Prosecutors paint Penske backed ex-mayor as a lying crook UPDATE #4 Former Mayor Kwame Kilpatrick on Tuesday refused to give under oath the names of those who provided him financial support, choosing instead to invoke his Fifth Amendment right against self-incrimination.
But prosecutors revealed during the second day of a hearing over Kilpatrick's ability to pay $1 million restitution to the city that others played a role, including local developer John Rakolta Jr., who backed out of an agreement that involved other prominent businessmen and attracted the attention of FBI and Internal Revenue Service agents.
"Someone is paying for his restitution, and he is claiming to this court that he has the inability to pay when he in fact is not paying for it himself," said Assistant Wayne County Prosecutor Athina Siringas. "Money just keeps on appearing and people just keep on giving."
Agents from the FBI and IRS contacted Compuware Chairman Peter Karmanos Jr. in August about a $240,000 loan he and other business leaders made to Kilpatrick, a Compuware lawyer testified. General counsel Daniel Follis said Karmanos told him to cooperate with investigators.
After federal agents contacted Compuware, a hurried effort was made to complete the repayment terms, which hadn't been squared away, Follis testified. Kilpatrick signed the promissory notes after federal agents made inquiries. Prosecutors argued the money was a gift all along, and therefore should have been disclosed to the court weighing Kilpatrick's ability to repay $1 million to the city.
Kilpatrick originally was to receive $300,000, but John Rakolta Jr., chairman of Walbridge construction company, backed out. Rakolta said Tuesday he declined after consulting with advisers. Much more at Detroit Free Press10/31/09 Former Detroit Mayor Kwame Kilpatrick's claim that he knows little about his family finances because they are now handled by his wife is common when spouses face legal liabilities, experts say.
Cooley Law School professor Curt Benson said Carlita Kilpatrick has a right to protect herself and her children from her partner's debts.
But, in the last year, more than $1 million has moved through five bank accounts in Kwame and Carlita Kilpatrick's names, according to the Wayne County Prosecutor's Office. And, at least several hundred thousand was available to Kilpatrick when he claimed he had only $6 per month left after his expenses for $1 million restitution he agreed to pay the city, according to prosecutors.
Part of that money was a $240,000 loan to Kilpatrick from four prominent businessmen and a $50,000 gift to Carlita Kilpatrick from Ambassador Bridge owner Manuel "Matty" Moroun.
When the hearing into whether Kilpatrick has been honest about his income continues on Nov. 17, prosecutors will likely focus on where the other $710,000 came from and where it went, experts said. The hearing will determine if Kilpatrick's $6,000 monthly restitution payments should be cut or raised.
The source of most of the money that Carlita Kilpatrick moved in her accounts remains unexplained.
"It's difficult to prove, tricky really," Cooley's Benson said. "Gifts to a spouse generally are beyond the direct reach of the prosecutor, but gifts and loans are family assets and should be reported when you are considering restitution."
Kilpatrick testified on Thursday that he got a $240,000 loan the day after leaving jail from auto mogul Roger Penske; Dan Gilbert, chairman and founder of Rock Financial and Quicken Loans; Jim Nicholson, president and CEO of PVS Chemicals; and Kilpatrick's new boss Peter Karmanos Jr., chairman and CEO of Compuware.
Kilpatrick's lawyer, Michael Alan Schwartz, has complained Wayne County Prosecutor Kym Worthy is pursuing Kilpatrick to punish him for landing a six-figure job, driving expensive cars and living in a $1 million home in a posh Dallas suburb.
"More time and energy is being spent on this, perhaps than any probation issue ever in the history of the city," said Wayne State law professor Peter Henning. "I'm not sure this is an effort to punish so much as this is the trial the prosecutor didn't get before." Detroit News10/30/09 WWJ Newsradio 950 interview on Belle Isle with Roger Penske also talking about his support for Mayor Kilpatrick.
10/30/09 Four of Metro Detroit's most powerful business leaders pony up $240,000 to speed Kwame Kilpatrick's exit from the mayor's office.
And what do they get in return?
Embarrassment, potential questions about their credibility -- get ready for "what does Kwame have on them?" -- and yet more evidence that the disgraced felon seldom fails to throw whatever supporters he can muster under the proverbial bus. All he had to do was pay his bills and assume responsibility for the trust he shattered again with his profligacy.
But he couldn't because he wouldn't. Instead, the likes of Roger Penske, Dan Gilbert, Jim Nicholson and Peter Karmanos are thrust into the uncomfortable, if completely predictable, positions of defending an arguably civic act now tarnished by Kilpatrick's unwavering arrogance. And his return.
That wasn't the intent when the four agreed in the summer of 2008, months before the mayor resigned, to extend him a loan that would be used to support Kilpatrick and his family once he served his 99 days in jail. Karmanos, chairman of Compuware Corp., threw in a job with a subsidiary in Dallas, adding that Kilpatrick would be "through" if other legal problems arose.
"The pitch was that he needed to go for the betterment of the city," an influential business leader familiar with the meeting and the logic behind it told me Thursday. "We are losing jobs, we are losing opportunity; we are the laughingstock of the world. They say no good deed goes unpunished. This is a perfect example."
Yes, it is. But there's more to it. Each of the four titans could claim his own relationship with the former mayor. Each, in his own way, respected the mayor's smarts and raw political skills. Each harbored a soft spot for the potential they saw and appreciation for the action he delivered on their behalf.
All four essentially control their business empires as entrepreneurs, meaning they are less answerable to boards of directors and shareholders than the heads of Detroit's automakers, banks or utilities. And each of the four, though they aren't saying so right now, should be bitterly disappointed with Kilpatrick.
Nicholson, chairman of Detroit-based PVS Chemicals Inc., led the last-minute fundraising push to help get Kilpatrick re-elected in 2005. Penske worked alongside the mayor on Super Bowl XL, a smashing success. Gilbert pledged to invest the future of his empire in Kilpatrick's Detroit, a promise Gilbert intends to keep. And Karmanos is Karmanos: loyal and iconoclastic, a mentor and a friend.
Kilpatrick's disclosure of the loans, offered in a Wayne County courtroom, signals their political tone-deafness, mixed with potentially obscured loyalties -- to Kilpatrick, to Detroit, to both? Did they consider the ramifications to their reputations if the transaction was made public? Did they care? Would it matter? Would it harm their ability to work with the new mayor or color future dealings with the city?
Or would the civic intent -- to make him go away so Detroit could begin to repair the damage left behind -- trump any lingering questions about their motivations?
Gilbert, chairman of Livonia-based Quicken Loans Inc., said in a statement that the "belief was that the mayor would make the decision to leave office sooner knowing that a loan would be made available to him." Karmanos and Penske, chairman of Penske Corp. and other affiliated businesses, issued similar statements.
Each was punctuated with a simple line saying the loans remain outstanding. And they probably will be for a long time.
The only surprise here should be that anyone is surprised Kilpatrick took this long to demonstrate his untrustworthiness to the public, to business moguls, you name it. I mean, this is the guy who frequently laced conversations about the need for him to resign with unequivocal implications he would need some cash -- ahem, "loans" -- to do so.
The Kama Kilpatrick who found himself again in a courtroom answering the questions of prosecutors remains the same who beguiled some of the region's wealthiest and most powerful business leaders.
He's the one whose political prowess persuaded business leaders to stand on the sidelines as the text-message scandal slowly sank his administration. If not Kama, the phrase went back then, who?
He's the one who, down big in the polls in the fall of 2005, walked into a Detroit Renaissance board meeting, presented his vision for the economic redevelopment of the city and blew the heavy-hitters away. Within weeks, they were raising big money he would use to beat Freeman Hendrix.
He's the guy who couldn't resist hanging with rappers and NFL stars at Super Bowl events, vexing planners for the game in Detroit, but managed to bend the city bureaucracy to the needs of Super Bowl XL.
He's the guy who's still not gone, even now. The Detroit News
10/29/09 Another well-known and powerful Detroiter's name just came up as a benefactor of the former Detroit Mayor Kilpatrick family.
Kilpatrick testified that he took out a loan for $240,000 from an individual on Feb. 4. Payment is not scheduled to begin until 2010. Upon further questioning, he said four individuals made the loan.
"Who are the individuals?" Prosecutor Goner said.
Kilpatrick answered: Roger Penske, Jim Nicholson, Dan Gilbert and Pete Karman’s.
Roger Penske issued a statement today following the testimony of Kilpatrick this afternoon that he was one of four Detroit-area business leaders who contributed to a $240,000 loan for the ex-mayor:
Roger Penske's statement
“Together with several other business leaders, I made a personal loan to former Mayor Kilpatrick last year in response to his concern for the welfare of his family following the disclosures which led to his resignation. To date, the full amount of the loan remains outstanding.” Detroit Free Press (Related article)