A former high-ranking aide to three Chicago mayors was sentenced Wednesday to 18 months in prison and fined $75,000 for his role in the collapse of a crooked Bridgeport bank with ties to the Daley family and their political organization.
William “Billy” Mahon, who grew up down the street from the late Mayor Richard J. Daley, is among 16 people indicted for what federal officials have called “a massive embezzlement scheme” at the Washington Federal Bank for Savings, which shut down in December 2017.
Federal investigators closed the bank 12 days after the bank’s chief shareholder, chief executive oficer, president and chairman of the board, John Gembara, was found dead with a rope around his neck in the bedroom of bank customers Marek Matczuk, who has since been convicted of embezzlement.
Mahon, 57, is the first bank official or employee sentenced in the scheme. He admitted falsifying bank records and cheating on his income taxes for eight years.
Besides the prison sentence, Mahon also was fined $75,000, which is some of the money he was paid as a member of the board of directors.
Two others charged in the scheme have been sent to prison.
Former Ald. Patrick Daley Thompson, Daley’s grandson and a Washington Federal customer, has served his prison sentence for lying to federal regulators about the money he owed the bank.
And Jan Kowalski, whose two brothers have been indicted in the bank collapse, is in prison for helping conceal money for one of her brothers.
U.S. District Judge Virginia Kendall agreed with federal prosecutor Michelle Petersen that Mahon should be sent to prison, rejecting an argument from Mahon’s attorney Thomas Breen that his client wasn’t as culpable as the bank employees and therefore should get probation.
“The seriousness of the offense is significant,” Kendall said after noting that many bank customers lost money.
One customer went bankrupt. Another lost more than $93,000.
“These are people trying to save money for their futures, their retirements,” the judge said. “Imagine losing close to $100,000.”
The Federal Deposit Insurance Corp. spent nearly $139.8 million to cover the bank’s losses. About $59 million has been recovered from insurance policies and customers whose loans were purchased by other banks. But the FDIC says it’s still out $83 million, including money owed to many customers.
Mahon admitted that, during his 16 years on the bank board and its loan committee, he falsified numerous documents so federal regulators wouldn’t know the records were created after the customers had gotten money from Gembara.
Mahon also falsified records on his personal loans so federal regulators wouldn’t know that he qualified for the loan on his three-flat only after he was given a $130,000 loan by Gembara and his wife.
Kendall admonished Mahon: “Why aren’t you asking, ‘Why am I signing these forms? Why am I backdating this document?’
“You’re a smart man. You chose not to follow the policies in place that would protect the money of those people,” Kendall said. “A teenager would know, ‘I shouldn’t backdate a form that’s going to the bank.’ A teenager would know, ‘I shouldn’t file false tax returns.’ ”
Breen argued that Mahon was unaware the bank was being looted under Gembara, who gave out loans that didn’t have to be repaid.
Breen said federal regulators were partly at fault for failing to catch Gembara’s scheme, an argument Kendall dismissed.
“I don’t know if [Gembara] was threatened or extorted,” Breen said. “But Bill Mahon didn’t have a clue that the Kowalskis ... and the others were cheating, stealing ... I don’t understand how all of this money could be leaving the bank without auditors figuring it out.”
Mahon spent more than 30 years working for the city’s Department of Streets and Sanitation under Mayors Richard M. Daley, Rahm Emanuel and Lori Lightfoot. City Hall gave him permission to serve as one of the five members of the bank’s board of directors for 16 years.
After federal regulators closed the bank, Mahon continued working at City Hall until he was indicted in December 2021, resigning from his job as a deputy commissioner a month later when he began collecting his annual pension of $98,000.
“I stand before you taking full responsibility,” Mahon told Kendall, sobbing before a few dozen relatives and friends.
“I’m sorry for those who were impacted by my actions and my inactions,” Mahon said. “I have tremendous remorse and guilt for not taking my role on the loan committee more seriously.”
READ SUN-TIMES’ INITIAL WASHINGTON FEDERAL INVESTIGATION
The first story in the Sun-Times investigation of the failed Bridgeport bank Washington Federal Bank for Savings, published March 4, 2018.
