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Chicago political dynasty heir found guilty of tax fraud

City Council Member Patrick Daley Thompson is the first member of his politically powerful family to be found guilty of federal crimes.

CHICAGO (CN) — A federal jury found Chicago City Council Member and 11th Ward Alderman Patrick Daley Thompson guilty of seven counts of tax fraud on Monday night for lying to federal regulators in 2018 about how much money he owed to the now-closed Washington Federal Bank for Savings and knowingly filing bogus tax returns for five years.

A Chicago alderman facing a federal trial is nothing new to the windy city. Thirty alderpersons have been convicted of corruption since 1973; 14th Ward alderman Edward Burke, the longest-serving member of the City Council, is currently preparing for his own federal trial over 14 bribery and extortion charges. What makes this case unique is the "Daley" in Patrick Daley Thompson's name.

It's a name with a lot of weight in Chicago. Daley Thompson's grandfather was former Chicago mayor Richard J. Daley, his uncle is former Chicago mayor Richard M. Daley. Though never a mayor, he is now the first member of the Daley family to have gone to trial over federal criminal charges. He is now also the first Daley to be found guilty of such charges, and could face up to 30 years in jail.

The jury delivered the guilty verdict after three days of testimony and three and a half hours of deliberation.

According to prosecutors, Daley Thompson falsely reported to creditors and the Federal Deposit Insurance Corporation that he only owed $110,000 to Washington Federal when he actually owed about $269,000 in loans he solicited, received and never paid back. He was also convicted of low-balling his taxable income between 2013 and 2017, and falsely reporting that he payed over $170,000 in mortgage interest payments in the same time period.

Taken together, the tax money Daley Thompson has now been convicted of dishonestly reporting amounts to less than half a million dollars. It's small-ball compared to the multi-million dollar corruption and civil rights scandals his uncle and grandfather were implicated in, but U.S. Attorney Brian Netols told jurors Monday that the case isn't about the amount of money the alderman may have pinched, however small. It's about what he called Daley Thompson's "outrageous conduct," particularly as a member of such a well-connected family.

Daley Thompson's defense attorney Chris Gair offered a different interpretation of events. He characterized the bogus tax returns as just a series of mistakes arising from sloppy accounting work and the alderman's own busy schedule.

"He's got two full-time jobs and three offices," Gair said Monday.

Daley Thompson did not testify during the trial. Whatever the truth of his tax statements, his case is also part of a larger, multi-million dollar embezzlement scandal surrounding Washington Federal and its former CEO John Gembara.

Phone records obtained by prosecutors show Daley Thompson was in contact with Gembara shortly before he committed suicide in the home of one the bank's wealthy customers in 2017. The FDIC closed Washington Federal in December 2017 after Gembara's death and paid out over $90 million to refund the losses the bank's investors suffered from its collapse.

“[Daley Thompson] knew the person who gave him the money was dead,” Netols said in his opening arguments last Tuesday, referring to Gembara. “So what he did is he got on the phone and told [debt collectors] that he was shocked at the mortgage [note] he got.”

According to Professor Evan McKenzie, head of the University of Illinois at Chicago’s political science department, this connection to the defunct Washington Federal, along with his status as a member of the Chicago political nobility, is what made Daley Thompson an attractive target for federal prosecutors.

"It's a $90 million bank fraud ... when the lid came off this thing, he was a target," McKenzie said. He also acknowledged some similarities between Daley Thompson's trial and that of infamous Chicago mafioso Al Capone in 1931. Like Daley Thompson, Capone was a well-connected player in Chicago politics who was eventually convicted on federal tax crimes.

"A whole lot of people were connected to [Washington Federal]," McKenzie said. "It's not organized crime, it's organized political corruption."

McKenzie, along with fellow UIC political science professor Dick Simpson, said last week that Daley Thompson's trial is a significant event in Chicago's political history. For over 50 years the Daley family sat at the center of a white Democratic patronage network colloquially known as the Chicago Machine. Though the Machine preceded the Daleys by decades, both Richard J. and Richard M. Daley used it to place their own allies in important political positions throughout Chicago and Cook County for years.

Simpson said that Daley Thompson's trial, alongside ethics reform efforts undertaken by current Chicago mayor Lori Lightfoot, is a sign that the Machine may finally be running out of gas.

"The old Machine is beginning to fall apart," Simpson said.

Daley Thompson's office did not return a request for comment, but mayor Lightfoot's office released a statement Tuesday morning saying that the City Council would immediately begin looking for someone to replace him as 11th Ward alderman.

"Alderman Patrick Thompson has been judged by a jury of his peers and found guilty," Lightfoot's statement read. "This week, we will be outlining an open and transparent process to fill the vacancy with a qualified public servant that represents the values of the residents of the 11th Ward and the City of Chicago."

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