Day 62: Defense phase approaches in Kilpatrick case

Federal prosecutors built toward a powerful finish Monday in the City Hall corruption trial, showing jurors dramatic photos of Bobby Ferguson’s hidden safes stuffed with cash and checks.

The photos illustrated the government’s theory about what happened to some of the $84 million Ferguson allegedly pocketed as a result of tainted city deals awarded during the tenure of his pal, ex-Mayor Kwame Kilpatrick.

The government said it will wrap up its case against Kilpatrick, Ferguson and Bernard Kilpatrick on Tuesday.

The trial will adjourn for a day before the defense phase starts Thursday.

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View our archived coverage of Day 62: Defense phase approaches in Kilpatrick case.

Kwame Kilpatrick

Kwame Kilpatrick

Federal prosecutors will rest their case against former Detroit Mayor Kwame Kilpatrick and two others Tuesday following 63 days of testimony.

The trial will take a one-day break before the defense phase starts Thursday in federal court.

The City Hall corruption trial has featured testimony from almost 80 witnesses spread over five months and numerous allegations about Kilpatrick pocketing bribes, extorting contractors and steering taxpayer-funded projects to pal Bobby Ferguson.

It is unclear whether Kilpatrick, Ferguson or Bernard Kilpatrick will testify during the defense phase.

“If I didn’t tell the government, why would I tell you?” Ferguson lawyer Gerald Evelyn told The News on Monday.

Kilpatrick’s lawyers left federal court without talking to reporters.

Kwame Kilpatrick and Bobby Ferguson

Kwame Kilpatrick and Bobby Ferguson

City contractor Bobby Ferguson withdrew more than $2.5 million cash from various bank accounts during the time he allegedly shared proceeds of criminal activity with his pal, former Mayor Kwame Kilpatrick.

The withdrawals ranged from $1,000 to as much as $50,000, an IRS special agent testified. Many were just below the $10,000 threshold at which banks are required to send a report to the IRS.

In all, Ferguson withdrew $2,551,357 during Kilpatrick’s time as mayor, according to testimony Monday.

Kilpatrick is accused of extorting contractors and steering city deals to Ferguson, sometimes for no-show work. In all, Ferguson allegedly received almost $84 million in revenue from tainted taxpayer-funded deals, according to prosecutors.

Kwame Kilpatrick (Cartoon by Henry Payne)

Kwame Kilpatrick (Cartoon by Henry Payne)

The cash withdrawals increased during Kilpatrick’s tenure as mayor from 2002 to 2008.

In 2002, Ferguson withdrew $333,439 from various business and personal bank accounts.

In 2008, Kilpatrick’s last year in office, Ferguson withdrew $495,444.

Ferguson did not make all of the withdrawals, his lawyer Michael Rataj insisted.

Some of the withdrawals were made by employees.

“You’re not suggesting that all of these withdrawals…went into Mr. Ferguson’s pockets, are you?” Rataj asked IRS Special Agent Rowena Schuch.

“I have no idea what happened to the cash,” the agent said.

“There is nothing illegal about cashing a check and withdrawing cash is there?” Rataj asked.

As long as someone isn’t intentionally trying to avoid the $10,000 threshold, Schuch said.

Doing so would be a financial crime called structuring.

In this case, Ferguson is not charged with structuring or money laundering.

Ferguson was charged with both crimes in a $12 million bid-rigging case that ended in a mistrial last summer.

Ferguson is facing an April retrial in federal court.

Ferguson Enterprises Inc. on Wyoming in Detroit.

Ferguson Enterprises Inc. on Wyoming in Detroit.

Jurors saw photo of hidden safes in contractor Bobby Ferguson’s offices and homes stuffed with stacks of cash.

The dramatic photos were shown after prosecutors said Ferguson’s companies received almost $84 million in revenue from allegedly tainted city deals awarded during pal Kwame Kilpatrick’s tenure as Detroit mayor.

Federal agents described a series of raids at Ferguson’s office in Detroit in January 2009 and residential locations in 2010.

When agents entered Ferguson’s office on the 24th floor of the Guardian Building in January 2009, agents found a toy train set on the floor and a hidden wall safe.

The safe was filled to the top with $261,500 cash.

Bobby Ferguson

Bobby Ferguson

“Much of it was still in the original bank straps, some were rubber-banded together,” FBI Special Agent Gwen Rosenthal testified.

Agents also found certificates of deposit totaling $1.2 million.

The same day, agents raided Ferguson’s other office on Wyoming in Detroit.

Again, they found a hidden safe and $7,000 cash.

In September 2010, agents raided a Southfield townhouse linked to Ferguson.

Inside, agents found $275,000 found inside a safe hidden behind a clothes dryer. The money was found in $5,000 and $10,000 stacks of $50 and $100 bills.

“It was full, pretty much to the top, if not expanding when we opened it,” Rosenthal said.

Agents fanned out the money, which filled a table. Jurors saw that photo, too.

Agents also found more than $500,000 worth of checks.

The money is a fraction of the approximately $4 million in cash and assets seized by the feds in its investigation of Ferguson during a years-long probe of City Hall corruption and alleged bid rigging.

Michael Rataj

Michael Rataj

Some of the cashier’s checks found at the Guardian Building were for his daughters’ college tuition, defense lawyer Michael Rataj said.

Ferguson had so much cash at his properties because one bank canceled his accounts after the FBI started asking questions, Rataj said.

“Agent Rosenthal, there is nothing illegal about having a safe in your office, correct?” Rataj asked.

“Correct,” she said.

“Or having a safe at a residence?” Rataj asked.

“Correct,” the agent said.

“People do it all the time,” the lawyer said.

“I don’t know about that, but it’s legal,” the agent said.

“It’s not illegal to have cash at your residence,” Rataj said.

“When it’s not proceeds of illegal activity,” the FBI agent said.

“Mr. Ferguson paid taxes on every dime he had, isn’t that true?” Rataj asked. “Yes or no.”

“I’m not an IRS agent,” Rosenthal said. “I have not looked. By my knowledge, Mr. Ferguson paid taxes on at least part of it.”

“He’s not charged with any tax counts is he?” Rataj asked.

Rosenthal wasn’t sure, thought she is not one of the lead agents in the City Hall corruption case.

Ferguson is not facing tax charges in the corruption case.

Bobby Ferguson

Bobby Ferguson

Bobby Ferguson’s companies received almost $125 million in city revenue during pal Kwame Kilpatrick’s time as mayor, a federal agent testified Monday.

In all, Ferguson and his firms pocketed almost $84 million in revenue from tainted taxpayer-funded deals that are included in the City Hall corruption indictment.

It was the first time the government publicly tallied the cost to taxpayers of allegedly criminal wrongdoing that led to charges against Ferguson and his pal, the former mayor.

U.S. Environmental Protection Agency Special Agent Carol Paszkiewicz went through a series of city deals, most of which involve the Detroit Water and Sewerage Department.

EPA Special Agent Carol Paszkiewicz.

EPA Special Agent Carol Paszkiewicz.

Some of the contracts were steered to Ferguson and involved extortion, according to prosecutors. Several deals involved Grosse Pointe Farms tycoon Tony Soave’s former firm Inland Waters.

Ferguson allegedly extorted $5 million from construction firm Walbridge Aldinger, which is headed by CEO John Rakolta Jr., a national finance co-chair for failed Republican presidential candidate Mitt Romney.

Ferguson lawyer Michael Rataj said the contract figures are out of context for the contractor’s companies, Ferguson Enterprises Inc. and Xcel Construction.

Not all the money wound up in Ferguson’s pockets, his lawyer said. Diesel fuel is expensive as are new tires for heavy equipment, Rataj said.

Michael Rataj

Michael Rataj

“For each of these contracts, you don’t have the costs and expenses incurred by FEI or Xcel, do you?” Rataj asked.

“Correct,” Paszkiewicz said.

“The real story is in the costs and expenses, not just in the revenue,” Rataj said.

“I don’t know what you mean by that,” she said.

Rataj faulted the agent for not including total revenue for other firms linked to the corruption scandal.

On one deal, for example, Inland received more than $138 million in revenue.

Lawyer John Shea and Kwame Kilpatrick outside federal court.

Lawyer John Shea and Kwame Kilpatrick outside federal court.

Kwame Kilpatrick was not sitting on a pile of cash accumulated through years of saving, an IRS agent testified Monday.

IRS Agent Carl Selz countered a defense claim intended to explain why Kilpatrick had $840,962 in unreported income flowing through the ex-mayor’s bank accounts.

Kilpatrick’s spending habits did not suggest he was sitting on a cash hoard, Selz said. He was spending money quickly and any large amounts of cash he received was from kickbacks and bribes, prosecutors allege.

One sign Kilpatrick did not have a cash hoard, Selz said: The former mayor ordered suits on layaway at a Southfield clothing store.

“That was funny to me. Either you put it on layaway and go home and get money to pay if off or you put it on layaway because you don’t have the money to pay it off in full,” Selz said. “He couldn’t possibly have a cash hoard.”

Defense lawyer James C. Thomas, however, pointed to earlier testimony that Kilpatrick hid money in his shoes in a closet at home.

“That was only $1,500,” Selz countered.

Kwame Kilpatrick and lawyer James C. Thomas

Kwame Kilpatrick and lawyer James C. Thomas

Kwame Kilpatrick’s defense lawyer attacked the qualifications Monday of an IRS revenue agent who concluded the former Detroit mayor cheated the IRS out of more than $195,000.

On Friday, IRS Agent Carl Selz said he was a certified fraud examiner.

On Monday, Selz admitted his certification expired last year and was not renewed.

Prosecutors acknowledged the discrepancy Monday.

“It was my mistake,” Selz said.

Defense lawyer James C. Thomas also probed bank records indicating Kilpatrick spent $841,000 more than he earned while mayor.

In all, Kilpatrick deposited more than $531,000 in cash into various bank accounts between 2003 and 2008.

Prosecutors allege the extra money was bribes and kickbacks from businessmen and others, including Kilpatrick fundraiser Emma Bell and former Cobo Center contractor Karl Kado.

“Are you taking the position that there has been any direct correlation between payments and money placed into the bank,” Thomas asked.

“I don’t know,” Selz said.

“So the purpose of any of these dollars, you cannot say?” Thomas asked.

“That is correct,” Selz said.

Thomas tried to justify Kilpatrick wrongly claiming a $5,000 tax deduction for a gift made to his alma mater from the ex-mayor’s nonprofit group.

Thomas said Kilpatrick made a mistake claiming the tax deduction.

“Can you understand how something like that would happen, a mistake, not a willful, intentional intent to deceive?” Thomas asked the agent. “In the same fashion that you came in and said you were a certified fraud examiner but had been suspended?”

 

Word on the street is the feds have one more secret audiotape for jurors before resting this week, a recording allegedly involving Kwame Kilpatrick talking from the Big House.

Details are unclear but the recorded jailhouse conversation is expected to come near the end of the government’s criminal case, which started in September.

Jurors already have heard one call Kilpatrick made from the slammer.

In mid-October, prosecutors played a recording of a phone call Kilpatrick made from the Wayne County Jail while cooling his texting thumbs.

Ayanna Kilpatrick Ferguson

Ayanna Kilpatrick Ferguson

The call was played to support allegations Kilpatrick treated his nonprofit group like a slush fund.

During the call, Kwame Kilpatrick and his sister Ayanna Kilpatrick Ferguson planned a 90th birthday party for their grandfather, Marvel Cheeks.

“We got to do something real nice for grandaddy’s birthday?” Kwame Kilpatrick said.

“Definitely,” his sister said.

“Get a big band to play old tunes,” Kwame Kilpatrick says. “Have people get up and give him an award.”

Kwame Kilpatrick

Kwame Kilpatrick

Kilpatrick suggested having people from the community attend the party and give his grandfather gifts, including a suit from the mayor’s Southfield haberdasher and some 10-gallon action from Henry the Hatter.

The party was held in May 2009 at the Atheneum Suite Hotel and partially paid for with a $2,500 check from the Kilpatrick Civic Fund. Another $3,800 cashier’s check paid for the rest of the party.

There is at least one other jailhouse call — between Kilpatrick and his pal/co-defendant Bobby Ferguson.

The call was revealed in federal court records obtained by The News, that indicates investigators launched a worldwide search for cash generated by the alleged racketeering conspiracy involving Kilpatrick and Ferguson.

FBI agents sought records tied to foreign bank accounts, wire transfers and other documents relating to Ferguson’s international travel since January 2007, according to court records.

From The News story describing the phone call:

In 2008 and 2009, Ferguson and Shakib Deria, an executive at one of his companies, made at least two trips to Dubai in the United Arab Emirates and traveled to South Africa, according to an FBI search warrant affidavit filed in U.S. District Court. They set up at least one company while in South Africa.

Kwame Kilpatrick and Bobby Ferguson

Kwame Kilpatrick and Bobby Ferguson

An FBI affidavit includes a transcript of a jailhouse phone conversation between Ferguson and Kilpatrick in November 2008, when Kilpatrick was jailed for obstruction of justice related to the text scandal.

Ferguson referred to a recent trip he made to the Middle East and discussed future trips with Deria, who in the phone call is referred to as “the African.”

Ferguson: “Man, I’m tellin’ you, though. I’ve been thinking about that trip me and the African took.”

Kilpatrick: “Yeah.”

Ferguson: “Oh, man. When you come home … that, that’s it.”

Robert Snell
Robert Snell is the Detroit News federal courts reporter. He can be reached at rsnell@detnews.com or (313) 222-2028.