Patrick Daley Thompson indicted over loans from failed Bridgeport bank, declares innocence

Ald. Patrick Daley Thompson — a nephew of one former Chicago mayor and grandson of another — has been charged with making false statements and filing a false income-tax return.

He is the highest-profile figure to face criminal charges in a case involving a clout-heavy Bridgeport bank that was shut down over what authorities say was a massive fraud scheme.

Thompson, 51, faces prosecution on seven charges involving Washington Federal Bank for Savings.

The federal indictment made public Thursday accuses Thompson “of falsely representing on five years of income taxes that he paid interest on money he received from Washington Federal, even though he knew he did not pay interest in the amounts reported on the returns.”

Thompson got $219,000 from the bank between 2011 and 2014 — before he was elected to the Chicago City Council in 2015 — through “a purported loan and other unsecured payments,” prosecutors said. “He made one repayment on the loan but then stopped making payments, and he failed to pay interest on the funds he received. He made one payment on the loan but failed to pay any interest.”

After federal regulators shut down the bank in December 2017, the Federal Deposit Insurance Corp. tried to collect the money from the alderman, according to prosecutors, who said Thompson said he owed only $110,000 and that he’d used the money for home improvements.

According to the indictment, Thompson knew he owed $219,000 and “that $110,000 of it was paid to a law firm as Thompson’s capital contribution.”

In a written statement in response to the charges, Thompson denied doing anything illegal.

“I am very disappointed by the Justice Department’s decision to return an indictment against me today for inadvertent tax preparation errors and my incorrect memory about the amount of a personal bank loan,” the alderman said. “I discovered the tax error and paid the small amount of taxes I owed. When the bank provided me the documents showing the actual amount of the loan, I promptly paid it back. Both matters were resolved before there was any government investigation.

“I want to make two points,” Thompson said. “First, my conscience is clear. I did not commit any crime, I am innocent, and I will prove it at trial.

“Second, I am, first and foremost, a public servant. The charges in the indictment do not relate in any way to my public service or to my professional life. I remain 100% dedicated to serving the people of Chicago to the best of my ability. I have complete confidence in our system of justice and look forward to showing that the accusation is false.”

If convicted, he could face a maximum of 30 years in prison for making false statements to the FDIC and three years in prison for each of the false tax returns authorities say he filed.

The indictment details some but not all of what prosecutors believe Thompson spent the money on.

The Chicago Sun-Times reported Feb. 21 that Thompson bought a $340,000 summer home in Michigan with a secret loan from a small Bridgeport bank that federal regulators later shut down.

Washington Federal never publicly recorded the loans, for which federal authorities found that Thompson made only one payment on the principal and nothing on the interest, according to the indictment.

But authorities found that the Bridgeport alderman still deducted thousands of dollars in interest payments that he owed the bank — but hadn’t paid — on the federal income-tax returns he and his wife filed with the Internal Revenue Service between 2014 and 2018, the indictment says.

When Thompson was questioned about the unpaid loans on Feb. 23, 2018, by Royal Savings Bank — which took over the deposits of Washington Federal and was considered an agent of the FDIC — the alderman “falsely stated he only owed $100,000 or $110,000 to Washington Federal and that any higher amount was incorrect.”

Then, when the FDIC questioned him about the loans on March 1, 2018, Thompson also said he owed the bank only $110,000 on the loan, which he said was for home improvements.

The indictment says Thompson also underreported his income on those tax returns, including his first year as an alderman — a year he reported earnings of $1.8 million.

Pat Nabong / Sun-Times

That’s the year Thompson and his siblings sold their interest in Pensacola Place, an Uptown high-rise they inherited from the father. The building was sold for $65.7 million. Thompson reported earning in excess of $25,000 on that deal, according to statements he filed with the Chicago Board of Ethics.

Federal regulators shut down Washington Federal less than two weeks after John F. Gembara — its president, chief executive officer and major shareholder — was found dead, seated in a chair, a rope around his neck, in the master bedroom of the $1 million Park Ridge home of his bank customer and friend Marek Matczuk. Matczuk had five outstanding loans from Washington Federal totaling about $1.8 million.

The investigation of the bank so far has resulted in federal charges against nine others, including Matczuk and four bank officials.

Besides Thompson’s personal loans, the alderman also got an $80,000 loan from the bank two months before it was shut down — money he previously has told the Sun-Times was to make repairs to the 11th Ward Regular Democratic Party headquarters at 3659 S. Halsted St.

The only public notice of the party’s loan was in campaign-finance reports the 11th Ward Regular Democratic Organization filed with the Illinois State Board of Elections after the bank was closed. Sources have said that, when regulators shut down the bank, they discovered the 11th Ward organization hadn’t made any payments on the loan.

Thompson has told the Sun-Times that a lawyer arranged the bank loan for the ward organization, whose precinct captains include William M. Mahon. Mahon, a deputy commissioner of the Chicago Department of Streets and Sanitation, served on the bank’s board of directors from 2001 until federal regulators closed it.

About a year after Washington Federal was shut down, Thompson and his wife refinanced the mortgage on their Bridgeport bungalow — the home where his grandfather, the late Mayor Richard J. Daley, raised seven children — and got a mortgage on their summer home in New Buffalo, Michigan.

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The Sun-Times reported in March that Thompson failed to report ownership stakes in Penscacola Place and a second Uptown apartment complex called Scotland Yard Apartments that since have been sold for $85.5 million, despite financial disclosure laws requiring him to do so. Thompson inherited his stakes in those properties following the death of his father William Thompson in 2000.

Eight months after selling one of the properties, he voted to approve development plans there without disclosing his connection.

Patrick Daley Thompson is the youngest child of the late Mayor Richard J. Daley’s eldest child Patricia Martino, who, after a divorce, raised her three children next door to her parents’ bungalow in the 3500 block of South Lowe Avenue.

Thompson and his wife owned two Bridgeport homes at the time of the 2003 death of his grandmother Eleanor “Sis” Daley. They then bought the historic bungalow from the family estate for $415,000, sold one of their homes to a city worker who is part of the 11th Ward organization and kept the other house, which is two doors south of the Daley family bungalow.

Even before he first sought elected office, Thompson — who in his private law practice worked on development cases overseen by city officials during the tenure of his uncle, former Mayor Richard M. Daley — had long been seen as a likely candidate. After his uncle retired, Thompson mounted his first campaign, winning a seat on the board of the Metropolitan Water Reclamation District of Greater Chicago, the sewage-treatment agency.

Thompson was sworn into office in December 2012. That came just a day after one of his Daley cousins, Richard J. “R.J.” Vanecko, was indicted for involuntary manslaughter after a special prosecutor, appointed in the wake of a Sun-Times investigation, found that Vanecko threw a punch that killed David Koschman eight years earlier. Vanecko later pleaded guilty and spent two months in jail.

When former Ald. James Balcer (11th) announced he’d be retiring in 2015, Thompson gave up his seat on the water reclamation district board and ran for alderman of the South Side ward that’s been his family’s longtime political stronghold.

Thompson won the aldermanic seat on April 6, 2015. He was re-elected to another four-year term on Feb. 26, 2019. Two months later, on April 26, 2019, the Sun-Times reported the alderman was under investigation regarding the collapse of Washington Federal Bank.

Thompson married Kathleen Grace in May 1993. They are the parents of two daughters and one son. Thompson’s wife is an assistant principal at a Bridgeport elementary school.

He worked in real estate while attending the John Marshall Law School. He has been licensed to practice law since November 1999.

After working as an attorney with the law firm of DLA Piper, often as a lobbyist, Thompson is now “of counsel” with the law firm Burke, Warren, MacKay & Serritella. He represents “clients in a broad-based real estate practice,” including zoning, property tax assessments and tax-increment financing, according to his biography on the law firm’s website.

He represents property owners seeking to lower their real estate taxes by convincing the Cook County assessor and the Cook County Board of Review to reduce the property assessments given to their property.

Read Sun-Times’ Washington Federal investigation

Contributing: Robert Herguth, Fran Spielman, Tom Schuba

Thompson statement below

THOMPSON INDICTMENT BELOW