San Diego What the Joseph C. Glickmans believed was a simple $242,000 gift to an annuity trust has become a $32.4 million tax nightmare.
Now the La Jolla couple, well known in San Diego's social and political circles, are banking on the U.S. Tax Court in Washington, D.C., to intervene and overturn the Internal Revenue Service decision.
Glickman, founder and chairman of a highly regarded banking company based in Chicago, and his wife, Beverly, each filed an eight-page petition to challenge the IRS ruling in the court.
"I consider this to be a very private matter," the 83-year-old Glickman told a reporter.
The couple's tax attorney, Marshall E. Eisenberg of Chicago, declined to comment on the specifics of the case.
"It's a technical issue," Eisenberg said in a telephone interview. "We believe the government is incorrect in its assertion, and we expect to prevail in the litigation."
What ran Glickman and his wife afoul of the IRS are the gifts each made to the Joseph C. Glickman Grantor Annuity Trust. Their son, Robert J. Glickman of Chicago, president and chief executive officer of the Corus Bank, is the trustee.
Peter Weidenbruch, a Georgetown University tax law professor, said such a trust allows the grantor to place funds, stocks, or other valuables in the trust, draw annual income from it, and designate beneficiaries of the trust.
Quoting a Research Institute of America (RIA), Inc., study, Melanie Steinberg, an Arlington, Virginia, certified public accountant, said that "at the end of the specified term, the property" then goes to the designated recipients.
The RIA document said that under a Grantor Retained Annuity Trust "the grantor transfers property to a trust and reserves an irrevocable right to receive a fixed dollar amount payment, or a fixed percentage of the initial fair market value of the property transferred" into the plan.
In this case, the IRS said the property involved the stock of the Corus Bank.
Corus was woven by Joseph Glickman into a Chicago-area financial behemoth from a small Midwestern bank he and others bought in Minnesota in 1966. Corus now has 12 branches and $2.4 billion in assets and plays a prominent role in financing student loans.
Glickman, then a Minneapolis businessman, and other investors bought the River Forest State Bank from Minneapolis financier Carl R. Pohlad. At the time, River Forest had $18 million in assets.
An astute businessman, Glickman found banking to his liking. He moved the base of his operations to Chicago, and two years ago River Forest changed its name to Corus, which has muscled its way to the top, becoming Chicago's tenth largest banking operation.
While mostly a fringe player in banking operations now, he still maintains a quasi-active role in running Corus. The day-to-day decisions fall on the shoulders of his son, Robert, who is also chairman of Madison Bank and Trust Co.
Corus's acquisition of Madison eight years ago gave the banking company a foothold on the west end of Chicago's Loop area, its first in the center of the city. The bank holding company has cast about looking for other good banking ventures.
Beginning in 1994, Corus moved into buying common stock in other publicly traded banks, but not just in the Chicago area. Apparently, it paid off -- big.
Just ten days after Corus, then River Forest, bought a block of stock in Suburban Bancorp of Palantine, Illinois, for $41 a share in the spring of 1994, the Glickman wizardry worked again. River Forest sold those shares for $73 when less than two weeks after the stock purchase the Bank of Montreal announced that it would take over Suburban.
The Glickman-dominated banking operation also snapped up $18 million worth of stock in 15 to 20 other banks that same year and said it also would embark on an additional $35 million stock-buying spree in other banks.
However, the high-riding superstars of the Midwestern banking world took a stumble last year as Corus moved to restructure its major stake in the home-equity loans. The bank's second-mortgage lending operation ran into bad credit losses and had to take a $11.3 million write-off in the fourth quarter of 1996, nearly twice that of similarly sized Midwestern banks.
Corus Bank took it hard since its net charge-offs for bad credit usually hovered in the negative 0.1 percent range as late as a year earlier.
The setback saw Corus downsize the number of mortgage loans last year to 10 to 15 a month, down from 300 to 400 monthly a year earlier when the home-equity losses jarred the company.
Joseph Glickman's presence at Corus is also felt through the art work he has collected and that now adorns the walls of the main office of Corus and its branches scattered around Chicagoland.
Karen VanPassen, a spokeswoman for the bank, said the 500 paintings the bank chairman owns and Corus uses are mainly oil and watercolors, some by well-known artists.
"He bought an entire grouping several years ago," she added. "We have nine [main] locations, and they are spread throughout them."
She said she did not know whether ownership of the paintings are in Glickman's own name or that of his trust's.
Banking is not Corus's only business. The bank-holding company has also moved into the medical finance field. The bank touts a medical finance program that is now available at hospitals in 26 states.
The bank has also reached out with its commercial real estate lending services into other states so that last year the share of loans being made in California and other states doubled to 30 percent from 1995.
Along with a much-envied operating record and the expensive art collection gracing its walls, Corus has also embarked on an ambitious program to restore several of its banks. Among those getting a face lift was the bank's headquarters, Chicago's ornate Lincoln National Bank Building, which dates back to the Roaring '20s.
For the first half of this year, Corus reported $20.1 million of net income, matching earnings reported for the same period last year.