Bridgeport bank failure fallout could see William Mahon, aide to 3 Chicago mayors, get prison in Washington Federal Bank for Savings case

William Mahon walking out of the Dirksen Federal Building after pleading guilty Aug. 7 to charges in connection with the failure of Washington Federal Bank for Savings.

Anthony Vazquez / Sun-Times

William “Billy” Mahon, the youngest son of a Bridgeport cop, spent 33 years at City Hall, serving as a high-ranking aide to Mayors Richard M. Daley, Rahm Emanuel and Lori Lightfoot and managing to stay on even in the face of repeated misconduct.

Mahon was 23 when he first went to work in the Daley administration in 1989 — at a time, he admits in newly filed court documents, that he was starting a daily cocaine habit he says lasted five years. There’s no evidence to show he was ever punished for his illegal drug use.

Mahon was in his early 30s when, according to court testimony and the findings of a City Hall investigation, he helped rig test scores so politically connected job candidates could land city jobs or promotions — a violation of a federal court order known as the Shakman decree. A federal investigation of city hiring and promotions ended up rocking City Hall, with Daley’s patronage chief going to prison. Mahon wasn’t charged. He ended up facing disciplinary action, though the punishment for his role in the scandal didn’t come until years later.

When Mahon was 40, the city’s inspector general pushed to fire him after an investigation found that he repeatedly ran personal errands and had gone to a White Sox game while on the clock at City Hall. But the Daley administration declined to follow that recommendation. Instead, Mahon was suspended from his job for 29 days.

Now, Mahon, 57, a loyal member of the Daley family’s 11th Ward Regular Democratic Organization for nearly 40 years, no longer can look to anyone at City Hall to help keep him from facing the consequences of his actions.

On Wednesday, he’ll face the prospect of prison when he is sentenced for his role at Washington Federal Bank for Savings, which federal authorities shut down after discovering massive fraud. 

Washington Federal is the crooked Bridgeport bank whose customers included Chicago city officials and employees, the Daley political organization, then-Ald. Patrick Daley Thompson, who’s a grandson of the late Mayor Richard J. Daley and nephew of former Mayor Richard M. Daley, Daley’s pal Oscar D’Angelo and others who made money in Daley’s scandal-scarred Hired Truck Program.

Swept up in the investigation that also sent Thompson to jail, Mahon has admitted falsifying bank records during the 16 years that he served, with City Hall approval, on the bank’s governing board.

Mahon was one of the bank’s five board members in November 2017. That’s when federal regulators discovered more than $100 million had been embezzled from the tiny bank in what authorities have described as a scheme led by John F. Gembara, who was Washington Federal’s chief executive officer, president and board chairman. Gembara was found dead, with a rope around his neck, at a bank customer and friend’s Park Ridge home on Dec. 3, 2017. Twelve days later, regulators shut down the bank.  

An ongoing federal investigation found that Gembara ordered bank employees and officials including Mahon to falsify records in an effort to keep regulators in the dark about how customers with ties to Gembara — described in court testimony as “friends of John” — were handed millions of dollars in supposed loans. Often, investigators found, the loans were handed out without any paperwork, those getting the loans weren’t required to provide collateral, and there was no expectation that they ever would have to repay the loans.

John F. Gembara, who was chief executive officer, president and chief shareholder of Washington Federal Bank for Savings in Bridgeport.

Provided

Criminal charges were filed against Mahon and two other Washington Federal board members, six bank employees and seven customers, including Thompson. 

When Mahon, who had been a member of the bank’s loan committee, was indicted in December 2021, he was on the city payroll in the Lightfoot administration as a deputy commissioner in the city Department of Streets and Sanitation. He retired a month later and soon began tapping a yearly city pension of $98,849.

“While Mahon and the rest of the loan committee were not performing their review functions, President Gembara was repeatedly breaking Washington Federal’s lending rules,” Michelle Petersen, an assistant U.S. attorney, wrote in a court motion in which she is asking U.S. District Judge Virginia Kendall to send Mahon to prison for two years. “Had Mahon and the rest of the board members exercised any actual oversight, they may have uncovered the embezzlement sooner.”

Thomas Breen, Mahon’s lawyer, has told the judge that Mahon should get less prison time, if any. He pointed to him having no prior criminal record.

“Mr. Mahon acknowledges that he should have done his due diligence and provided meaningful and substantive oversight before signing the loan approval forms and that he failed on this part,” Breen wrote. “Mr. Mahon is one of the least culpable participants. He had no knowledge of the scope and structure of the criminal activity, had no role in planning or organizing the criminal activity, had no decision making authority and did not directly profit from the criminal activity.”

In arguing for prison time, prosecutors pointed out that Mahon falsified his own loan applications so government banking regulators wouldn’t know about the $130,000 loan he got from Gembara and his wife so he would quality for a bank loan to tear down his boyhood home and build a three-flat on the site. He told investigators in 2019 he never repaid the Gembaras.  

“Mahon is the only co-conspirator who also falsified records to . . . get loans for which he could not otherwise qualify,” Petersen wrote.

Mahon pleaded guilty to one count of cheating on his federal income tax returns, though he acknowledged he actually cheated the IRS for eight years, between 2011 and 2018, by under-reporting the rent that he got from tenants who leased apartments from him at the three-flat he built with his bank-financed deal.

The now-defunct Washington Federal Bank for Savings at 2869 S. Archer Ave.

Cook County assessor’s office

Mahon, the youngest of four children, was raised three blocks south of the bungalow where the late Mayor Richard J. Daley raised his family. 

In court papers, Mahon says he began his cocaine habit in 1989, a year after the death of his father, retired Chicago police Lt. William T. Mahon.

Mahon gave up working for the White Sox in 1989 to take a job as a press aide for then-newly elected Mayor Richard M. Daley’s Office of Special Events, working on Taste of Chicago and other city festivals.

In 1993, Mahon and his then-wife got their first mortgage from Washington Federal. Over subsequent years, he got two dozen loans totaling more than $4.3 million, some which  remained unpaid at the time the bank was closed, records show.

In his court filings, Mahon says he kicked his cocaine habit in 1995, after the birth of his twin daughters and his transfer to the Department of Streets and Sanitation, where he stayed for the rest of his career at City Hall.

During his time at Streets and San, Mahon was part of an illegal hiring scheme in Daley’s administration to fill city jobs with people who also were doing political work and who got hired or promoted over more qualified candidates in violation of the Shakman decree that required City Hall to make most job decisions on the basis of merit. The hiring scandal, an outgrowth of the Hired Truck scandal, led to criminal convictions for Daley patronage director Robert Sorich and three other city officials in 2006.

Noelle Brennan, who was serving as the federal court’s monitor for City Hall’s compliance with the Shakman decree, sought suspensions for William Mahon and other city officials. After Mayor Richard M. Daley retired, Mahon ended up being handed a 45-day unpaid suspension from his job and was barred from taking part in any future hiring decisions.

Ashlee Rezin / Sun-Times

Seven years later, Noelle Brennan, who was serving as the federal court’s monitor of City Hall compliance with the Shakman decree, sought suspensions for Mahon and other city officials who also hadn’t been charged in the scheme. After Daley retired, Mahon ended up being suspended without pay for 45 days. He also was barred from taking part in any future hiring decisions.

In her written report, Brennan revealed that City Hall’s inspector general’s office previously tried to fire Mahon because he “repeatedly engaged in personal activities,” including going to a Sox game, during work hours. The Daley administration, though, declined to fire him.

WILLIAM MAHON SERVED UNDER THESE 3 MAYORS

WILLIAM MAHON SERVED UNDER THESE 3 MAYORS

Former Mayor Richard M. Daley and then-Mayor Rahm Emanuel in December 2014.

Brian Jackson/ Sun-Times

Then-Mayor Lori Lightfoot in October 2019.

Manuel Martinez / WBEZ

Mahon was brought in by Gembara in 2001 to be on the Washington Federal board. The bank boss asked him to fill a board seat left vacant after the death of Gembara’s father-in-law, Breen said in a court filing.

“Mr. Mahon had no experience in the banking or financial institutions,” Breen wrote. “Mr. Mahon hesitated at the offer, but Gembara assured him that he was qualified, could learn everything that was required of him, and Mr. Gembara would be there to guide and help him along the way. 

“But what Mr. Mahon did not know was that Mr. Gembara would use his inexperience and naivety to help cover up a scheme to embezzle money from Washington Federal.”

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.

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