Prosecutors shredded one Kwame Kilpatrick alibi Thursday and his defense lawyer made a giant math mistake while trying to explain almost $900,000 cash found in the ex-mayor’s bank accounts.
An IRS agent spent Thursday showing jurors the former Detroit mayor lived beyond his means and had access to almost $900,000 in unreported income. The money was kickbacks, bribes and proceeds of a criminal racket, according to prosecutors.
Testimony continues at 9 a.m. Friday in federal court.
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Kwame Kilpatrick and lawyer James C. Thomas.
Kwame Kilpatrick’s lawyer stumbled again and made a major math error while trying to explain away almost $900,000 in unreported cash found in the ex-mayor’s bank accounts.
The money wasn’t kickbacks or bribes, defense lawyer James C. Thomas said. The money was cash gifts given to Kilpatrick at lavish birthday parties in Detroit, and not taxable income.
Kilpatrick, for example, was given cash gifts from Detroit Police brass and attendees at 30th and 36th parties at the Majestic Theater and Atheneum Suite Hotel.
One party in 2006 was attended by 200 people who paid $50 each to attend.
That would total $10,000.
Instead, Thomas said that totaled $100,000.
The money was given to Kilpatrick as a gift, the lawyer said.
“You don’t agree with my math?” Thomas asked IRS Special Agent Ron Sauer.
“I’m not going to disagree with your math, Mr. Thomas, just your facts,” the agent said.
Lawyer James C. Thomas, left, with Kwame Kilpatrick.
Kwame Kilpatrick and his wife were hoarding cash when he was a state lawmaker, according to a defense lawyer who offered an alibi Thursday for $840,962 in unreported income flowing through the ex-mayor’s bank accounts.
Defense lawyer James C. Thomas tried blunting testimony from an IRS agent who analyzed Kilpatrick’s bank records from 2002 to 2008.
IRS Special Agent Ron Sauer concluded Kilpatrick took home more than $605,000 as Detroit’s mayor but spent an additional $840,962. The extra money was kickbacks, bribes and proceeds from a criminal racket, according to the government.
“You can’t tell us whether he had any significant savings in cash prior to 2001, can you?” Thomas asked the agent.
“I can tell you that in 2001 he made frequent small cash withdrawals and someone with a cash hoard would not need to make frequent, small cash withdrawals if he had a cash hoard or in a shoebox,” Sauer said. “He would pull it out of a shoebox.”
“If he wanted to,” Thomas said. “It would be his choice, correct?”
“Correct,” the agent said.
“Are you suggesting the only way to get cash is through a bribe or when he cashes a check?” Thomas asked. “There are other ways in which a person could receive cash that might not be taxable.”
“That is a possibility,” Sauer said.
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)
Kwame Kilpatrick’s lawyer changed tactics Thursday while explaining why the former mayor wrongly claimed a $5,000 tax deduction on a gift made by his nonprofit group.
A day earlier, defense lawyer James C. Thomas claimed Kilpatrick was rightly entitled to the tax deduction because he was paid $5,000 to give a speech at alma mater Florida A&M University and donated the money back to the college.
An IRS agent Thursday testified he subpoenaed university records that show Kilpatrick wasn’t paid to give a speech and didn’t donate money.
His nonprofit Kilpatrick Civic Fund, however, did donate $5,000 and Kilpatrick claimed the deduction on his 2007 taxes.
After making the donation, Florida A&M mailed a gift receipt to Kilpatrick at the Manoogian Mansion.
The receipt wrongly credits Kilpatrick with making the donation.
James C. Thomas
Thomas suggested Kilpatrick never read the receipt before giving it to his accountant.
“Do you foreclose the possibility that Mrs. Kilpatrick or some other person opened this document and placed it somewhere?” Thomas asked IRS Special Agent Ron Sauer.
“I don’t know that that’s possible,” the agent said.
“Either it was submitted willfully and intentionally or it was a mistake, would you agree?” Thomas asked the agent.
“Yes,” Sauer said.
“And we’ll leave it to the jury to decide,” the lawyer said.
Kwame Kilpatrick
Prosecutors aired Kwame Kilpatrick’s law school grades Thursday to prove he knew better than to allegedly cheat the IRS.
Kilpatrick, who is charged with filing phony tax returns and evading taxes, was well-versed in income tax laws, an IRS agent testified.
Prosecutors obtained Kilpatrick’s law school transcripts showing he studied income tax law at the Detroit College of Law in the 1990s.
His grade: C+.
Kwame Kilpatrick
Kwame Kilpatrick took home more than $605,000 as Detroit’s mayor but spent an additional $840,962, according to testimony Thursday.
An IRS agent testified about his five-year probe of Kilpatrick’s finances, which was aimed at showing the former mayor had access to large amounts of unreported cash beyond his roughly $150,000 annual mayoral salary.
“Kwame Kilpatrick was living beyond his means,” IRS Special Agent Ron Sauer testified.
Prosecutors allege the extra income was kickbacks and bribes paid by city contractors and proceeds of a criminal racket inside City Hall.
Also Thursday, jurors were told Kilpatrick’s nonprofit group picked up the tab for $152,096 worth of personal expenses for the ex-mayor and his family between 2003 and 2008.
The expenses were not listed as income on Kilpatrick’s personal tax returns — an alleged crime that could send the former mayor to prison.
The expenses were detailed early on in the City Hall corruption trial but an IRS agent totaled the expenses for jurors Thursday in hopes of drilling home that Kilpatrick is a tax cheat who hid income from the IRS.
Carlita Kilpatrick
Prosecutors tried stripping yet another alibi by Kwame Kilpatrick to explain why he had more than $531,000 in cash flowing through several bank accounts while mayor.
Kilpatrick’s lawyer earlier suggested the money came from the ex-mayor’s wife, Carlita Kilpatrick, but an IRS agent analyzed the former first lady’s bank accounts and found less than $17,000.
IRS Special Agent Ron Sauer contrasted Kwame Kilpatrick’s banking activity before and after being elected mayor of Detroit in 2001.
Kilpatrick made no cash deposits while serving as a state lawmaker, the agent testified. There were no large cash withdrawals and the only money flowing in was Kilpatrick’s state paycheck.
After becoming mayor, Kilpatrick had access t o $531,000 beyond his mayoral salary — money that included kickbacks and bribes paid by contractors, according to the government.
Carlita Kilpatrick and Kwame Kilpatrick
Kwame Kilpatrick did not receive any loans, gifts or inheritances that might explain the more than $500,000 in unreported cash flowing through his bank accounts during his time as Detroit mayor, an IRS agent testified.
IRS Special Agent Ron Sauer testified as prosecutors continued to chip away at defense alibis floated by Kilpatrick’s lawyer Wednesday and tried to prove the former mayor cheated on his taxes. Prosecutors allege the money was proceeds of a criminal racket, including bribes and kickbacks from city contractors.
Sister Ayanna Kilpatrick Ferguson outside federal court.
Sauer sent subpoenas to several Kilpatrick relatives and questioned them about whether they loaned the former mayor any money or were aware of any inheritance.
The answer: no.
He also analyzed wife Carlita Kilpatrick’s finances.
“Carlita had income in 2002 and 2003, but after 2003, there was no reported income,” Sauer said.
Kwame Kilpatrick, however, had plenty of cash beyond his mayoral salary, Sauer said.
He analyzed the former mayor’s bank records showing Kilpatrick made cash payments on his credit card totaling more than $282,000 from 2002 through 2008.
During the same time period, Kilpatrick deposited $194,350 cash into several accounts at Chase Bank, the agent testified.
Kwame Kilpatrick
An IRS special agent Thursday shredded an alibi floated by Kwame Kilpatrick’s lawyer a day earlier to explain why the former mayor took a tax deduction for a $5,000 gift to his alma mater.
IRS Agent Ron Sauer said Kilpatrick was not paid $5,000 to give a speech at Florida A&M University in 2007 and there are no records indicating he donated the money back to the university.
Sauer subpoenaed FAMU records between 2001 and 2009 for any documents. There were no tax records indicating Kilpatrick was paid for giving a speech or made any donations to his alma mater beyond paying $100 to participate in a golf outing.
“Were there any records of honorariums or payments to Kwame Kilpatrick?” Assistant U.S. Attorney Michael Bullotta asked.
“No, I did not,” Sauer said.
Bernard Kilpatrick
Prosecutors rebuffed Bernard Kilpatrick’s claim that he was a political consultant advocating for his client to get city contracts, not a well-connected insider capitalizing on his son’s job as mayor of Detroit.
Near the end of testimony about Kilpatrick working behind the scenes to have his client get work on the $200 million Book Cadillac project, an FBI agent said Bernard Kilpatrick was anything but a normal consultant.
Kilpatrick threatened to call the head of the Detroit Economic Development Corp. to have a rival fired from the project and steer a sludge-hauling subcontract to another client.
“Is it normal to reach out to the head of the DEGC and get someone thrown off?” Assistant U.S. Attorney Michael Bullotta asked FBI Special Agent Robert Beeckman.
“To entertain throwing off a Detroit headquartered and minority-owned company because they weren’t hiring that person’s client, that’s not a regular consultant function,” Beeckman said.
Bernard Kilpatrick
FBI wiretaps captured Bernard Kilpatrick trying to orchestrate which firm received a valuable city contract to haul waste in a $1.2 billion sludge deal.
Kilpatrick didn’t want minority contractor Jim Jenkins to get the trucking subcontract, according to FBI wiretaps from February 2008. Kilpatrick was bitter about Jenkins removing his client, Capital Waste Inc., from working on the $200 million Book Cadillac hotel restoration and giving the work to “some white boys.”
“Jim Jenkins been bulls——’ me for about the last month,” Kilpatrick told one of Bobby Ferguson’s employees during the call.
Kilpatrick then mentioned the possibility of securing work for his client on the sludge deal with Synagro Technologies Inc.
But Jenkins was angling to get the Synagro trucking subcontract, according to the phone call.
“I told (Jenkins) under no circumstances that mother—— get in, f— him,” Kilpatrick said.
Lawyer John Shea and Bernard Kilpatrick
Kilpatrick’s lawyer John Shea dismissed the wiretaps as tough talk and said there is no evidence that the mayor’s father took action to get Jenkins removed from working on the Book Cadillac.
The project was too important as a symbol of the city’s resurgence to corrupt, Shea said.
“There’s nothing illegal about him bad-mouthing a general contractor if he feels Jenkins is untrustworthy,” Shea told FBI Special Agent Robert Beeckman.
“I don’t think that’s what he was doing here,” Beeckman said.
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