U.S. Supreme Court hears appeal by former Ald. Patrick Daley Thompson

The U.S. Supreme Court heard arguments Tuesday in an appeal from former Ald. Patrick Daley Thompson, who claims he was wrongly convicted of lying to bank regulators even though his statements were misleading.

Thompson, heir to the Daley political dynasty, asked the justices to take a narrow reading of the term "false statement" in the law used to convict him over unpaid loans.

A jury found Thompson guilty in February 2022 of two counts of lying to regulators but also five counts of filing false income tax returns. U.S. District Judge Franklin Valderrama sentenced him to four months in prison, a sentence he has already served.

Thompson is the grandson of the late Mayor Richard J. Daley and the nephew of former Mayor Richard M. Daley. He was elected to represent the 11th Ward in the City Council in 2015 and re-elected in 2019.

His case is the latest taken up by justices on how the feds pursue corruption cases. Last year, the Supreme Court limited the use of a bribery law that’s been key in several federal cases in Chicago.

In court Tuesday, Thompson's lawyer Chris Gair asked the justices to reject the Seventh Circuit Court of Appeals decision that lumped misleading and false statements together.

Gair said over one hundred federal statutes include the words "false" and "misleading" to include a wide array of illegal behavior. But the statute used against Thompson only prohibits "false statements" to federal financial institutions, he said.

"It is important for the court to give some guidance on the question of whether a statement is misleading or false," Gair argued. "This statute could be used extremely broadly to punish a number of types of dealings between individuals and very sophisticated financial institutions."

The case against Thompson revolved around $219,000 he received between 2011 and 2014 from Washington Federal Bank for Savings in Bridgeport. Thompson received a $110,000 loan from the bank in November 2011. He then received an additional $20,000 in March 2013 and $89,000 in January 2014.

The bank was shut down in December 2017 amid allegations of massive fraud, days after its president was found dead in a bank customer’s $1 million home.

Thompson paid no interest on the loan, according to the feds. But he falsely claimed deductions for mortgage interest purportedly paid to the bank on his tax returns for the years 2013 through 2017.

The Federal Deposit Insurance Corp. hired Planet Home Lending to collect on Thompson’s loans, records show. It sent him an invoice in February 2018 stating his balance was $269,120 — the principal of $219,000 plus interest.

Thompson called the customer service line and said, “I borrowed $100,000. … I mean, I borrowed the money, I owe the money — but I borrowed $100 thou—$110—I think it was $110,000. … I want to quickly resolve all this, and — and — you know, what I owe.”

Thompson read the amount on the invoice and said, “I dispute that.”

Gair told the Supreme Court that Thompson’s statements were not false. “He did borrow $110,000 and he did dispute owing $269,000.”

Some of the justices’ questions revolved around the context in which Thompson allegedly gave his statement.

Justice Sonia Sotomayor said Thompson's statement was actually false when considering the invoice he was responding to listed the full amount he owed. She likened it to someone entering a store 50 times.

"If the question is, 'Did you enter 50 times?' And he says, 'I only entered 10 times.' It's not literally true. It's literally false that he entered 10 times."

But Gair argued there was no question posed to Thompson in the first place, so he could not have lied to the bank. Thompson never said he "only" owed the $110,000, Gair said.

Assistant U.S. Solicitor General Caroline A. Flynn, arguing against Thompson, pushed the justices to accept a broader interpretation of "false statement." She said the jury that convicted Thompson was correct in considering the context of his statement and accepting it as false, even if the statement was literally true.

Later, Sotomayor acknowledged that the Seventh Circuit of Appeals may have made a mistake by "treating falsity and misleadingness as all of a piece." She suggested the court could settle the legal question.