Ex-Detroit Mayor Kwame Kilpatrick Indicted by Feds on 19 Mail Fraud, Tax Counts

David Ashenfelter, M.L. Elrick and Jennifer Dixon, Detroit Free Press, June 24, 2010

Kwame Kilpatrick illegally used the nonprofit Kilpatrick Civic Fund like a piggy bank to pay for crisis consultants, a Cadillac, trips–even summer camp for his kids–a federal grand jury said Wednesday, charging the former mayor with 19 counts of fraud and tax evasion.

The indictment comes seven years after Internal Revenue Service and FBI agents began looking into the fund in the wake of a Free Press report that a homeless shelter operator gave the fund $50,000 during Kilpatrick’s first run for mayor in 2001. The newspaper reported that Kilpatrick then wrote a letter recommending the shelter receive a multimillion-dollar public contract.

Despite Kilpatrick’s repeated claims to the contrary, the indictment says he used fund money for campaign and personal expenses, ranging from polling to yoga and golf lessons to college tuition for relatives.

Prosecutors contend he failed to report more than $640,000 in taxable income while mayor that he received in the form of cash, flights on private jets and perks paid for out of the civic fund.

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The indictment did not include public corruption charges, a point Kilpatrick spokesman Mike Paul seized upon.

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Will he see bribery charges?

Wednesday’s 19-count indictment against Kilpatrick could keep him behind bars for decades. But the charges said nothing about whether Kilpatrick took bribes or kickbacks–classic political corruption charges that federal authorities have been seeking to pin on Kilpatrick for years.

Federal law enforcement officials noted, however, that the investigation of Detroit-area corruption is ongoing.

“Investigation into corruption in municipal government continues,” U.S. Attorney Barbara McQuade said late Wednesday. She wouldn’t say whether there would be more charges against Kilpatrick or others.

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The indictment does not say how much of the $642,702 in taxable income he failed to report allegedly came from the civic fund. Some portion of that income involved cash and private flights from unspecified sources, the value of which should have been declared on his tax return as income, the indictment contends.

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The indictment accuses Kilpatrick of filing false tax returns in calendar years 2003-2007 by failing to report $470,951 in income. It also accused him of income tax evasion for failing to report $171,751 in income in the same categories in calendar year 2008.

The tax charges carry maximum penalties of three to five years in prison and $250,000 fines.

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Besides Kilpatrick, others who have served as officers of the Kilpatrick Civic Fund are Kilpatrick’s sister Ayanna Kilpatrick; his former chief of staff and lover Christine Beatty, and former mayoral appointee and longtime friend Derrick Miller.

The Free Press previously reported that federal officials were investigating several friends and family members of Kilpatrick, including his father, Bernard Kilpatrick, who operated a consulting business, and Bobby Ferguson, a Kilpatrick pal who received city contracts worth millions for everything from housing demolition to water pipe installation.

At least nine businesspeople have told investigators they paid tens of thousands of dollars to Bernard Kilpatrick to try to get city contracts through his son.

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