Shortly after federal regulators took over Washington Federal Bank for Savings, Chicago Ald. Patrick Daley Thompson got a letter in the mail saying he owed $269,000 to a new lender and that his first payment — with interest — was due in a few weeks.
Thompson called the new debt servicer, Planet Home Lending, in a huff, saying he’d only borrowed about $100,000 from Washington Federal and was “perplexed” about the amount they now claimed he owed. The conversation was recorded as part of the company’s customer service record.
“I signed a promissory note … for $100,000 in 2011,” Thompson said on the February 2018 recorded call, which was played for jurors Thursday in Thompson’s federal tax fraud trial. “I have no idea where the 269 number comes from, ’cause this doesn’t match with anything that I have.”
Prosecutors say that was a lie.
Thompson, 52, the grandson and nephew of Chicago’s two longest-serving mayors, is charged with falsely claiming mortgage interest deductions on his tax returns and repeatedly lying about the lines of credit he received from Washington Federal, including during the call with Planet Home Lending.
Testimony in Thompson’s trial, the first for a sitting alderman in more than 20 years, is scheduled to wrap up Friday, when prosecutors will rest their case and Thompson’s attorneys are expected to call a handful of quick witnesses. Closing arguments would likely be Monday.
The roughly 15-minute call, which was played in its entirety as jurors followed along with a transcript, was an enlightening moment in a trial that has so far featured mostly paper evidence.
“Hi Bill, my name is Patrick Thompson,” the alderman said to the call taker before launching into an explanation of Washington Federal’s collapse, which he described as a “bad situation” where there was some “financial impropriety and the owner of the bank — uh — ultimately ended up committing suicide.”
The bank’s president, John Gembara, was found hanged at the home of a customer days before the Federal Deposit Insurance Corp. took over, according to court records.
“I want to quickly resolve this,” the alderman told the Planet Home Lending representative. “I have something that says I owe $2,000 by March 1 or I’m going to incur interest. So hopefully you can hold that, so you can do your research because I don’t think that’s the right amount.”
Near the end of the conversation, Thompson said he’d tried “half a dozen times” to close on a mortgage loan with Washington Federal through the years, but it never happened. He said he was “very active in the community and knew Gembara was prone to “blackout periods” where he failed to get back to customers or finalize transactions.
“There was no response nothing coming from them,” he said. “So I am — I was shocked to open up the mail.”
The call was played during the testimony of Jacob Evans, an FDIC special agent who confronted Thompson at his Bridgeport bungalow on the morning of Dec. 3, 2018, about 10 months after the alderman first disputed his debt with Planet Home Lending.
Evans told the jury it was cold when he and his partner arrived around 8:15 a.m. and saw Thompson’s car was warming up in the driveway. He answered a knock at the door, and after they identified themselves, Thompson invited them in to the immediate entryway, he said.
They talked about his loan with Washington Federal before they served him with a subpoena to testify before a federal grand jury probing the bank’s collapse, Evans said. A copy of the subpoena shown to the jury demanded tax, property and mortgage records pursuant to an official criminal investigation.
A report Evans and his partner wrote about the interview said they asked Thompson whether he’d been making payments on his personal loans with Washington Federal, and the alderman answered “Yeah.”
But when he was asked to produce canceled checks as proof, Thompson replied, “No, there weren’t any.” He then requested an attorney be present for any further questioning, according to the report.
Thompson’s attorney, Chris Gair, has characterized the report generated from the interview as unreliable and that Thompson’s answer about payments was misconstrued by the agents, who had asked confusing, compound questions.
Before Evans testified, Gair asked that prosecutors be barred from asking the agent about Thompson stopping the interview. U.S. District Judge Franklin Valderrama agreed, saying it would be “too prejudicial” for the jury to hear about it.
On cross-examination, Gair referred to the agents’ confrontation with Thompson as an “ambush interview” designed to catch the alderman off guard.
“That’s a pretty intimidating circumstance, to have two armed federal agents show up on your doorstep unannounced, isn’t it?” Gair asked.
The jury has heard testimony that several days after that interview, Thompson reached out to his accountant and said he needed to amend his tax returns to reflect that he had not actually paid mortgage interest in loans from Washington Federal as the bank’s statements had shown.
Instead, Thompson for the first time described the money he’d borrowed from the bank as an interest-free “line of credit,” the accountant, Robert Hannigan, testified Wednesday.
Thompson, however, has said the interest he claimed on his taxes was an innocent mistake that he was already in the process of fixing when he learned of the criminal probe into Washington Federal’s collapse.
Elected as 11th Ward alderman in 2015, Thompson is the first member of his family’s political dynasty to be charged with a federal crime. He’s also the first sitting alderman to face a federal jury since the Operation Silver Shovel probe more than two decades ago.
Gair told the jury in opening statements Tuesday that Thompson lived a “frazzled” life and hardly paid attention to what was in the returns. Any false information, Gair said, was provided by Washington Federal, not Thompson.
But records presented to the jury by prosecutors on Wednesday appeared to show that Thompson was keenly aware of his mortgage interest deductions, not only from his loans at Washington Federal but also his traditional mortgages on his Bridgeport bungalow and a nearby rental property.
On Thursday, jurors heard from John Holly, a retired FDIC receiver who said he tried to get to the bottom of what Thompson and other customers owed after Washington Federal was shut down.
“The nature of the receivership was that the books were not particularly reliable,” he said. “We followed the money.”
The indictment accused Thompson of lying to Holly and his colleague about the reason for the original $110,000 loan from Washington Federal, which he said was for home improvements when it actually was used as a partner buy-in for his law firm.
On cross-examination, Gair repeatedly challenged Holly’s recollection of what Thompson said, noting that there was no mention of Thompson’s purported claim about home improvements in Holly’s contemporaneous notes of their conversation.
Holly also said that Thompson seemed genuinely confused about what his total debt was with Washington Federal.
“I don’t think he realized it was that much,” Holly said.
The final witness Thursday, IRS Agent Haydee Gonzalez, testified that Thompson should not have claimed tens of thousands of dollars in mortgage-interest deductions in his tax returns because he’d never made payments on the loans, which were actually not mortgages but unsecured lines of credit.
Gonzalez testified that the total tax loss for the IRS due to the fraudulent returns was $15,589.
On cross-examination, however, she acknowledged that figure was less than 2% of the total income taxes Thompson actually paid during the same time period.