Two years ago, city of Chicago inspectors showed up at the Daley family’s longtime political headquarters, a stout brick structure in Bridgeport that houses offices for Cook County Commissioner John P. Daley, his nephew Ald. Patrick Daley Thompson and the 11th Ward Regular Democratic Organization they control.
Spurred by a neighbor’s complaint about loose bricks, the inspectors discovered code violations at the building at 3659 S. Halsted St. that required costly repairs including exterior brickwork, new drywall and the removal of plumbing fixtures and wiring, city records show.
To pay for that, Thompson turned to a neighborhood bank, Washington Federal Bank for Savings. He got an $80,000 loan, unsecured by any collateral, that was deposited into the 11th Ward campaign fund that’s controlled by Daley.
Thompson got the loan in October 2017, as federal regulators were turning up financial irregularities at Washington Federal.
Within two months, the bank president would be found hanged at a customer’s home in a death ruled a suicide. And authorities would shut down the bank over millions of dollars in unaccounted-for loans — losses that now total at least $80 million, according to the Federal Deposit Insurance Corp.
Thompson’s loan is now part of a broadening federal investigation that began with the missing money — including loans made without any collateral — and also includes the death of bank president John F. Gembara 12 days before the bank was ordered closed, the Chicago Sun-Times has learned.
Thompson is the third sitting alderman who is under federal investigation. The two others — Ald. Edward M. Burke (14th) and Ald. Danny Solis (25th) — are involved in a separate investigation in which Burke has been charged with trying to shake down a Burger King operator for legal business.
Thompson, 49, refused interview requests and would not answer questions about the terms of the loan — including the interest that would be charged, when the money needed to be repaid and why there was no collateral.
Daley told the Sun-Times he would try to provide those answers but didn’t.
Through records and interviews, the Sun-Times also found that:
• The 11th Ward organization made no payments to Washington Federal before it was shut down in December 2017. The bank’s collateralized loans were taken over by another Chicago bank, Royal Bank for Savings. That didn’t include unsecured loans like the one Thompson got for the party’s ward headquarters. That $80,000 debt later was taken over by Royal under a five-year loan at 5 percent interest. It’s unclear if those were the same terms Thompson got from Gembara’s bank. The 11th Ward Democrats started repaying the money last June. It has repaid about $8,000 and made $5,100 in interest payments, campaign records show.
• Bansley & Kiener, an auditing firm that has long worked for the Daley family’s political funds, did the books for Washington Federal. It gave the bank a clean financial bill of health during annual reviews — the most recent completed five months before the bank was shut down. The firm also handles 11th Ward finances and has made campaign contributions to the Daleys. A federal judge recently ordered the company to turn over its records on the failed bank to the FDIC.
• Thompson also has faced personal financial troubles involving bank loans. He was an elected board member of the Metropolitan Water Reclamation District of Greater Chicago in January 2014 when he was sued by another Bridgeport lender, North Community Bank, which said he failed to repay an $88,000 loan on a home he and his wife owned in the neighborhood. The loan was overdue for three years when the bank sued, saying Thompson owed $88,000 in principal, $17,208 in interest and $1,738 in late fees. The bank dropped the lawsuit a month later but kept a lien on the house until the Thompsons sold it 2017.
• Over the past five months, Thompson and his wife Kathleen have gotten $704,000 in mortgages from Morgan Stanley Private Bank. A day before last Thanksgiving, they refinanced the Bridgeport bungalow where they now live — the home where Mayor Richard J. Daley, his late grandfather, raised his family. The Thompsons got a $454,000 mortgage on that house. Two weeks later, they got a $250,000 mortgage from Morgan Stanley on their second home, in New Buffalo, Michigan. According to the loan documents, Thompson’s wife “is not assuming liability for payment” of either mortgage.
• Why did Bridgeport bank president kill himself in customer’s Park Ridge home? March 4, 2018
• After Bridgeport banker found dead, top debtor tries to avoid repaying $20M, April 8, 2018
• Feds find massive fraud at shuttered Bridgeport bank whose president was found dead, Nov. 9, 2018
Washington Federal was founded in 1913 by Gembara’s grandfather to serve his fellow Polish immigrants. It focused on residential mortgages, with a few commercial loans. Its main office was in Bridgeport, at 2869 S. Archer Ave., with a branch at 1410 W. Taylor St. in Little Italy.
On Dec. 3, 2017, Gembara was found dead of what’s been ruled a suicide inside the million-dollar Park Ridge home of a contractor, Marek Matczuk, a friend and bank customer with five outstanding loans from Washington Federal totaling about $1.8 million. U.S. Bank, which holds the first mortgage, has been trying to foreclose on Matczuk’s house for the past two years.
Gembara was discovered with a rope around his neck seated in a chair in Matczuk’s master bedroom. Park Ridge police and the Cook County medical examiner’s office concluded he killed himself.
Twelve days later, regulators shut down Washington Federal for “unsafe or unsound” practices that the FDIC continues to investigate.
Authorities have zeroed in on at least $80 million that’s unaccounted for because Gembara issued loans without documentation or collateral, part of a scheme that federal regulators failed to detect for years, according to an audit by the U.S. Treasury Department’s inspector general released last November that found “massive fraud” at the bank.
The inspector general found that inexperienced federal bank examiners were assigned to examine the bank and overlooked numerous “red flags.”
An attorney for Gembara’s widow previously has told the Sun-Times, “It looks like your garden-variety bank fraud — except this one involves a banker.”
Investigators also are scrutinizing Robert M. Kowalski, a longtime Gembara associate who got at least $27 million in loans from Washington Federal. After the FDIC contacted Kowalski about his outstanding loans — many of them for apartment buildings that rely on government-subsidized Section 8 housing vouchers — he filed for bankruptcy.
The FDIC has accused Kowalski of failing to disclose all of his assets to the bankruptcy court.
He and his sister Jan Kowalski have been in federal custody for several weeks for failing to abide by a bankruptcy judge’s order to turn over $250,000.
Kowalski also has been indicted for bankruptcy fraud.
In an interview last year, he told the Sun-Times he believes Gembara was killed by a Washington Federal loan recipient worried that the fraud scheme was unraveling and that authorities would get Gembara to talk.
Park Ridge police wouldn’t comment on Gembara’s death but released a letter showing they’ve been in touch with the FBI.
Some of Gembara’s relatives also suspect he was killed.
The FDIC has filed a $14.5 million claim against Gembara’s estate to try to recover money it says he improperly distributed to five customers it identifies only by their initials.
Washington Federal’s former board members, including Gembara’s sister Janice Weston, have hired lawyers as authorities examine the board’s oversight of the bank.
Another of the former board members, William Mahon, is a top official in Chicago’s Department of Streets and Sanitation and was a political ally of former Mayor Richard M. Daley, another uncle of Thompson. In 2013, Mahon was suspended from work for 45 days for his role in Daley’s fraudulent hiring scheme, for which the mayor’s patronage director went to prison.
Mahon’s sister is married to a first cousin of former 11th Ward Ald. Patrick Huels. Mary Ann Mahon-Huels is acting president of the South Loop Chamber of Commerce, where Thompson is secretary. Bansley & Kiener does accounting work for the nonprofit.
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