A federal grand jury has indicted Michael Halikias, chairman of Republic Bank of Chicago, accusing him of lying to regulators about a 1989 real estate loan.

Mr. Halikias was charged Oct. 8 with perjury and conspiring to defraud the Office of Thrift Supervision. The alleged crimes were in connection with an OTS investigation of a potential conflict of interest in a $2.6 million loan First Cook Community Bank made to Connaught Corp., a local real estate development firm.

The agency began its investigation in December 1991 after getting a tip that Mr. Halikias had controlled Connaught at the time it got the loan. Mr. Halikias was chairman of First Cook at the time.

However, that investigation found no concrete evidence of a conflict of interest and was closed without any disciplinary action in July 1993.

New evidence prompted a probe by the U.S. Attorney's office, however. And last week, the grand jury found that Mr. Halikias and two others had lied to the OTS about Mr. Halikias' role in the development firm. The U.S. Attorney's office would not disclose the evidence.

The indictment described a complex perjury-for-loan exchange in which one Connaught officer, David J. Wabick, allegedly lied about Mr. Halikias' involvement in exchange for additional loans for future real estate projects.

Mr. Halikias, Mr. Wabick, and David L. Heyes, a real estate partner of Mr. Wabick, are to be arraigned in Chicago this week.

Through an attorney, Mr. Halikias, 64, denied that he had ever controlled Connaught.

"It would be a huge injustice to draw any conclusion from the indictment," said James R. Epstein, a lawyer at Epstein, Zaideman & Esrig in Chicago. "While we don't like to try cases in the press, we are saying that Mr. Halikias is innocent of any wrongdoing and will demonstrate his innocence in a court of law."

OTS officials would not comment specifically on the charges against Mr. Halikias, Mr. Wabick, and Mr. Heyes. But William Fulwider, an agency spokesman, said conflict of interest allegations are evaluated case by case, adding that it's generally a conflict when "one's own interests are put ahead of the institution's."

Mr. Halikias faces up to five years in prison if convicted of the perjury charge, according to Robert Kent, assistant U.S. attorney for the Northern District of Illinois. If convicted, he would most likely be forced to step down as chairman of Republic Bank.

A Greek immigrant who amassed a fortune developing strip malls, office buildings, and the outdoor music arena World Theatre, Mr. Halikias combined two struggling savings and loans to create First Cook in 1989. It was merged into Republic Bank in 1994.

Today, Republic Bank has $342 million of assets.

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