A former accountant for Ald. Patrick Daley Thompson testified Wednesday that the alderman filled out detailed tax organization documents in advance of filing returns that prosecutors say contained fraudulent information.
Robert Hannigan, who helped prepare Thompson’s returns beginning in 2015, was the sixth witness called by prosecutors in Thompson’s trial on federal tax charges, which is now in its third day at the Dirksen U.S. Courthouse.
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 before it collapsed in December 2017.
His attorney, Chris 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.
Thompson filled out what’s known as a “tax organizer” for each year, listing his income from the city and his law firm and also information from his 1098 forms that show how much he paid over the previous year in mortgage interest, which earned him a break on the tax he owed, according to Hannigan.
On one of the organizers, which was shown to the jury during Hannigan’s testimony, Thompson scribbled a note saying he’d tried to collect the information “as best as possible” but wanted to follow up with a phone call.
“I need mortgage interest,” Thompson’s handwritten note read. “What about property taxes on second home?”
Prosecutors also showed the jury an email Thompson sent to Hannigan in April 2017 complaining that he’d been trying to get tax documents from Chase Bank regarding his loan on the rental property, but was dealing with a frustrating automated phone tree.
On cross-examination, Gair asked Hannigan repeatedly about the “haphazard” manner in which Thompson sent his tax information, with documents stuffed into a red folder that contained extraneous items like a letter about life insurance and a department store receipt for a necktie.
“Patrick did not pay any particular attention to his tax file, isn’t that correct?” Gair asked Hannigan at one point, prompting a hearsay objection from prosecutors. Gair followed up by asking whether some of the documents in Thompson’s file had never even been opened.
“That’s probably correct,” Hannigan replied.
Hannigan also acknowledged under Gair’s questioning that Thompson sometimes waited until the last minute to file his taxes, including one year when the alderman walked his return to the mailbox at 9 a.m. on Tax Day.
Hannigan also testified on direct examination that Thompson approached him in December 2018 and said he needed to amend his returns to reflect that he had not actually paid interest in loans from Washington Federal as the bank’s statements had shown.
That was several days after federal agents knocked on the alderman’s door to ask questions about his connections to the failed bank and its president, John Gembara, who had been found hanged in the home of a customer. Agents also served Thompson with a subpoena for his tax records that day.
Hannigan’s testimony could prove problematic for Thompson, who 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.
Thompson, who has represented the 11th Ward since 2015, is the first member of his family’s political dynasty to by 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.
In his opening statement, Gair portrayed the alderman as sloppy and disorganized, but not a criminal. He said Thompson was “always on the run” between his law office, aldermanic duties, and soccer games for his kids, and filing his tax returns was likewise a scramble.
“This is a guy who’s got piles of paper all over his office. On the chairs, on the floor, you name it,” Gair said. “And he’s a big procrastinator. … He’s frazzled.”
He said it was the bank that created false documents, not Thompson, and that the alderman did what most other taxpayers do when it’s time to file a return.
“He threw ‘em all in a big folder along with a lot of other stuff and he sent it to his accountant to sort it out,” Gair said. “When he found out, he did what any honest person would do, he fixed it. He filed amended returns and paid the back taxes, and he did it because it was simply a mistake. It’s not a crime to make a mistake.”
Prosecutors, however, painted a far different picture, saying Thompson must have known that he wasn’t making payments on his debt with Washington Federal, and that he was not supposed to be claiming mortgage interest on his taxes because the loans weren’t mortgages at all.
After Washington Federal was shut down, Thompson made a call on a recorded line to Planet Home Lending, which was trying to collect on his debt, Assistant U.S. Attorney Brian Netols told the jury in his opening statement.
The alderman “expressed shock,” saying he’d only borrowed the original $110,000, Netols said. But Thompson knew that the man who’d given him the money — Gembara — was dead, Netols said. Thompson also knew that the people he was dealing with were not from Chicago and were in the dark about the details of the loans, according to Netols.
“He decided he was going to lie to them, to take the chance that they wouldn’t find the other payments he’d received,” Netols said.
The charges Thompson faces have nothing to do with his position as an elected official, and U.S. District Judge Franklin Valderrama has barred most direct testimony about it.
While prosecutors have made no mention of Thompson’s position on the City Council, Gair described his client in his opening remarks as a family man who is a respected public servant.
“Since 2015, he’s been an alderman of the city of Chicago,” Gair said. “Patrick Thompson is a man of integrity. He’s a straight arrow. He’s one of the good guys.”
The judge is also limiting evidence about Gembara’s death — including that it was ruled a suicide — as well as the separate-but-related embezzlement scheme at Washington Federal that has led to the indictment of 14 former bank officers and customers.
jmeisner@chicagotribune.com
A former accountant for Ald. Patrick Daley Thompson testified Wednesday that the alderman filled out detailed tax organization documents in advance of filing returns that prosecutors say contained fraudulent information. Robert Hannigan, who helped prepare Thompson’s returns beginning in 2015, was the sixth witness called by prosecutors in Thompson’s trial on federal tax charges, which is now in its third day at the Dirksen U.S. Courthouse. 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 before it collapsed in December 2017. His attorney, Chris 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. Thompson filled out what’s known as a “tax organizer” for each year, listing his income from the city and his law firm and also information from his 1098 forms that show how much he paid over the previous year in mortgage interest, which earned him a break on the tax he owed, according to Hannigan. On one of the organizers, which was shown to the jury during Hannigan’s testimony, Thompson scribbled a note saying he’d tried to collect the information “as best as possible” but wanted to follow up with a phone call. “I need mortgage interest,” Thompson’s handwritten note read. “What about property taxes on second home?” Prosecutors also showed the jury an email Thompson sent to Hannigan in April 2017 complaining that he’d been trying to get tax documents from Chase Bank regarding his loan on the rental property, but was dealing with a frustrating automated phone tree. On cross-examination, Gair asked Hannigan repeatedly about the “haphazard” manner in which Thompson sent his tax information, with documents stuffed into a red folder that contained extraneous items like a letter about life insurance and a department store receipt for a necktie. “Patrick did not pay any particular attention to his tax file, isn’t that correct?” Gair asked Hannigan at one point, prompting a hearsay objection from prosecutors. Gair followed up by asking whether some of the documents in Thompson’s file had never even been opened. “That’s probably correct,” Hannigan replied. Hannigan also acknowledged under Gair’s questioning that Thompson sometimes waited until the last minute to file his taxes, including one year when the alderman walked his return to the mailbox at 9 a.m. on Tax Day. Hannigan also testified on direct examination that Thompson approached him in December 2018 and said he needed to amend his returns to reflect that he had not actually paid interest in loans from Washington Federal as the bank’s statements had shown. That was several days after federal agents knocked on the alderman’s door to ask questions about his connections to the failed bank and its president, John Gembara, who had been found hanged in the home of a customer. Agents also served Thompson with a subpoena for his tax records that day. Hannigan’s testimony could prove problematic for Thompson, who 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. Thompson, who has represented the 11th Ward since 2015, is the first member of his family’s political dynasty to by 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. In his opening statement, Gair portrayed the alderman as sloppy and disorganized, but not a criminal. He said Thompson was “always on the run” between his law office, aldermanic duties, and soccer games for his kids, and filing his tax returns was likewise a scramble. “This is a guy who’s got piles of paper all over his office. On the chairs, on the floor, you name it,” Gair said. “And he’s a big procrastinator. … He’s frazzled.” He said it was the bank that created false documents, not Thompson, and that the alderman did what most other taxpayers do when it’s time to file a return. “He threw ‘em all in a big folder along with a lot of other stuff and he sent it to his accountant to sort it out,” Gair said. “When he found out, he did what any honest person would do, he fixed it. He filed amended returns and paid the back taxes, and he did it because it was simply a mistake. It’s not a crime to make a mistake.” Prosecutors, however, painted a far different picture, saying Thompson must have known that he wasn’t making payments on his debt with Washington Federal, and that he was not supposed to be claiming mortgage interest on his taxes because the loans weren’t mortgages at all. After Washington Federal was shut down, Thompson made a call on a recorded line to Planet Home Lending, which was trying to collect on his debt, Assistant U.S. Attorney Brian Netols told the jury in his opening statement. The alderman “expressed shock,” saying he’d only borrowed the original $110,000, Netols said. But Thompson knew that the man who’d given him the money — Gembara — was dead, Netols said. Thompson also knew that the people he was dealing with were not from Chicago and were in the dark about the details of the loans, according to Netols. “He decided he was going to lie to them, to take the chance that they wouldn’t find the other payments he’d received,” Netols said. The charges Thompson faces have nothing to do with his position as an elected official, and U.S. District Judge Franklin Valderrama has barred most direct testimony about it. While prosecutors have made no mention of Thompson’s position on the City Council, Gair described his client in his opening remarks as a family man who is a respected public servant. “Since 2015, he’s been an alderman of the city of Chicago,” Gair said. “Patrick Thompson is a man of integrity. He’s a straight arrow. He’s one of the good guys.” The judge is also limiting evidence about Gembara’s death — including that it was ruled a suicide — as well as the separate-but-related embezzlement scheme at Washington Federal that has led to the indictment of 14 former bank officers and customers. jmeisner@chicagotribune.com