A former high-ranking City Hall official with close ties to the Daley family’s political organization pleaded guilty Monday in the collapse of Bridgeport’s Washington Federal Bank for Savings, which federal regulators shut down in 2017 over a massive embezzlement scheme involving its CEO.
William M. Mahon — who served on the bank board while working as a deputy commissioner of the city of Chicago Department of Streets and Sanitation — admitted he falsified loan documents so banking regulators would think the board was properly overseeing John F. Gembara, the bank’s CEO, president, chairman of the board and chief shareholder.
George Kozdemba, another bank board member, also pleaded guilty Monday, admitting he, too, falsified bank records to deceive regulators.
In their plea agreements, Mahon, 56, and Kozdemba, 73, said they were rubber stamps for Gembara, acknowledging that the board wasn’t providing any oversight and that Gembara had full control of the bank until November 2017, when regulators directed the bank board to suspend him.
Days after the board suspended Gembara, he was found dead with a rope around his neck inside the main bedroom of Marek Matczuk, a Park Ridge contractor who had millions of dollars in outstanding loans from the bank. Authorities ruled that Gembara killed himself.
Matczuk is set to stand trial next month on charges that he embezzled more than $6 million from the bank.
Mahon, whose late father was a Chicago police lieutenant who lived walking distance from Mayor Richard J. Daley, worked for the city for more than 30 years, until he resigned about a month after being indicted.
At one time earlier in his career with the city, Mahon had been recommended for firing by City Hall’s inspector general. That was for doing personal activities — including attending a White Sox game — while he was supposed to be at work. Instead, Mayor Richard M. Daley’s administration reduced Mahon’s penalty to a 29-day suspension.
Later, Mahon was handed a 45-day suspension by Mayor Rahm Emanuel’s administration for having helped rig test scores so the Daley administration could fill City Hall jobs with patronage workers — a scam that led to the conviction of Robert Sorich, who was a top Daley aide. Mahon wasn’t charged in that case.
Mahon, who has no college degree, was in his early 30s when City Hall gave him permission to serve on the bank board in 1999 and again in 2001, city records show.
Gembara and his widow Therese Gembara personally lent Mahon $130,000 so he could get bank loans on a three-flat he built in the 3800 block of South Lowe Avenue. Mahon never disclosed that personal loan on his loan applications to Washington Federal. Altogether, Mahon got 24 loans totaling more than $4.3 million from the bank since 1993. Some of the loans were unpaid when the bank failed.
Mahon also pleaded guilty Monday to cheating on his federal income taxes in 2018 by inflating the expenses on his three-flat and under-reporting the rent he collected from tenants. He has agreed to amend his federal tax returns since 2011.
Mahon faces a possible sentence of as much as eight years in prison, and Kozdemba, a retired electrician for the Metropolitan Water Reclamation District of Greater Chicago who now lives in Florida, faces up to five years in prison. They are to be sentenced in December.
Both are collecting government pensions of more than $98,000 a year.
Three of the four surviving bank board members have pleaded guilty to charges in connection with the bank failure. Among them: Gembara’s sister Janice M. Weston, who pleaded guilty last Wednesday and has yet to be sentenced.
Lester Stepian, the fourth bank board member, has been cooperating with federal investigators.
Six bank employees and two customers have pleaded guilty to charges resulting from the bank’s collapse. Two of them have been given deferred-prosecution agreements that could erase their convictions in exchange for cooperating with prosecutors.
A jury convicted Robert M. Kowalski, who was a friend of Gembara and one of the bank’s biggest delinquent customers, of embezzling $8 million.
His sister Jan Kowalski pleaded guilty to helping him conceal assets when he filed for bankruptcy.
The bank collapse also led to charges that halted the political career of Ald. Patrick Daley Thompson (11th). Thompson represented Bridgeport in the Chicago City Council until he was convicted last year of cheating on his federal income taxes and lying to federal regulators about $219,000 he borrowed from Gembara’s bank.
The two remaining defendants, Matczuk and Miroslaw Krejza, also a contractor, are charged with embezzlement. Their trial is scheduled to begin Sept. 5.
