Bridgeport bank failure fallout: William M. Mahon out at Chicago’s city Streets and San Dept. a month after Indictment in failure of Washington Federal Bank for Savings

A high-ranking City Hall official with close ties to the Daley family has resigned as deputy commissioner of the Department of Streets and Sanitation a month after he was indicted in a massive bank fraud case that led to the forced shutdown of a clout-heavy Bridgeport bank.

William M. Mahon had continued to collect his $138,800-a-year city salary for nearly a month after a federal grand jury charged him on Dec. 7 with conspiracy to defraud the United States and six counts of income-tax fraud.

His resignation Tuesday came after Chicago Sun-Times reporters had repeatedly asked Mayor Lori Lightfoot and her aides about his employment status at City Hall.

A top Streets and San official with deep Daley ties indicted in Bridgeport bank failure case

Mahon — who for at least 16 years was on the board of directors of Washington Federal Bank for Savings, where he headed its loan committee — had been identified by the Sun-Times in November 2018 as a target of the federal investigation of the bank.

The federal probe has resulted in criminal charges against 15 people, including Ald. Patrick Daley Thompson (11th), who got loans from the bank and faces trial on charges including income-tax fraud.

Mahon, 55, is in line to receive a city pension of more than $98,000 a year for the rest of his life.

He and his lawyer Thomas Breen won’t comment.

Lightfoot previously had told the Sun-Times she wanted Mahon out after his indictment.

Asked why Mahon had remained on the job, Lightfoot press secretary Cesar Rodriguez says, “The mayor is not involved in department-level hiring decisions.”

Mahon’s boss Cole Stallard, who was appointed streets and sanitation commissioner by Lightfoot in July, won’t comment.

Stallard and his wife had gotten a $417,400 mortgage for their house in Beverly from Mahon’s bank on Oct. 25, 2016, according to records filed with the Cook County clerk’s office. That was 15 months after Stallard and his wife had emerged from bankruptcy, according to federal court records.

Mahon was on the bank’s loan committee when Washington Federal approved the mortgage for Stallard. Both were deputy streets and san commissioners at the time.

Cole Stallard was appointed by Mayor Lori Lightfoot in July as the city’s streets and sanitation commissioner. He won’t talk about the $417,400 mortgage that he and his wife got from the failed Bridgeport bank where William M. Mahon was on the loan committee or why Mahon was allowed to remain in his Streets and San job for a month after his indictment.

After federal regulators shut down Washington Federal, Stallard’s loan was assumed by another bank. He has since refinanced it.

Asked whether anyone had interceded on Mahon’s behalf to keep him on the job — and allow his city pension to grow — for more than three years after the Sun-Times reported he was under criminal investigation in the case involving Washington Federal, Rodriguez says: “There is nothing more to add. Thank you.”

A top Streets and San official with deep Daley ties indicted in Bridgeport bank failure case

Mahon had survived a 2006 recommendation from the city inspector general’s office that he be fired. The City Hall watchdog had urged then-Mayor Richard M. Daley’s administration to boot him for running personal errands and attending a White Sox game when he was supposed to be working. Instead, Daley aides handed Mahon a 29-day suspension.

Mahon also faced disciplinary action as a result of the City Hall hiring scandal that sent Robert Sorich, who was Daley’s patronage director, to prison in 2006 for rigging test scores on behalf of favored job candidates.

Mahon — who wasn’t charged with any crime in connection with that — was given a 45-day suspension in 2013, after his role in city hiring came under scrutiny. The Emanuel administration let him serve that over a span of several months so he wouldn’t miss a paycheck.

Mahon previously has declined to discuss Washington Federal, a small, century-old bank long operated by the family of John Gembara, who was president, chief executive officer and majority stockholder when he was found dead with a rope around his neck inside the main bedroom of bank customer’s Park Ridge home on Dec. 3, 2017. His death was ruled a suicide, though family members and friends have questioned that.

Twelve days later, federal regulators shut down the bank over what they have described as a massive embezzlement scheme involving Gembara that siphoned off $90 million of the bank’s assets, mostly through loans to favored people for which they could find no documentation and for which prosecutors have said there was no expectation they ever would need to be repaid.

Feds have evidence of income-tax fraud in Bridgeport bank failure, sources say

The Sun-Times first reported Mahon’s role on Washington Federal’s board in March 2018 and subsequently reported that he chaired the board’s loan committee at the time the bank was closed amid the federal investigation into fraudulent loans — an investigation that centered on employees and the four surviving bank board members, including Gembara’s sister Janice Weston and Mahon, who at the time was a top streets and sanitation official under then-Mayor Rahm Emanuel, Lightfoot’s predecessor.

In the four years since federal authorities closed the bank, records show Mahon has collected city paychecks totaling more than $500,000, got a promotion under Emanuel and continued to build his city pension.

Clout’s piggy bank

Mahon long has been a precinct captain for the 11th Ward Regular Democratic Organization, the army of political workers the Daley family has run for decades. The ward organization is headed by Thompson, the indicted Chicago City Council member who represents Bridgeport, and Cook County Commissioner John Daley, Thompson’s uncle.

Divorced with two grown daughters, Mahon is the son of a former Chicago police lieutenant and grew up three blocks south of the late Mayor Richard J. Daley’s South Side home, where Thompson now lives.

According to city records, Mahon got permission from the Daley administration in 1999 and again in 2001 to serve on the bank board.

It’s unclear who picked him for the bank board or why. He doesn’t have a college degree and, according to city personnel records, didn’t have any background or experience in banking or finance.

Mahon had been working for the White Sox when he was hired at City Hall in 1989 as a press spokesman for the Mayor’s Office of Special Events. That was a few months after Richard M. Daley took office as mayor.

In 1995, Mahon moved to Streets and San, which handles garbage pickup, snow removal and vermin control. Most recently, he has been deputy commissioner for quality control and accountability — one of the department’s highest-ranking jobs.

According to an organizational chart posted on the Department of Streets and Sanitation’s City Hall webpage, William M. Mahon reported to three people: Streets and San Cmsr. Cole Stallard and Stallard’s two top aides. Stallard and his wife had gotten a $417,400 mortgage for their house in Beverly from Mahon’s bank on Oct. 25, 2016, after emerging from bankruptcy, records show.

According to an organizational chart posted on the department’s City Hall webpage, Mahon reported to three people: Stallard, his first deputy and his managing deputy.

Mahon got two dozen mortgages totaling $4.8 million from Washington Federal since 1993, most of them after joining the bank’s board, records show.

According to his indictment, Mahon got two of those loans in 2011 after bank employees inflated appraisals.

Those were among 14 mortgages Mahon received on the South Lowe Avenue property his parents once owned — loans to tear down their former home and to build a three-flat there where he now lives.

Mahon’s application for those mortgages didn’t disclose that he also had been given a personal loan by Gembara and his wife for $130,000, according to the indictment. A source says that loan was never repaid.

John F. Gembara, who was chief executive officer, president and chief shareholder of Washington Federal Bank for Savings in Bridgeport. — John F. Gembara.

The grand jury issued a subpoena to City Hall nearly three years ago seeking copies of Mahon’s building permits for the three-flat.

The income-tax fraud charges Mahon faces accuse him of underreporting the rent he collected from tenants and falsifying the building’s expenses between 2013 and 2018.

Mahon also is charged with conspiracy to defraud the United States as part of a multi-year embezzlement scheme during the time he was on the bank board.

He and other board members are accused of doctoring paperwork to falsely make it appear that the bank’s loan committee signed off on loans that actually had been made months earlier.

Though Thompson is charged separately from Mahon and the others involved with the bank, he came under scrutiny during the investigation of the bank failure.

Indicted Ald. Patrick Daley Thompson (11th) is scheduled to go on trial in February.

Thompson — a grandson of the late Mayor Richard J. Daley and nephew of former Mayor Richard M. Daley — is charged with income-tax fraud for filing tax returns showing he paid interest on three loans from Washington Federal even though he never paid the interest or the principal on those loans.

After he came under investigation, Thompson repaid the loans and amended five years of tax returns.

He has acknowledged he hadn’t made payments on the loans but blamed his accountant for claiming the interest deductions for the interest he never paid. Thompson, who is an attorney specializing in real estate deals, and his wife signed those tax returns.

Thompson is scheduled to go on trial in federal court in Chicago on Feb. 4.