Jurors heard dry but potentially devastating testimony about Kwame Kilpatrick’s finances Wednesday and listened to FBI wiretaps that portrayed Bernard Kilpatrick as scheming to give his clients a piece of the Book Cadillac hotel renovation project.
The deep dive into the former Detroit mayor’s finances was part of the government’s attempt to prove Kilpatrick cheated on his taxes and filed false tax returns.
Kilpatrick is charged with five counts of filing false tax returns — a three-year felony — and one count of tax evasion — a five-year felony.
Prosecutors also backed up a claim made during opening statements that Kilpatrick pocketed more than $500,000 during his tenure as mayor “over and above his salary.”
The unreported income allegedly included $90,000 from contractor pal Bobby Ferguson, cash, private jet flights and personal expenses paid for by the ex-mayor’s nonprofit group, the Kilpatrick Civic Fund.
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Bernard Kilpatrick
Bernard Kilpatrick wanted city officials to dump a black contractor from the Book Cadillac hotel renovation in 2008 for failing to hire his client, according to testimony Wednesday.
The news emerged in FBI wiretapped phone calls that portrayed the former Detroit mayor’s father as working behind the scenes to steer taxpayer-funded projects to clients who paid him hundreds of thousands of dollars.
Bernard Kilpatrick was captured on wiretapped phone calls trying to figure out a way to get contractor Jim Jenkins off the hotel project in early 2008, according to testimony.
Jenkins, a contractor on the project, allegedly, had dumped a subcontractor who was one of Kilpatrick’s clients, Capital Waste Inc.
Westin Book Cadillac hotel
According to testimony, Capital Waste is owned by businessmen John Runco and John Francis, who were paying the mayor’s father thousands of dollars each month. During Kwame Kilpatrick’s terms as mayor, the firm paid Bernard Kilpatrick $222,000, according to the FBI.
Francis called Bernard Kilpatrick in February 2008 in hopes of having Capital Waste re-hired at the Book Cadillac, one of the city’s largest renovation projects, which was overseen by a quasi-public agency, the Detroit Economic Growth Corp.
During the February 2008 phone call, which was intercepted by the FBI, Francis complained about a rival firm removing waste from the hotel.
The rival firm was hired by Jenkins.
Francis discussed having a city official make trouble for Jenkins, according to testimony
“Who’s like the regulatory board that could give (Jenkins) trouble?” Francis asked the mayor’s father. “We need somebody to go in there and say, ‘You know, we’re gonna (expletive) start writing you up for every little f—— violation.’”
Kilpatrick suggested Gerard Grant Phillips, the head of the city’s Human Rights Department.
Kwame Kilpatrick and Bobby Ferguson outside federal court.
Kilpatrick promised Francis he would investigate.
The same day, Bernard Kilpatrick called Bobby Ferguson, the powerful contractor and close friend of Kwame Kilpatrick.
Again, the FBI was listening as Bernard Kilpatrick complained about Jenkins.
“I really would like to run him out of town,” Kilpatrick said.
In a separate call, Kilpatrick phoned a Ferguson employee and expressed his interest in having the city dump Jenkins from the Book Cadillac.
“I’m gonna try and get someone to do something to him,” Kilpatrick said on one recorded phone call.
George Jackson
At one point, Kilpatrick referred to George Jackson, the head of the Detroit Economic Growth Corp.
“I was gonna go to George Jackson and see if I can get Jim taken out,” Kilpatrick said.
Jenkins never re-hired Capital Waste, according to prosecutors.
But in a bid to appease Kilpatrick, Jenkins’ offered to get Capital Waste work at a Detroit casino and a Livonia bank, according to prosecutors.
Kwame Kilpatrick and lawyer James C. Thomas outside federal court.
Kwame Kilpatrick’s alibi for a $5,000 donation to his alma mater required an interesting twist in time.
Prosecutors revealed the donation while accusing Kilpatrick of being a tax cheat and lying on his returns. While doing so, the government questioned two Kilpatrick tax preparers, including one from Texas, where the former mayor relocated after resigning in 2008 amid the text-message scandal.
Kwame Kilpatrick’s donation to Florida A&M, from the university’s annual report.
On Oct. 15, 2007, the former mayor’s nonprofit group, Kilpatrick Civic Fund, gave $5,000 to the Florida A&M University Foundation for a young alumni initiative.
On Oct. 23, the university wrote a gift receipt crediting Kilpatrick with making the donation. Kilpatrick is listed among the university’s top donors in its annual report, which is seen in the photo above.
After receiving the gift receipt, Kilpatrick wrongly claimed the $5,000 deduction on his personal taxes, according to testimony Wednesday.
Defense lawyer James C. Thomas initially claimed Kilpatrick was paid $5,000 to deliver a speech at the university and simply donated the honorarium to Florida A&M.
Kilpatrick, he said, was rightfully entitled to the tax deduction.
Christine Beatty
But Thomas claimed the speech was Oct. 27, 2007 — four days after the university gave Kilpatrick the gift receipt.
Thomas later told the jury that the speech was a “hypothetical.”
In October, Thomas offered an interesting alibi to justify why Kilpatrick’s nonprofit group paid for a 2002 trip for the ex-mayor and mistress Christine Beatty.
Thomas suggested the real purpose of a resort stay in Vail, Colo., was for Kilpatrick to attend a meeting of the National Council of Mayors about 97 miles away in Denver.
Kwame Kilpatrick
Kwame Kilpatrick’s lawyer suggested the $732,000 in cash the former mayor allegedly failed to report as income were gifts and loans.
Defense lawyer James C. Thomas offered one other possible alibi: there was no money.
The feds call the money kickbacks, bribes and proceeds of a racketeering conspiracy and the views clashed Wednesday in federal court.
Kilpatrick’s tax preparer testified about the ex-mayor’s finances as prosecutors accused the former mayor of evading taxes and filing phony returns.
James C. Thomas
In all, Kilpatrick failed to disclose at least $732,000 in income, according to prosecutors, but his lawyer offered alibis.
“Is a gift income?” Thomas asked Terrell.
“No,” the accountant said.
“If I gave suits as a gift, that wouldn’t be income,” the lawyer said.
Terrell agreed.
“If I gave someone money, would that be income?” Thomas asked.
“No,” Terrell said.
Thomas countered a summary from the feds detailing a parade of government witnesses who testified they gave Kilpatrick cash in the form of kickbacks or bribes.
Under direct examination, Terrell said none of that money was disclosed by Kilpatrick on his tax returns.
Thomas suggested the alleged payoffs never happened.
“If he did not receive any cash, there would be no need to tell you he had taxable income for the purposes of his tax returns, would you agree?” Thomas asked.
“Right,” Terrell said.
Kilpatrick’s lawyer tried to shift blame for the former mayor taking a $5,000 deduction after his nonprofit group donated money to Florida A&M University in 2007.
The date of the $5,000 donation doesn’t match up with the date of a $5,000 gift receipt issued by Florida A&M, Thomas noted.
He suggested Kilpatrick was paid $5,000 to deliver a speech at the university and donated the money to Florida A&M and was thereby entitled to the tax deduction.
Besides, his lawyer said, Kilpatrick was merely a “figurehead” at the nonprofit Kilpatrick Civic Fund, which was run by a board of directors.
Kwame Kilpatrick
Kwame Kilpatrick claimed a personal tax deduction after his nonprofit group gave a $5,000 gift to the former Detroit mayor’s alma mater, according to testimony Wednesday.
The financial transaction emerged during a dry but potentially devastating day of testimony from Kilpatrick’s tax preparer as prosecutors focused on alleged tax crimes committed by the former Detroit mayor.
In October 2007, the Kilpatrick Civic Fund gave $5,000 to the Florida A&M University Foundation for a young alumni initiative.
The check was signed by the ex-Detroit mayor’s mistress, Christine Beatty, and high-school pal Derrick Miller.
Christine Beatty
Kilpatrick later claimed he gave the $5,000 gift, according to testimony from accountant Gregory Terrell. Prosecutors showed jurors a $5,000 gift receipt from Florida A&M given to Kilpatrick in October 2007.
“If Kwame Kilpatrick told you the $5,000 was paid by the Civic Fund and not by him personally, would you have used that to deduct from his personal income?” Assistant U.S. Attorney Mark Chutkow asked.
“No,” Terrell said.
“Why not?” the prosecutor asked.
“I would have told him he shouldn’t take the deduction because he didn’t actually make the donation,” Terrell said.
Kwame Kilpatrick and Bobby Ferguson outside federal court.
U.S. District Judge Nancy Edmunds called a brief break in testimony Wednesday after a juror complained about feeling ill.
It’s unclear if the juror got bit by a flu bug, bed bug, a spy bug or a but testimony stalled for about 20 minutes while a nurse examined the juror.
Kwame Kilpatrick
Kwame Kilpatrick was his family’s sole breadwinner and did not earn money from legitimate sources to explain more than $500,000 in cash flowing into his personal bank accounts, according to testimony Wednesday.
Wife Carlita Kilpatrick mostly was unemployed between 2003 and 2007, according to testimony, and only reported $19,000 in income from a nonprofit group run by the mayor’s sister.
Testimony from Kilpatrick’s tax preparer Gregory Terrell was aimed at removing any potential alibi Kilpatrick might offer to explain cash prosecutors believe came from extorted contractors, co-defendant Bobby Ferguson and others.
Assistant U.S. Attorney Mark Chutkow
“Did Kwame Kilpatrick ever tell you he received any large gifts?” Assistant U.S. Attorney Mark Chutkow asked.
“No,” Terrell said.
“Did he ever tell you he received any large inheritances?” the prosecutor asked.
“No,” Terrell said.
“Did he talk to you about any large gambling winnings?” Chutkow asked.
“No,” the accountant said.
“Or did he tell you about any discharges of previous debts?” Chutkow asked.
“No,” Terrell said.
“Did he ever tell you about other folks who made large repayments of loans to him?” Chutkow asked.
“No,” Terrell said.
“Did he ever talk about any large civil judgments he received?” the prosecutor asked.
“No,” Terrell said.
“Did he ever provide you with information as to any other nontaxable sources of income?” the prosecutor asked.
“No,” the accountant said.
Kwame Kilpatrick
Kwame Kilpatrick never told his accountant about large cash payments from city contractors, pal Bobby Ferguson or other businessmen allegedly extorted by the former Detroit mayor, according to testimony Wednesday.
Kilpatrick also never disclosed cash kickbacks from his fundraiser, Emma Bell, accountant Gregory Terrell testified.
The testimony came as prosecutors focused on Kilpatrick’s alleged tax crimes and harkened back to allegations sprinkled throughout the five-month City Hall corruption trial about payoffs, envelopes stuffed with cash and kickbacks stuffed in bags and bras.
Terrell said Kilpatrick’s primary source of income from 2003 to 2007 was his salary as mayor. He received at least one $2,500 check for a speaking engagement in 2003, but little else.
Karl Kado walks out of federal court in Detroit. (David Guralnick / The Detroit News)
“During those tax years, did he ever tell you he obtained cash from a contractor for Cobo Center, Karl Kado?” Assistant U.S. Attorney Mark Chutkow asked.
“No,” Terrell said.
“Or (former aide) Derrick Miller?” Chutkow asked.
“No,” said Terrell, whose firm handled tax issues for the mayor’s nonprofit group, the Kilpatrick Civic Fund and mayoral campaign.
“Did he ever tell you he obtained cash from a homeless shelter operator named Jon Rutherford?” Chutkow asked.
“No,” Terrell said.
“Did Mr. Kilpatrick, during those tax years, ever tell you he obtained cash from Derrick Miller for city property deals?” the prosecutor asked.
Asian Village owner Andrew Park.
“No,” Terrell said.
“Did he ever tell you he obtained cash from Derrick Miller from businessmen who operated…Asian Village?” Chutkow asked.
“No,” Terrell said.
“Did Mr. Kilpatrick tell you he obtained cash from a city contractor named Bobby Ferguson?” Chutkow asked.
“No,” Terrell said.
“Did he ever tell you he used the Civic Fund to pay for family vacations?” Chutkow asked.
“No,” the accountant said.
“Did he ever tell you he used the Civic Fund to pay for the purchase of golf clubs?” Chutkow asked.
“No,” Terrell said.
“Or golf lessons?” the prosecutor asked.
“No,” the accountant said.
“Or yoga lessons?” Chutkow asked.
“No,” Terrell said.
Kwame Kilpatrick outside federal court.
Kwame Kilpatrick failed to disclose at least $732,000 in income while serving as Detroit mayor and cheated the IRS, according to federal prosecutors.
Those two allegations will be explored in depth as prosecutors focus on the former Detroit mayor’s taxes while nearing the end of the government’s five-month-long case. The first witness Wednesday: Kilpatrick’s tax preparer, Gregory Terrell.
The $732,000 came in the form of cash, private jet flights and personal expenses charged to his nonprofit group, the Kilpatrick Civic Fund between 2003 and 2008, according to prosecutors.
According to the City Hall corruption indictment, Kilpatrick also pocketed $90,000 from contractor and co-defendant Bobby Ferguson, who allegedly kicked back cash after receiving millions in city deals.
Out of all the charges against Kilpatrick, filing false tax returns and income tax evasion carry the least amount of time in prison — three and five years, respectively.
Gregory Terrell
Racketeering conspiracy, extortion and mail and wire fraud for example, are 20-year felonies.
Here’s a breakdown by year of the false tax return charges, according to the indictment:
In 2003, Kilpatrick:
Failed to disclose that he had additional income in the form of cash, private jet flights and personal expenses paid for by the Civic Fund, amounting to at least $67,181.
Kilpatrick said his income was $188,227.
In 2004, Kilpatrick:
Failed to disclose that he had additional income in the form of cash and private jet flights, amounting to at least $74,925.
The former mayor said his income that year was $167,940.
In 2005, Kilpatrick:
Failed to disclose that he had additional income in the form of cash and private jet flights, amounting to at least $11,279.
Kilpatrick said his total income was $156,329.
Kwame and Carlita Kilpatrick check in with their three sons at the American Airlines ticket counter at Detroit Metro on Thursday, Sept. 18, 2008. (Velvet S. McNeil / The Detroit News)
In 2006, Kilpatrick:
“Failed to disclose that he had additional income in the form of cash, private jet flights and personal expenses paid for by the Civic Fund, amounting to at least $122,997.
Kilpatrick said his income was $153,024.
In 2007, Kilpatrick:
Failed to disclose that he had additional income in the form of cash, private jet flights and personal expenses paid for by the Civic Fund, amounting to at least $194,569.
Kilpatrick said his income was $167,005.
Kilpatrick also faces one count of income tax evasion.
From the indictment:
During the calendar year 2008, defendant KWAME KILPATRICK had and received unreported taxable income in the form of cash, private jet flights and personal expenses paid for by the Civic Fund, amounting to at least $261,751.
Bobby Ferguson
KWAME KILPATRICK owed the United States of America an income tax of $85,397 for this unreported taxable income. Specifically, he concealed income from the Internal Revenue Service in the following ways: (a) he caused to be filed a false joint U.S. Individual Income Tax Return, Form 1040, for calendar year 2008; (b) he caused an individual employed by his mayoral campaign and associated non-profits to kick cash back to him from wages paid to the individual by the campaign and non-profits; and (c) he caused the Civic Fund to pay for certain of his personal expenses and concealed such payments; and (d) he accepted a $90,000 cash payment from FERGUSON.
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