Detroit Ex-Mayor to Be Sentenced as City Seeks to Rebuild
By Margaret Cronin Fisk, Steven Church & Steve Raphael – Oct 10, 2013 12:01 AM ET
Ex-Detroit Mayor Kwame Kilpatrick, convicted on 24 counts of public corruption, may get 28 years in prison at his sentencing as U.S. prosecutors seek to link his conduct to the city’s bankruptcy, which came almost five years after he left office.
The 43-year-old Democrat was found guilty in March of racketeering conspiracy, extortion, bribery and tax evasion. An associate, contractor Bobby Ferguson, was also convicted on multiple charges, and his father, Bernard Kilpatrick, was found guilty of filing a false tax return.
Prosecutors have asked U.S. District Judge Nancy Edmunds in Detroit to sentence the former mayor today to at least 28 years, saying he “systematically exploited his office to enrich himself, his friends and his family.” The U.S., which is also seeking $9.6 million in restitution, alleged that his conduct worsened Detroit’s fiscal woes a half-decade before it filed its record $18 billion municipal bankruptcy in July.
Defense lawyers called the linkage a “cheap shot.” Kilpatrick’s corruption isn’t cited among the reasons for the bankruptcy, either by the city’s emergency manager, Kevyn Orr, or its creditors. Orr blamed the bankruptcy on decades of economic decline and population loss.
“Kilpatrick is not the main culprit of the city’s historic bankruptcy, which is the result of larger social and economic forces at work for decades,” prosecutors said in an Oct. 3 court filing. “But his corrupt administration exacerbated the crisis.”
Kilpatrick, who has been held in federal prison in Milan, Michigan, since his conviction, resigned in September 2008 after pleading guilty to two state felony counts of obstruction of justice for lying on the witness stand in an unrelated case.
His attorneys have asked Edmunds to limit the sentence to at most 15 years, while rejecting as unfounded the claim that their client’s actions affected the bankruptcy.
“The government’s attempt to roll the city of Detroit’s 2013 bankruptcy filing into the instant case oversimplifies the complex problems that Detroit has faced for more than five decades,” they said in an Oct. 7 court filing.
The government’s claim is “really more of an attempt to play to media speculation,” Howard Gurewitz, an attorney for Kilpatrick, said in a phone interview before today’s hearing. “We have asked the judge to look at all the factors, including the positive.”
While Edmunds will weigh any accomplishments, the extent of the corruption proved at trial will result in a long sentence, said Alan Gershel, a former federal prosecutor.
“He began with a lot of promise, but the overriding fact is the harm he did far outweighed the benefit,” Gershel, a professor at Cooley Law School in Auburn Hills, Michigan, said before the sentencing.
“This went on for years,” said Gershel, former chief of the criminal division in the U.S. Attorney’s Office in Detroit. “It’s the most egregious case that I’ve seen.”
Kilpatrick, the son of former U.S. Representative Carolyn Kilpatrick, created a culture of corruption and exploited his power while the city was failing, the prosecutors said in their sentencing memorandum.
“As mayor, Kilpatrick lived a luxury lifestyle his city salary could not possibly support,” prosecutors wrote. This included “jetting around the country in private planes supplied by city contractors and pension fund recipients,” they said.
“On those occasions when his globe-trotting included a legitimate government purpose — like a conference of mayors — he often arrived with a head-turning entourage of bodyguards, associates and friends befitting a foreign head of state. Meanwhile on the home front, the city he was supposed to govern faced a projected $230 million deficit.”
Kilpatrick’s former appointed city treasurer, Jeffrey Beasley, was indicted in March on charges of taking bribes and kickbacks in return for approving investments for Detroit’s two pension funds. The grand jury accused Beasley of arranging flights for Kilpatrick to Las Vegas, Tallahassee, Florida, and Bermuda, paid for by a company that managed investments for the police and fire pension fund.
“The indictment, which names Kilpatrick as a co-conspirator, alleges that the corruption caused more than $84 million in losses to the financially imperiled pension funds,” prosecutors said in the Oct. 3 memo.
Beasley has pleaded not guilty and is scheduled for trial in March.
While Kilpatrick was mayor, the city arranged to borrow more than $1.45 billion to plug a hole in the city’s pension fund for its retired workers.
Interest-rate swaps related to that debt almost caused the city to default on payments to the swap-holders in 2009, the city has said in court. Under the swaps contracts, if interest rates rose above a certain level, the swap-holders had to pay the city and if rates fell, the city would have to pay the swap holders.
When rates fell, Detroit avoided default by renegotiating the contracts to give the swap-holders collateral rights over casino taxes. As part of the bankruptcy, the city will try to buy its way out of the contracts by paying the holders about $250 million.
“Had the city of Detroit not entered into the $1.4 billion pension certificates of participation and the subsequent swaps in 2006 and 2009, the city’s financial status would be less dire today,” Orr’s spokesman, Bill Nowling said in an e-mail. “Thirty-nine cents of every dollar the city spends was going to service debt, the lion’s share of which was created by the swaps.”
Edmunds may weigh government allegations that Kilpatrick’s conduct had some relationship to the bankruptcy in determining a sentence, said Gershel, the former prosecutor.
“A judge can consider evidence from multiple sources,” he said. “If you can establish that it hastened the city’s bankruptcy, it can be a factor.”
The criminal case is U.S. v. Kilpatrick, 10-cr-20403, U.S. District Court, Eastern District of Michigan (Detroit). The bankruptcy case is City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
To contact the reporters on this story: Margaret Cronin Fisk in Detroit at email@example.com Steven Church in Wilmington, Delaware at firstname.lastname@example.org; Steven Raphael in federal court in Detroit.