CHICAGO (TIP): Amrish Mahajan, former president of failed Mutual Bank of Harvey and a major fundraiser for imprisoned former Gov. Rod Blagojevich, has been barred from future participation in the banking industry under a newly released regulatory order. Mr. Mahajan consented, without admitting or denying unsafe or unsound banking practices, to a May 1 order by the Federal Deposit Insurance Corp. prohibiting him from participating “in any manner” in the conduct of the affairs of any federally insured institution. Until early 2009, Mr. Mahajan ran Mutual Bank of Harvey, one of the most active lenders to Indian-Americanowned businesses in the Chicago area and an enthusiastic commercial real estate lender in Chicago and other markets around the country.

The bank, which had $1.7 billion in assets at its peak, failed spectacularly in 2009, saddling the FDIC’s insurance fund with an estimated $917 million in losses, according to the latest FDIC account. That makes it the costliest Chicago-area bank failure since the beginning of 2009. Mr. Mahajan is a defendant in an FDIC lawsuit against former officers and directors of Mutual Bank seeking $130 million in damages. That suit, filed in October 2011, is pending and in discovery. In its order – you can read the document at the end of this story – the FDIC said it had “reason to believe” that Mr. Mahajan had engaged in unsafe or unsound banking practices and that “such practices and breaches of fiduciary duty demonstrate personal dishonesty and/or willful or continuing disregard for the safety and soundness of the bank.” Mr. Mahajan didn’t respond to a request for comment.

A spokeswoman for the law firm representing him declined to comment. Mr. Mahajan was known for his political connections, particularly to Mr. Blagojevich. Mutual Bank briefly entered the realm of national politics after news surfaced of the bank’s role in financing the purchase of a lot next to the home of then-U.S. Sen. Barack Obama. The Obama family bought part of the lot from the wife of Blagojevich fundraiser Tony Rezko after Mutual Bank lent her $500,000 to purchase the property.Mr. Rezko is in prison on charges of fraud, among other things. Mr. Obama, during his initial run for president, acknowledged later that the deal was a mistake.