Kwame Kilpatrick shorted the IRS out of almost $200,000 by failing to report cash and other income, according to testimony Friday.
The new figures emerged as prosecutors neared the end of their criminal case against Kilpatrick, his father Bernard and contractor Bobby Ferguson.
Kilpatrick, meanwhile, continued to make news outside of federal court. The state Department of Corrections ordered the former Detroit mayor to spend the weekend in jail for violating conditions of his parole.
Testimony resumes at 9 a.m. Monday in federal court.
Meanwhile, Ferguson could end up behind bars before the end of the City Hall corruption trial.
A federal judge Thursday found Ferguson in contempt for failing to comply with an order issued in a civil lawsuit filed by a local pension trust fund.
Ferguson has seven days to cure the contempt before the court issues a bench warrant for his arrest.
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Kwame Kilpatrick
Kwame Kilpatrick lied on his taxes and owes more than $195,000 to the IRS, according to testimony Friday.
An IRS revenue agent testified after analyzing Kilpatrick’s tax returns from 2003 to 2008, the year Kilpatrick resigned.
Kilpatrick did not report taxable income during those years and owes $195,403 in federal taxes, IRS Agent Carl Selz testified.
The unreported taxable income includes cash deposits and personal expenses paid by the ex-mayor’s nonprofit group, the Kilpatrick Civic Fund.
Here’s the agent’s breakdown of Kilpatrick’s finances:
2003:
Taxable income reported on return: $151,806
Additional taxable income: $78,100
Additional tax due and owing: $23,857
2004:
Taxable income reported on return: $133,474
Additional taxable income: $60,600
Additional tax due and owing: $17,701
2005:
Taxable income reported on return: $125,303
Additional taxable income: $75,293
Additional tax due and owing: $22,969
2006:
Taxable income reporter on return: $118,224
Additional taxable income: $98,755
Additional tax due and owing: $29,934
2007:
Taxable income on return: $123,173
Additional taxable income: $95,447
Additional tax due and owing: $28,441
2008:
Taxable income on return: $41,299
Additional taxable income: $250,250
Additional tax due and owing: $72,501
Grand total tax due and owing: $195,403
Kwame Kilpatrick spent $841,000 more than he earned while serving as Detroit mayor, but didn’t file bankruptcy or fall into debt, an IRS agent testified Friday.
That’s because he was pocketing bribes and kickbacks from contractors and other Detroit businessmen, prosecutors allege.
“Do you have any evidence that Mr. Kilpatrick went into debt to make these expenses?” Assistant U.S. Attorney Michael Bullotta asked IRS Special Agent Ron Sauer. “He didn’t declare bankruptcy, did he?”
“He did not,” Sauer said.
The testimony came during the end of the government’s focus on Kilpatrick’s finances. Prosecutors tried to counter defense suggestions that the unreported income was cash gifts from friends and others.
The birthday gifts ranged from $10 to $1,000.
“Would those checks account for the additional money above his wages?” Bullotta asked.
“No,” Sauer said.
Christine Beatty and Kwame Kilpatrick
Kwame Kilpatrick might have resigned as chairman of his nonprofit group in 2001 but was still ordering the Kilpatrick Civic Fund to pay for his personal expenses, according to prosecutors.
Assistant U.S. Attorney Michael Bullotta countered defense claims Friday that Kilpatrick was a figurehead and not controlling the nonprofit group.
Assistant U.S. Attorney Michael Bullotta
In November 2002, Kilpatrick sent a text message to his mistress Christine Beatty telling her to grab a Civic Fund check to pay for a trip to the Sonnenalp Resort in Vail, Colo.
The Civic Fund spent $1,009 for the lovers to stay at the resort.
While there, the charity paid for manicures, pedicures and a “gentleman’s facial.”
Prosecutors showed text messages between Beatty and the mayor ahead of the trip. The lovers spent three nights in a $420-a-night room.
Kilpatrick: “Are you ready for the 7th?”
Beatty: “You can’t even understand how ready. When we go away, it’s like stealing a moment that is supposed to be a reality anyway.”
On Kilpatrick’s mayoral calendar, seized by investigators, Kilpatrick’s staff summed up how he spent Nov. 7.
“Gone fishing,” the calendar read.
Lawyer James C. Thomas and Kwame Kilpatrick.
Kwame Kilpatrick’s lawyer and an IRS agent continued squabbling Friday over expenses approved by the ex-mayor’s nonprofit group.
Lawyer James C. Thomas is trying to justify the personal expenses, which allegedly violate tax laws, by claiming money was spent on education, one of the Kilpatrick Civic Fund’s purposes.
Thomas pointed to one expense that paid to send Kilpatrick’s twin sons to an educational summer camp.
Bernard Kilpatrick
“Certainly the Civic Fund had educational purposes, did it not?” Thomas asked IRS Special Agent Ron Sauer.
“It did, but not for the figurehead’s children,” Sauer said.
Thomas also tried to justify the Civic Fund paying for a Florida hotel stay for the ex-mayor’s father, Bernard Kilpatrick, in May 2008.
“You have no knowledge what he did down there for the Civic Fund,” Thomas said.
“I have no knowledge he did anything for the Civic Fund,” Sauer said.
Thomas tried to raise doubt about other alleged personal expenses paid for by the Civic Fund.
The Civic Fund paid to fly Kilpatrick to Texas in 2008 but Thomas suggested the mayor was meeting with bank officials in the wake of Comerica Bank relocating from Detroit to Texas.
The bank relocated its headquarters to Texas in 2007.
“Are you aware that negotiations occurred with the city and banks in Dallas?” Thomas asked.
Kwame Kilpatrick and family.
“I’m not aware,” Sauer said.
Thomas wrapped his cross-examination by showing jurors a $13,027 check written to the Civic Fund by Kilpatrick and his wife. The couple apparently reimbursed the nonprofit group for expenses.
The check wouldn’t have covered all of the allegedly illegal personal expenses, however.
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.
Kwame Kilpatrick left gestures to passers by as he and Ferguson leave federal court Aug. 8.
Kwame Kilpatrick appeared relaxed during a break in the City Hall corruption trial Friday but declined to comment on being ordered to spend the weekend in jail for violating parole.
Kilpatrick met privately with lawyer James C. Thomas in a conference room, looked through the snack shop with pal and co-defendant Bobby Ferguson and brushed past reporters stationed on the first floor of federal court.
When asked about whether he would comment on the parole violation, Kilpatrick shrugged and said no.
Kwame Kilpatrick was a figurehead and had no authority with his nonprofit group, his lawyer said Friday, though prosecutors allege the ex-mayor treated the Kilpatrick Civic Fund like a personal piggy bank.
Defense lawyer James C. Thomas tried distancing the former mayor from the nonprofit group, showing jurors paperwork indicating Kilpatrick resigned from the board in 2001.
“He no longer had any authority with the Civic Fund,” Thomas told IRS Special Agent Ron Sauer.
“He no longer had an official capacity,” the agent corrected.
Erik Rayford
The board, however, was stocked with intimates and relatives.
The board was headed by his sister, Ayanna Kilpatrick Ferguson. The vice chairmen were high-school pals Derrick Miller and Erik Rayford.
Rayford gave the ex-mayor $1,799 last fall — a gift that was not disclosed and contributed to parole violation charges being filed today.
The Civic Fund’s board also included Kilpatrick’s ex-mistress Christine Beatty.
Kwame Kilpatrick and lawyer James C. Thomas.
People may have given Kwame Kilpatrick cash birthday presents but not enough money to account for more than $800,000 in unreported income found in the ex-mayor’s bank accounts, an IRS agent said.
IRS Special Agent Ron Sauer disagreed with an attempt by Kilpatrick’s lawyer to explain the mysterious cash, which prosecutors allege was bribes, kickbacks and proceeds of criminal activity.
At times, the cross-examination with lawyer James C. Thomas turned testy.
One of Kilpatrick’s college friends testified that Bobby Ferguson handed him a bag filled with $90,000 to give to the mayor in fall 2008 at the Atheneum. (David Coates / The Detroit News)
Thomas said there were numerous birthday parties during which people gave Kilpatrick money and other instances when city employees, including police officials, lavished the ex-mayor with cash.
Thomas faulted the IRS agent for not being aware of a birthday party in 2006 at the Atheneum Suite Hotel.
“One party in 2006 does not account for all the cash we identified,” Sauer said.
“How would you know unless you determined the sum total of all the events in which Mr. Kilpatrick received cash?” Thomas said.
“The investigation findings and evidence do not support your theory,” Sauer said.
Sauer said investigators ruled out large cash gifts, loans and other sources of non-taxable income from relatives and other people.
They hauled Kilpatrick relatives in front of a federal grand jury, including the ex-mayor’s mother, former Congresswoman Carolyn Cheeks Kilpatrick.
Lawyer James C. Thomas, left, with Kwame Kilpatrick.
Kwame Kilpatrick’s lawyer fessed up to making a huge math error Thursday while trying to explain why federal agents found more than $800,000 in cash in the ex-mayor’s bank accounts.
Lawyer James C. Thomas jokingly referred to the mistake at the start of testimony Friday in court while questioning IRS Special Agent Ron Sauer.
“Yesterday, we had a math quiz and you and I were both under the stresses of the day,” Thomas said.
“I’d prefer you not drag me into it,” Sauer said. “I don’t do math on the stand.”
On Thursday, Thomas said the mayor was given cash gifts during birthday parties.
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.
Nobody pointed out the mistake Thursday. On Friday, Thomas acknowledged the slip-up.
“I’ve got broad shoulders and thick skin,” the lawyer said.
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