
Former Illinois governor Otto Kerner, a Democrat who served from 1961 to 1968, was convicted in 1973 of bribery, tax evasion and perjury. Prosecutors said he was allowed to buy race-track stock at a bargain-basement price in return for favorable action on legislation affecting the racing industry.
Kerner was sentenced to three years in prison but, due to ill health, was paroled in 1975 after seven months.