Ald. Patrick Daley Thompson (11th) had a history of tax trouble even before his conviction Monday on federal income tax fraud charges.
Thompson was working for a law firm when the Internal Revenue Service placed a lien against his Bridgeport bungalow on June 16, 2010, saying he and his wife Kathleen owed $38,635 in income taxes for 2008 and 2009. Though the IRS typically won’t say that taxes were paid, it removed the lien in August 2010.
On Jan. 30, 2013, less than two months after Thompson was sworn in as an elected commissioner of the Metropolitan Water Reclamation District of Greater Chicago, the IRS sent the Thompsons a letter threatening to place another lien on their home, this time for failure to pay $13,614 in taxes.
Thompson then turned to John F. Gembara, president and chief executive officer of Washington Federal Bank for Savings, seeking money to pay his taxes. On Feb. 20, 2013, Thompson wrote the IRS a check. Two days later, he got a $20,000 check from Gembara’s bank.
Seven months later, in September 2013, the Better Government Association and CBS2 reported that Thompson had been getting a homeowner’s exemption on a two-flat he owned two doors south of his home and, as a result, had received an illegal tax break for over a dozen years that reduced his property taxes by $11,161. Thompson said then that he didn’t know his two-flat had been getting the tax break, which is available for a homeowner’s primary residence, and that he had now paid the money he previously should have paid in property taxes.
That was the same year Thompson and his wife began filing income tax returns on which they reduced the amount of federal income taxes by claiming they had paid interest on the $219,000 he owed Gembara’s bank.
But Thompson had never made any interest payments to the bank, as prosecutors highlighted during his income tax fraud trial. So it was illegal to have deducted those payments on his tax returns from 2012 through 2017, which saved him more than $15,558 over that period.
Thompson was serving his first Chicago City Council term when federal regulators shut down Gembara’s bank on Dec. 30, 2017, after uncovering a massive fraud scheme involving $90 million in bad loans — loans authorities later said often were handed out without any documentation or even any expectation that the money ever would have to be repaid.
A year later, Thompson refinanced his Bridgeport home and his summer home in Grand Beach, Michigan, repaying the money he’d borrowed from Gembara’s now-defunct bank.
He then amended his tax returns, trying to repay the money he’d illegally deducted over the six years. But IRS rules allowed him to amend his returns for only the final two years, his 2016 and 2017, repaying $7,194.
Last April, Thompson was indicted on tax fraud charges involving the interest he claimed on the money he got from Gembara’s bank.
