Facing foreclosure, Patrick Daley Thompson turned to clout’s piggy bank

Patrick Daley Thompson needed money.

The nephew of former Mayor Richard M. Daley and grandson of the late Mayor Richard J. Daley had his law practice and his post as an elected commissioner of the Metropolitan Water Reclamation District of Greater Chicago. He also had whatever he took in from renting out a two-flat he owned in Bridgeport not far from the one where he and his family lived — the same house where his grandfather lived as he built one of the nation’s most powerful political machines.

But Thompson also had two mortgages — and, according to court records, he was nearly three years past due on one of them, owing $107,447 on a mortgage for the two-flat.

That’s when he turned to Washington Federal Bank for Savings. The small, family-run Bridgeport bank gave him $89,000.

Unlike typical loans that most people might get, Thompson didn’t sign anything promising to pay this back.

Because that’s how things worked at Washington Federal — clout’s piggy bank.

That’s the picture federal authorities have drawn of the now-indicted Thompson, who has been alderman since 2015 of the 11th Ward that includes the longtime Daley political base of Bridgeport and was home to Washington Federal, which regulators shut down in December 2017 over $82 million in missing money and a massive fraud scheme.

Thompson had long done business with another Bridgeport bank, Chicago Community Bank, getting a dozen loans there. It hadn’t foreclosed on him when he failed to pay off a balloon note on the two-flat that was due in March 2011.

Cook County assessor’s office

But when the bank was sold under pressure from federal regulators and rebranded as North Community Bank, it filed the foreclosure suit against him in January 2014 over that loan.

The Cook County sheriff’s office delivered a copy of the lawsuit to his Bridgeport bungalow — the same home where his late grandfather raised his seven kids. The papers were left with Thompson’s wife Kathleen.

Two days later, Thompson got $89,000 from Washington Federal, according to the April 29 indictment that charges him with filing false federal income-tax returns for five years and making false statements to federal banking regulators.

The indictment says Thompson used that money to pay off a debt with another bank, not naming that bank.

Five days after he got the money from Washington Federal, North Community dropped its foreclosure lawsuit against Thompson without saying whether Thompson had repaid all of the $88,500 loan plus interest and penalties he owed.

Thompson got the money from Washington Federal without having to post any collateral — without signing any documents saying he would repay the money, according to his indictment.

And he didn’t repay any of that money until federal regulators suddenly shut down the bank nearly four years later — marking the nowadays-rare failure of a bank in the United States.

Thompson, who is also a lawyer in private practice, is charged with seven felonies related to three transactions — one loan and two other deals that required no collateral or payments — involving Washington Federal.

The federal grand jury that returned the indictment against Thompson charged him with making false statements to federal regulators, saying he owed $110,000 to Washington Federal that he’d borrowed to buy an equity stake in the law firm where he worked when, in fact, he owed the bank $219,000.

He also is accused of cheating on the federal income taxes he and his wife filed between 2013 and 2017 for deducting the interest owed, but never paid, to Washington Federal.

After being indicted, Thompson, 51, said: “I did not commit any crime, I am innocent, and I will prove it at trial.”

He said that, when he was questioned about his dealings with Washington Federal, he gave the wrong figure because he had forgotten how much money he owed the bank. Regarding the false income-tax returns, he said he made “inadvertent tax errors,” deducting more interest than he’d paid.

Thompson’s attorney, Christopher Gair, didn’t return messages seeking comment.

Thompson was a student at John Marshall Law School in 1998 when he and his wife paid $157,500 for the two-flat two doors south of his grandparents’ bungalow in the 3500 block of South Lowe Avenue. They bought it with a mortgage from Chicago Community Bank.

The Thompsons got another loan from Chicago Community Bank — for $43,000 — on the two-flat in March 2006, later increasing the amount of that loan twice, to $88,500, court records show. They weren’t required to make any payments until the loan came due in March 2011, the records show.

That loan was delinquent when Thompson borrowed $110,000 on Nov. 15, 2011, from Washington Federal. It sent a check to the law firm where Thompson was a partner. He had joined the law firm — Burke, Warren, MacKay & Serritella — that year.

He made just one payment to Washington Federal toward the $110,000 he’d borrowed, then stopped paying, according to the indictment.

The delinquent loan from Chicago Community Bank was outstanding at the time Thompson took office as a water reclamation district commissioner in December 2012.

Four months later, on March 22, 2013, the indictment says, Thompson “solicited and received” $20,000 from Washington Federal to pay past-due taxes to the Internal Revenue Service. He never signed any documents promising to repay that money, and he didn’t do so until after the bank had been closed and authorities were poring over its books, according to the indictment.

Ten months after that, on Jan. 16, 2014, Chicago Community Bank — now operating as North Community Bank — sued Thompson to collect on the $88,500 loan that was supposed to have been paid off in March 2011. The lawsuit said Thompson owed $107,447, including interest and late fees.

Thompson’s wife accepted service of the lawsuit on Jan. 22, 2014, according to court documents filed by the sheriff’s office.

On Jan. 24, 2014, Washington Federal gave Thompson $89,000 “to pay off a lien held by another financial institution on a property owned by” Thompson, according to the indictment.

Five days later, on Jan. 29, 2014, the sheriff’s office served Thompson with the foreclosure papers at his law office. The same day, North Community Bank dropped its lawsuit.

But the bank kept a lien on the two-flat until the Thompsons sold it on Jan. 17, 2017, for $335,000.

Kevin Tanaka / Sun-Times file

Besides the three transactions identified in the indictment, Thompson also got an $80,000 loan from Washington Federal in October 2017 to help make repairs to the 11th Ward Regular Democratic Party headquarters at 3659 S. Halsted St.

Thompson and his uncle, Cook County Commissioner John P. Daley, run the 11th Ward organization, which never made any payments on the loan until after federal regulators closed the bank on Dec. 15, 2017. The loan has since been renegotiated with Royal Savings Bank, which took over the deposits of Washington Federal, and the Daley political organization has been making payments, according to campaign-finance reports it’s filed with the state of Illinois.

Washington Federal’s board of directors suspended John F. Gembara — who was its president, chief executive officer and major shareholder — on Nov. 28, 2017, as federal regulators were unraveling the fraud scheme at the bank.

Five days later, on Dec. 3, 2017, Gembara was found dead, sitting in a chair, with one end of a rope wrapped around his neck and the other around a stairwell inside the master bedroom of the Park Ridge home of Marek Matczuk, who owns a construction company and had five outstanding loans totaling $1.8 million from Gembara’s bank.

Federal regulators shut down the bank on Dec. 15, 2017.

Kevin Tanaka / Sun-Times file

Matczuk is among 10 people who so far have been charged in the criminal investigation that federal prosecutors say involved an embezzlement scheme in which Gembara was stealing money from the bank founded in 1913 by 10 Polish immigrants to serve their community.

According to the bank’s history, Gembara’s grandfather later joined the bank. And John Gembara followed his father Emil Gembara in running the bank.

Federal prosecutors have said they expect more people to be indicted in the investigation of the bank, whose losses were covered by the Federal Deposit Insurance Corp.

Among those under investigation are the four surviving board members, including Gembara’s sister Janice Weston; George Kozdemba, a retired electrical technician from the water reclamation district whose father also served on the bank board; Lester Stepien, a comptroller at a meatpacking company; and William M. Mahon, a deputy commissioner with the Chicago Department of Streets and Sanitation who also is a member of Daley’s 11th Ward Democratic Organization.

READ SUN-TIMES’ WASHINGTON FEDERAL INVESTIGATION