Monday, November 14, 2011

“(Kwame) Kilpatrick Enterprise” in Detroit: Most Corrupt Municipal Administration Anyone Had Ever Seen


Court officer attaches unwanted "jewelry" to convicted felon-Mayor Kwame Kilpatrick last year

[See my report, “Detroit’s Gangster Mayor Reportedly to Accept Plea Today: Kilpatrick Era Over … for Now”]

Feds: Ex-mayor Kwame Kilpatrick, pals took millions

In the severest blow yet to what once was Detroit's most powerful political family, a federal grand jury charged ex-Mayor Kwame Kilpatrick, his father and three associates with turning city hall into the hub of a criminal enterprise that extorted millions from contractors.

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December 16, 2010
Story by David Ashenfelter, Tresa Baldas, M.L. Elrick, Jim Schaefer and Joe Swickard
Detroit Free Press

Former Detroit Mayor Kwame Kilpatrick is targeted in a landmark public corruption investigation. (Andre J. Jackson/Detroit Free Press)
"We are hopeful that this case and this indictment brings closure to this chapter in the city's history, and we hope ... the culture of corruption is over," U.S. Attorney Barbara McQuade said after releasing the 38-count indictment Wednesday.

The 89-page document accuses Kwame and Bernard Kilpatrick, top mayoral aide Derrick Miller, contractor Bobby Ferguson and former water department boss Victor Mercado of perverting the city's contracting process by forcing contractors to pay Ferguson millions of dollars -- sometimes for work he did not perform. The indictment alleges that the shakedowns continued up to Kwame Kilpatrick's last three weeks in office.

Miller and Ferguson are both longtime pals of Kilpatrick. If convicted, each of the five men faces up to 30 years in prison.

Lawyers for the Kilpatricks, Miller and Mercado predicted exoneration. Ferguson's lawyer said he needed time to review the charges.

"I think there's a perception in the public that if you worked in the Kwame Kilpatrick administration, then you're a crook" said Miller's attorney, Leon Weiss. "But, of course, that's not the case here."

The indictment is the culmination of a six-year investigation that traces its roots to a Free Press report from Kilpatrick's first run for mayor, in 2001. That story revealed that Kilpatrick wrote a letter endorsing a homeless shelter's bid for a multimillion-dollar county contract after his nonprofit civic fund received a $50,000 contribution from the shelter's owner.

Feds Accuse Kilpatrick, 4 Others Of City Hall Corruption

They abused the public's trust by helping themselves to loads of cash, yoga classes, rides in private jets, spa visits and college tuition for relatives -- all part of a scheme the feds dubbed the Kilpatrick Enterprise.

Ex-Detroit Mayor Kwame Kilpatrick, his father and three associates were charged Wednesday in a 38-count federal indictment with shaking down city contractors to steer millions in public funds into their own wallets.

Racketeering, bribery, extortion and fraud charges were levied against the former mayor; his father, Bernard Kilpatrick; previously indicted city contractor Bobby Ferguson; former top mayoral aide Derrick Miller, and former water department chief Victor Mercado in one of the largest public corruption investigations ever in the City of Detroit.

"If you steal from taxpayers, you are going to be held accountable," U.S. Attorney Barbara McQuade said at a news conference after the indictment was handed up.

"Getting out of office doesn't get you off the hook," she added, referring to Kwame Kilpatrick's resignation as mayor in September 2008 in the text message scandal.

Attorneys for the Kilpatricks, Miller and Mercado said they would aggressively battle the charges. Ferguson's lawyer said he needed to review the charges before commenting. The 89-page indictment, which supersedes a June income tax evasion and fraud indictment against Kwame Kilpatrick, laid out three general areas: That they extorted money from municipal contractors, defrauded state and donors to Kilpatrick's nonprofit groups and engaged in bribery and extortion involving other public contracts and investments.

Many of the accusations in the indictment were first revealed by the Free Press, including that Kilpatrick's wife, Carlita Kilpatrick, received personal income from a state grant intended to help children and seniors.

It said Kwame Kilpatrick, 40, misused his authority as a state representative and then as Detroit mayor to commit extortion, bribery and fraud. He's also accused of defrauding donors to his Kilpatrick Civic Fund, Kilpatrick for Mayor committee and the Kilpatrick Inaugural Committee.

The indictment said Ferguson, 41, of Detroit kicked back at least $424,000 in cash and other items to the ex-mayor. It said Kilpatrick used $595,000 in cash from the scheme to deposit into his bank account, pay credit card bills, buy clothes and repay loans.

Bernard Kilpatrick, 69, of Detroit, who opened a government consulting firm when his son became mayor, is accused of depositing $603,000 in cash into his personal bank accounts. He was charged with filing false tax returns for calendar years 2004, 2005 and 2007.

Mercado, 59, whom the ex-mayor appointed in 2002 to head the city's Water & Sewerage Department, is accused of steering contracts worth millions to Ferguson. Mercado is now general manager of a water district in San Antonio.

Miller, 40, of McLean, Va., a former Kwame Kilpatrick classmate and top aide, is charged with encouraging contractors to hire Ferguson or holding up projects for those who refused.

The charges -- racketeering, extortion, bribery, obstruction of justice, mail and wire fraud, signing false tax returns and income tax evasion -- carry penalties of three to 30 years in prison.

The federal probe of Detroit City Hall, first reported by the Free Press in 2008, has already led to criminal charges against 20 people. Of those, 15 have pleaded guilty, including former City Councilwoman Monica Conyers, who pleaded guilty last year to taking bribes for her vote on the Synagro sludge deal.

Kwame Kilpatrick's attorney, James Thomas, said his client is innocent.

"We look forward to fighting this case. I've talked to my client who is upbeat and is up for the fight," he said. "We expect that he's going to be vindicated at trial."

Ferguson's lawyer, Gerald Evelyn, said: "The government's had five or six years to work on this.... I need some time to review these 89 pages."

Bernard Kilpatrick's attorney, John Shea said: "This news is disappointing, but at least we'll finally know what it is we're fighting. And Bernard is prepared for the fight."

Mercado's lawyer, Martin Crandall, predicted that his client would be exonerated. He called him "a hardworking, dedicated public servant who never made a dime from any of these contracts that were rigged or illegally let."

Miller's attorney, Leon Weiss, said: "My guy is ready to stand up and fight.... He's a strong man. He's a principled man. He's a good family man."

The years-long investigation was conducted by the FBI, the Internal Revenue Service, the Environmental Protection Agency and the U.S. Department of Housing and Urban Development. McQuade acknowledged that it took time.

"People often ask me, 'What took so long?'... As you see from the indictment, this case involves very complex schemes," she said, adding that investigators pored over hundreds of thousands of records and interviewed hundreds of witnesses.

McQuade also said the investigation into Kwame Kilpatrick and his inner circle is over, but the municipal corruption probe is not.

She said she doesn't anticipate charging Kilpatrick's sister, Ayanna, who headed one of Kilpatrick's nonprofits, or his mother, longtime U.S. Rep.Carolyn Cheeks Kilpatrick. She wouldn't say whether former chief of staff Christine Beatty might be charged. And she said there was no evidence of wrongdoing by Kilpatrick's wife, Carlita Kilpatrick.

Cheeks Kilpatrick wouldn't comment on the indictment of her son and ex-husband as she was leaving the Capitol on Wednesday.

Alan Gershel, former longtime head of the U.S. Attorney's criminal division, said: "Based on this indictment, this was thoroughly corrupt administration.... It dwarfs anything I've ever seen."

University of Michigan law professor Len Niehoff said the prosecutors "not only went over the earth with a fine-toothed comb, they scorched it."

"This is a strong, muscular document, with each allegation supported by multiple sources," Niehoff said.

The grand jury foreman, flanked by Assistant U.S. Attorneys Michael Bullotta and Mark Chutkow, presented the indictment to federal Magistrate Mona Majzoub at 3:20 p.m., in a courtroom packed with reporters and 17 other grand jurors, whose terms expire Dec. 31.

Reporters were warned not to bother the jurors.

As reporters raced out of the courtroom to file stories, one grand juror congratulated and shook the hands of his colleagues, repeatedly declaring, "Job well done!"

The indictment said the heart of the scheme involved extorting city contractors to force them to hire Kilpatrick's longtime pal Ferguson on municipal contracts and to rig the award of contracts to give Ferguson a cut.

It said Ferguson obtained tens of millions of dollars in the scheme and shared some of it with coconspirators.

Detroit attorney Richard Zuckerman said his client, Walbridge, a major Detroit contractor, was among those pressured to hire Ferguson on city projects and who cooperated with investigators.

"Walbridge was anxious to cooperate because it perceived itself as a victim of inappropriate attempts to provide business to Bobby Ferguson and Ferguson-related entities," Zuckerman added, saying prosecutors always viewed Walbridge as a victim.

Among other things, the indictment said Kilpatrick, with the help of Miller and Kilpatrick's father, held up a $50-million sewer lining project until the winning bidder agreed to pay Ferguson, who eventually received $24.7 million when the contract ceiling was raised to $138 million.

Kilpatrick and Mercado allegedly canceled a $10-million sewer repair contract because the winning bidder rejected Ferguson's demand for one-fourth of the contract. The contract was awarded to another company, which agreed to include Ferguson, the indictment said.

The indictment said that while Kilpatrick was a state representative and mayor, he, his father and Ferguson obtained more than $650,000 in state and private donor funds under false pretenses. It said the money was supposed to be used for Kilpatrick's campaigns or the community.

Instead, it was spent on Kilpatrick's personal expenses and by Ferguson to redecorate his office.

The indictment said Kilpatrick and his father solicited more than $1.2 million during Kilpatrick's tenure as mayor from people with business before the City Council and two municipal pension funds.

It said John Rutherford, head of a nonprofit shelter in Highland Park who has been prosecuted in a tax case and whose donation to the Kilpatrick Civic Fund sparked federal interest, gave more than $500,000 to the Kilpatricks to get support for Rutherford's waterfront casino development plan. Rutherford pleaded in the tax case and is awaiting sentencing.

James Rosendall Jr., who is serving a prison sentence for bribery in the Synagro Technologies $1.2-billion sludge disposal contract with the city, bankrolled more than $50,000 in jet flights to get Kilpatrick's support for the deal.

And Cobo Center contractor Karl Kado, who was sentenced to probation for paying bribes to get and keep contracts, paid at least $360,000 to the Kilpatricks and Miller.

Criminal defense attorney and former top-ranking federal prosecutor David Griem said the indictment indicates that "there was a 'For Sale' tag on everything."

Given the gravity of the charges, Griem said it is unlikely the top three defendants -- the Kilpatricks and Ferguson -- would get less than 10-12 years if they pleaded. And if they go to trial and are convicted, "I'd be shocked if they get less than 15-18 years."

The indictment painted Miller and Mercado as members of the so-called Kilpatrick Enterprise, who used their positions and influence to pervert the city's bidding process. The pair are accused of helping rig water contracts, extorting millions from contractors, holding up projects for the benefit of Ferguson and steering work his way.

Mercado's bosses at the Bexar Metropolitan Water District called an emergency board meeting for today to discuss his possible dismissal.

Wayne State University law professor Peter Henning, a former federal prosecutor, said the strength and depth of the case is impressive, but prosecutors will be challenged "to keep it simple" and not overwhelm jurors with details.

Mayor Dave Bing and City Council President Charles Pugh declined to comment.

City Councilman Ken Cockrel Jr., who led the charge to remove Kwame Kilpatrick and briefly succeeded him as mayor, said: "This ... gives further credence to my belief that the City Council was fully correct in pushing for his removal."

Wayne County Executive Robert Ficano said: "This is another setback for the city and southeast Michigan.... No one is above the law, and justice must be pursued."

Staff writers Todd Spangler, John Wisely, Jennifer Dixon, John Gallagher, Steve Neavling and Chris Christoff contributed to this report.

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