Kwame Kilpatrick on trial: Day 61

Published On: Jan 30 2013 04:47:46 PM EST
Updated On: Jan 25 2013 01:15:48 PM EST
Kilpatrick wave
DETROIT -

Local 4 is inside the courtroom for the federal corruption trial of former Detroit Mayor Kwame Kilpatrick, Kilpatrick's dad Bernard Kilpatrick and his childhood friend Bobby Ferguson. Each day we bring you information from inside federal court as it happens.

So it seems that Kwame Kilpatrick will be spending the weekend in jail. 

READ: Kwame Kilpatrick served with 14 parole violations, headed back to jail

Last night, the Michigan Department of Corrections went to Kilpatrick's mother's Detroit home to serve him with 14 parole violation charges. 

He is required to report gifts and other income as a condition of his restitution agreement. 

After the trial ends today, Kilpatrick is expected to report to the Detroit Reentry Center and will spend the weekend behind bars.  He'll be released Monday. 

This will be round 4 into jail for Kwame. 

Most recently, Kilpatrick was tethered for failing to report $2,000 he received from a Chicago pastor. He was caught in December 2012 counting out the money on a surveillance camera at a Walmart in Chesterfield Township. 

I saw Kwame passing through security into the courthouse this morning and he looked particularly somber  and unhappy. 

He's sitting in the courtroom right now talking animatedly with his lawyer Jim Thomas. He's uber casual today, no jacket just a sweater 

9:06AM Judge Nancy Edmunds enters the courtroom. 

We'll be continuing with Thomas's cross examination of IRS agent Ron Sauer. 

Looking at the summary chart of Kwame's accounts. 

Sauer says IRS did not find that Carlita Kilpatrick had a Nuunion Credit union account. 

Sauer saying there were no cash deposits in 2001 into Kwame's Nuunion account. No cash expenditures. 

Sauer not correct to say there were no cash withdrawals. Sauer says there is a separate spreadsheet for that. 

Sauer does not remember specific numbers. 

Thomas going back to non-taxable gifting. 

Sauer says it depends but generally gifts to the receiver are not taxable. 

"I prefer you not drag me into it," says Sauer about Thomas's math error yesterday calculating $100,000. 

Thomas saying they were calculating 50 times $200. 

"We did not," says Sauer again not wanting to get drawn in to bad math. 

Thomas says it's ok he has broad shoulders he'll take the blame for this one. 

Thomas saying something about people in the city of Detroit not using accounts universally. 

"You'll have to enlighten me on that," says Sauer. 

Thomas says that banks have become very selective since 9/11 in who they do business.

 Sauer agrees that banks have become more careful since 9/11. 

Thomas says so you don't agree with me that people in Detroit have difficulty getting checking accounts. 

Thomas says one explanation for cash given at the party is that there was no check to trace back. Sauer agrees that's a possibility. 

Thomas says did you issue any subpoenas to any check cashing stores in Detroit. I did not says Sauer. 

What about Western Union? Possibly says Sauer but I would have to check records on that.

Thomas says because that would be an extra indication of Kilpatrick having more cash available in those years. 

Sauer says he has seen no evidence of use of check cashing businesses. Sauer says Kwame had accounts he used. 

"the evidence isn't supporting what you're portraying," says Sauer. "There is no evidence supporting cash loans or gifts to Kilpatrick." 

Sauer did not check any check cashing stores he says again. 

Thomas directs witness to purchase of red Escalade at Dalgleish Cadillac. Thomas asks if Kwame was being actively monitored by IRS at the time. 

Thomas asking if Kwame was being monitored by the IRS around the time of his incarceration in 2008. 

Thomas asking if Sauer knew about the send off by Kwame's mother and sisters 3 days before he went to jail and there was gifting that went on. Sauer doesn't know about that. 

Thomas says that Kwame's mother gave Kwame $4,000. Looking at the cashier's check from Carolyn Cheeks Kilpatrick. 

Sauer agrees that cashier's check is in Cheeks Kilpatrick's name. 

Sauer says that the Escalade is from 2009 so it doesn't impact the tax charges. The cashier's check just proves that it went to purchase the car. 

Sauer says he didn't personally interview Kwame's mother. She went before the grand jury. 

9:25AM Looking at series of transactions that occurred after October 2008.

Thomas showing a series of transactions around the time Kwame went to Wayne county jail in 2008. 

Looking at deposit of $4,400 into joint Comerica account for Kwame and Carlita on October 20th 2008. 

Looking at another deposit on October 27th $1,000 in cash and the rest is unintelligible. Talk into the microphone Thomas!!!! 

Looking  check from Willa Walls for $100 in October 2008. 

Tunesia Fowler Turner check for $100 in October 2008. Memo line says "Love you" 

Marvel Cheeks check for $100. 

Clotilde Fowler for $100. Also "Love you" in the memo line. Again in October 2008. 

Patricia Peoples, a relative of Kwame, February 13th 2009. Check for $250. 

Sauer says that it appears that checks were given to Kwame and that checks are not captured in cash analysis. 

Thomas says that is not the question. It's about cash that could have been gifted around the same time these checks were written. 

Sauer says it did pique their interest so those people were placed on a grand jury. 

Thomas says they may have known about others if they had seen it. 

Sauer says there were cash transactions before "Splash of Red" party in 2006 and after 2006. 

Thomas says how would you know if you didn't know about all the parties and that there was no cash given to him at these parties. 

Sauer says the findings and evidence do not support Thomas's theory. 

Sauer further says they took investigative steps to find cash sources of gifts. Sauer says they put many people on grand jury. 

Sauer agrees that he did not know about Splash of Red party. 

Thomas says so the gifts from that were not included in the summary. The lawyer says he wants to know sum total of Sauer's knowledge. 

Thomas references Splash of Red party, the Detroit Police party where gifts were made. 

Thomas says so the Detroit Police party not factored into summary or Kwame's 30th birthday. 

Thomas says if you didn't know about it, it couldn't have been accounted for. 

Sauer says if the cash was received and deposited, it is included in the analysis. 

Sauer agreeing that Kilpatrick Civic Fund is a tax exempt corporation and further agrees he is not a specialist on 501c4 corporations. 

Looking at the application for tax exempt status for the Kilpatrick Civic Fund. 

Surprise, surprise Thomas showing us the articles of incorporation for the Civic fund. He loves trotting these out at every opportunity. 

Sauer says this document was reviewed by IRS personnel. 

Really hard to understand what Thomas is asking as he not talking into the microphone. No idea what he is saying. 

Sauer saying tax exempt status was approved for the Civic Fund. 

Thomas says would you agree that Kilpatrick was representing the city of Detroit from 2002. Sauer agrees. 

Thomas saying that the articles were amended with respect to political participation. 

"They were never amended with the IRS," says Sauer. 

"They were never submitted to the IRS," says Sauer. He is claiming the amendments to allow for political activities were never given to the IRS. 

Sauer saying that he is not saying they weren't amended but they were never submitted to the IRS.

9:45AM Sauer says he believes the amendments were submitted to the state of Michigan. 

Looks like there is a fav receipt stamp for July 26th 2001. The amendments signed by Derrick Miller in July 2001. 

Sauer saying the original application for the Civic Fund is the only thing that was ever submitted to the IRS. 

Kwame is very invested in this testimony right now. Shaking his head, writing lots of notes. 

Article c): Educate Detroit residents on the importance of voting. 

US Attorney Michael Bullotta requests a sidebar. The lawyers all march over to the judge's bench. 

Sidebar disbanded. Thomas finally speaking into the microphone.

 Revised article c) emphasizes educating Detroit residents on voting. 

Now looking at revision of paragraph 4. Talks about the participating in and distribution of political statements. 

Thomas asks Sauer what was going on in the city in July 2001. Kwame was running for mayor. 

Derrick Miller signed the revised articles on July 24th 2001. They were received by the state of Michigan on July 26th 2001 but never by the IRS. 

Looking at consent of the Board of Directors on July 23rd 2001. Includes signatures from Ayanna Kilpatrick, Christine Beatty the board members Derrick Miller, Erik Rayford and William Phillips, the Secretary for the Civic Fund board. Kwame is not a board member of the Civic Fund at this point. 

Sauer says he thinks Kwame may still have signed some Civic Fund checks after this point. 

Thomas saying something about pre-signed checks. 

Thomas says that the Civic Fund was audited at one point in a civil investigation. Sauer says the criminal investigation stopped it. 

Looking at resignation of Kwame from the board of the Civic Fund on July 21st 2001. Ayanna Kilpatrick resigned as Secretary on August 21st 2001. 

Thomas says that the exhibit on Ayanna is being withdrawn because there are typos. 

Sauer says that William Phillips stepped away from the board of the Civic Fund sometime in 2008. 

Thomas discussing a metting of the board members of the Civic Fund at the Manoogian Mansion just before Kwame went to jail in October 2008. 

Sauer says he is aware of a meeting called by Kwame at the Manoogian Mansion. Not sure on the exact timing bit before Kwame went to jail. 

Thomas says the importance of this is whether William Phillips was at the meeting. 

Bullota objects on speculation. Judge overrules. 

Sauer doesn't know if Phillips was at the meeting. 

Thomas says Phillips was working for a large law firm in Detroit. 

Looking at a document from Phillips's law firm reviewing the dates that Phillips worked on a document for the city of Detroit. Thomas says that it is for the Civic Fund. Starting on April 28th 1999. 

Addressed to "Christian Beatty"- aka Christine Beatty. 

Looks like Phillips spent considerable time helping craft the Civic Fund document. 

Thomas says Phillips isn't the only lawyer working on the file. Sauer says that is possible. 

10:10AM Phillips still working on Civic Fund file in May 2001 which is just prior to the revised articles of incorporation being sent to the state of Michigan. 

So Thomas says there is a lawyer has been revising the statutes of the Civic Fund. 

There is a reference to Don Barden. Sauer says he thinks he is a Detroit businessman. 

2 entries for July 9th 2001 for Phillips' billing invoice detailing research on 501c3 and 501c4. 

Now looking at August 29th 2001 Free Press article "Kilpatrick Took Donation, now Questions Propriety." Infamous story about homeless shelter operator Jon Rutherford donating $50,000 to the Kilpatrick Civic Fund. 

Thomas shows that Phillips's firm Pepper Hamilton was billing for services in August 2001 around the time of the Rutherford/Civic Fund scandal. 

On August 24th 2001, there is a meeting and a review of IRS codes: "Conference with W. Phillips regarding political activity limitations." There is also research on IRS revenue rulings and into Michigan campaign finance laws. 

"Meeting with Berg, Beatty, Kilpatrick and Miller regarding Civic Fund Tax research on political activity limitations for 501c4." Listed on August 27th 2001. 

Bullotta calls for sidebar. Lawyers head over to judge's bench. Kwame hightails it out of the courtroom. 

So it would seems that Thomas is trying to indicate in painstaking detail that Kilpatrick and company spent many hours with their lawyer William Phillips going over laws involving the Kilpatrick Civic Fund and thus would not be inclined to break them. 

Judge clarifies to the jury that the objection is that the witness Sauer doesn't know what was going on at the law firm. Bullotta objecting that there is no foundation to ask this witness these questions. Judge says that the defense is under no obligation to bring in another witness to ask about the law firm billings. 

10:29AM Judge calls for a 20 minute break. 

Thomas asks if these billings are not specific and detailed. "It is specific," says Sauer.

10:58AM Jurors filter back in. Thomas continues with questioning Sauer about lawyer billings for consultations on the Civic Fund. 

Looking specifically at activity between August 27th and 30th 2001. On the 30th, describes "Legal research review of the Michigan Campaign Act, conference with B. Berg re same, conference with K. Kilpatrick re same." 

Judge sneezes and blows her nose. Juror says bless you. Judge tells jurors to stay healthy. 

Thomas makes some joke about no one saying God Bless you to the defendant. 

Thomas discussing specific exemptions to the Civic Fund. Talking about check from Civic Fund to the Great Wolf Lodge. Sauer remembers it. It was for $1,110. Sauer doesn't remember the amount. 

Thomas asks if this made it on the personal expenses spreadsheet IRS made. Sauer says he can't remember. 

Thomas bringing up the summary of personal expenses identified. 

Looking at the Spy Ops expenditure for $1,397 for October 2007. Thomas saying that the witness testified about that there was a desk that had Warren Evans nameplate on it. Sauer says he remembers that but that service was not related to this check. Thomas says that Warren Evans never occupied space on the 11th floor where the mayor's offices were. 

Looking at Marriott Express Cypress Harbor Orlando for $367.88. Thomas says if Kwame was on business for this trip would it be an expenditure. Sauer says it was Bernard and has no idea if he was there doing business for the Civic Fund. 

Now the first payment to Judy smith's Impact Strategies. Sauer says he recalls her testimony that she did no work for the Civic Fund. 

The Hilton Southlake and the Super Camp for $2640. Sauer agrees that the super Camp is an educational camp sponsored by Ivy League school. Sauer says he can imagine it was an educational experience for the Kilpatrick children and Jeaff Beasley's son. 

Sauer says he believes this was personal expenses.

"That is your opinion," says Thomas. 

"Yes it is," says Sauer. 

$5180 at Hilton Southlake on September 17th 2008. 

Lots of Hilton Southlake expenses in December 2008. 

Now Thomas loops back to the Civic Fund meeting in October 2008. April Edgar, Christine Beatty and others with the Civic Fund were there. Kwame was leaving office and leaving his residence at the Manoogian. Sauer says Kwame had pleaded guilty to charges in Wayne County and was facing incarceration. 

Sauer saying he is not sure about the exact date. 

Thomas says so Kwame was out of work, no place to stay, no job line up and travel restricted. 

"I don't know if that characterization is accurate," says Sauer. 

Thomas says that without Kwame in the room the meeting participants decided that things related to the move would be paid by the Civic Fund. So Thomas wants to know why these expenses were identified as personal expenses. 

Thomas asks if he is aware of Kwame ever contributed personally to the Civic Fund. 

"He may have," says Sauer. 

Looking at a check from May 6th of 2005 there is a personal check from Kwame for $1,500 for the Kilpatrick Civic Fund. 

So Thomas says it looks like there was money going in from Kwame into the Civic Fund. 

Sauer agrees that in May 2005 there was money going into the Civic Fund. 

Thomas asks if the Marriott Legacy town Center was included on list of personal expenses. 

Suaer can't remember. 

Thomas asks if Sauer is aware of trips Kilpatrick took to Texas related to the Civic fund. 

Sauer says he is not aware of any. 

Thomas hands a check to Sauer and asks if he recognizes it. 

It is a check to the Marriott Legacy Town Center for $982 on May 12th 2008. Signed by April Edgar and Derrick Miller. Sauer says it was not included on his list. 

Looking at the Four Seasons in Dallas for $1,150 is on the list. 

Thomas says that there are some trips to Texas that the IRS didn't put on  list and others that they did. Sauer agrees. 

Judge tells jury that just because a lawyer puts facts into a question that doesn't mean the facts are true. 

Thomas asking if Sauer is aware that Comerica moved its headquarters from Detroit to Dallas. 

Sauer doesn't recall exactly where the move was to. 

Thomas asks if Sauer was aware that the city did lots of business with Comerica and Kwame wasn't happy about the move. 

Thomas says is it too that Kwame met with banking officials to negotiate their transfer to Texas. Talking specifically around May 2008. 

Sauer says he remembers from news coverage that Kwame no longer wanted to do business with Comerica because they moved out of Michigan.  

11:28AM Looking at the check for $1,150 to the Four Seasons on March 31st 2008 drawn from Civic Fund. 

Sauer says he knows who Reverend TD Jakes is but does not knowing about a meeting with him and Kwame in Texas. 

Looking at a check to Potter's House from Civic Fund for $1,000 on April 4th 2008. Memo line reads Donation. Potter House is affiliated with Jakes's church. 

Thomas says we have seen certain checks. Thomas places a blank sheet of paper in  front of him "for demonstrative purposes." 

Thomas writes on the sheet $5180 from Hilton Southlake. 

"I have very little trust in Mr. Thomas's math and recollection," says Sauer about needing to see the spreadsheet of identified personal expenses again. 

Thomas writes another $1735 for Hilton Southlake town Square. Another item for $1574 and then another $1735. all at Hilton Southlake Town Square. 

Thomas is essentially listing all the expenses that should be excluded. Sauer used his calculator and initially comes up with $11,292.73. Thomas gets him to add an additional 1735 and the new total is $13,027.73. That's the amount Thomas is arguing shouldn't be included in personal expenses from the Civic Fund. 

Thomas hands Sauer a document from October 22nd 2010. 

Looking at cashier's check for April 13th 2008 for $13,027.73. Says remitted by Carlita and Kwame. Thomas says that's the exact amount we came up with. Saying the Kilpatricks reimbursed the Civic Fund that exact amount. 

11:41AM US Attorney Michael Bullotta redirects. 

August 13th 2008 is when the subpoena was served to Kwame on the Civic Fund. 

The payment from Kwame back to the Civic Fund was on April 13th 2009. Sauer says that did not pay back the total amount which was more than $152,000. 

Sauer says that he didn't include some expenses because he gave Kwame the benefit of the doubt that he was conducting Civic Fund business. 

Bullotta asks about Southlake, TX stays in September 2008. Witness Mahlon Clift testifies that the Kilpatrick's were there shopping for a new house. Bullotta asks if that is why Sauer included it. Sauer says it is. 

Bullotta brings back to the articles of incorporation and asks if it lists anywhere for personal uses or for the use of the campaign of Kilpatrick for mayor. Sauer says it does not. 

Sauer reads the corporation should not carry on any activity that goes against the 501c4. Paraphrasing here. 

Sauer says that the Civic Fund is a tax exempt organization. 

Bullotta brings back William Phillips's law firm billings. Looking at meeting activity in 2001. Bullotta says you were questioned about Kwame getting legal advice on the 501c4. 

Bullotta asks about the debate that occurred later that discussed what the Civic Fund could and could not do. 

Thomas asks for sidebar. 

Bernard passes a note to Mike Rataj who passes it to Bobby. 

Sidebar disbands and Bullotta says he wants to show clip from October 28th 2008 which was after those meetings. 

"We haven't used one penny, not one penny of the Civic Fund on this campaign because it's not allowed by law," says Kwame in the debate clip. 

Sauer agrees with what Kwame said on the clip about the legality of using Civic Fund monies. 

11:53AM Juror asks for a quick break.

12:05PM Looking at Kwame's resignation as Chairman of the Board from the Kilpatrick Civic Fund on August 21st 2001. 

Looking at a Civic Fund check for $1009.47 check to Sonnenalp Resort on November 7th 2002. 

Text exchange between Beatty and Kwame on November 9th 2002. 

Judge calls for sidebar. 

In the exchange, which we do not get to look at but have seen before, Kwame directs Beatty to get a check from the Civic Fund out of his bag to pay for the stay. 

Looking at a cash deposit of $4400 at Bank of America on October 20th 2008. 

Bullotta references October 2008 checks Thomas showed that Kwame received before going to jail. 

The checks seem to be dated October 22nd 2008. Bullotta says based on that, is it possible that Kwame took those to check cashing business on October 20th 2008. Sauer says no. 

Sauer says he tabulated all the checks Thomas introduced yesterday given to Kwame in June 2006. The total was $3846. 

Bullotta says that Thomas alluded that people may have also given cash. 

Looking at summary of Kwame's cash payments at the First Independence Bank. Looks like a cash payment was made on June 15th 2006 for $4,000. Sauer looked for cash deposits in June and did not find any. This was the only cash transaction that Sauer found. 

Sauer agrees that there are more cash deposits and payments after that date. Agrees too that cash deposits seem to be in round numbers. 

Looking at a $10 check to Kwame for $10 on June 18th 2006. Memo line reads "Our mayor" from Mabilene rogers. Kwame deposited it into his account. 

Looking at $1000 check to Kwame from Mazin and Basim Shina of June 9th 2006. The Shinas also gave $1000 to the Civic Fund in April 2008. Sauer agrees these checks were not included in his cash summary. 

Carilta's personal Comerica account was opened August 2000 and closed at the end of 2004. Sauer says that Carlita did not withdraw enough from her accounts to account for Kwame's large cash transactions. 

Total amount of cash withdrawals from Carlita's Comerica account was $26,813.70 from late 2002 through 2004. 

Looking again at the difference between Kwame's net wages between 2002 and 2008 and his outflows that came to $840,962.33 

Bullotta asks about Emma Bell and Derrick miller and if Kwame is receiving bribes or kickbacks is that taxable income for him. Yes it is says Sauer. 

Bullotta asks Sauer if Kilpatrick went into debt for the $840,962.33. Did he go into bankruptcy for it? He did not says Sauer. 

12:22PM Thomas crosses again. 

Thomas says what if Emma Bell, Derrick Miller and Karl Kado did not pay kickbacks or bribes, would that be taxable. no says Sauer. 

Thomas says you recognize that Carlita and Kwame may have shared expenses. Sure says Sauer. 

Thomas says Carlita's U.N.I.T.E. account not included in your calculations. No says Sauer. 

Thomas says the approximately $17 k from the U.N.I.T.E. and the more than $26k from the Comerica account not included in computations and thus they are not accurate. Sauer says computations are accurate. 

Thomas says didn't you say in my cross examination of you that you are not an expert in 501c4 corporations. Yes says Sauer. 

12:26PM Bullotta redirects. If you included that $17k and that $26K would that even come close to denting the more than $840k. no says Sauer. 

12:27PM Thomas aks if there is any indication of cash gifts or loans in that $840k. No says Sauer. 

12:28PM New witness Carl Selz is an IRS agent revenue agent. He does tax investigations. Been with IRS for 23 years. Before working with the IRS, he worked with the Detroit Police Department for 11 years. 

Training in investigative techniques and certified fraud examiner. 

Has testified 2 before in criminal tax cases. 

Says he has been brought in as a summary witness, an independent witness for the government. Says he only reviewed the indictment and the tax returns on this particular case. 

Judge asks witness to slow down. 

Selz says again he is an independent arm of the government. Say he has limited his views to tax returns and indictment. He makes summaries and tax comps. 

Selz says summary witnesses are not an automatic extension of the prosecution. Witness says he doesn't automatically accept everything placed in front of him. 

Selz explains that tax comps are the adjustments to particular tax return. 

Witness looked at Carlita and Kwame's tax returns for 2003 through 2008. Yes says witness. 

He has drawn a conclusion on whether they are correct. 

Bullota asks if he formed an opinion on tax returns' accuracy. Witness says yes. 

Looking at summary of 2003 through 2008 for criminal tax due and owing. 

Witness takes numbers off tax returns and includes adjustments to income which includes cash transactions and deposits in Kwame's multiple accounts, corrected taxable income, corrected tax liability and tax reported per return. Uses the specific item method. 

Witness goes over the numbers in painstaking detail. Really painstaking. 

Tax due and owing which is the difference between what Kwame actually paid in taxes and what he should have paid: in 2003 it's $23,857.48, in 2004 it's $17,701.42, in 2005 it's $22,969.18, in 2006 it's $29,933.58, in 2007 it's $28,440.63 and in 2008 it's $75,501.33. 

Bobby's lawyers Mike Rataj and Susan Van Dusen are chatting. Bullota asks the judge is there can be a little less talking because he is having a hard time hearing the witness. 

Bullotta asks if witness is aware that in 2008 Kwame left office and didn't get his full salary for the year. Witness says he is. 

Total tax owed by Kwame to the IRS for the period between 2003 and 2008 is $195,403.61. 

Now looking at computation of the understated income. 

Increase in taxable income after corrections: $78,100 in 2003, $60,600 in 2004, $75,293 in 2005. Removes sheet before I can get the next 2 years. 

Now looking at 2008. Increase in taxable income is $250,250.47. Kwame reported only $41,299 when he should have reported $291,549.47. 

Witness says he didn't take into accounts personal checks, private checks, cash for suits. strictly cash that went in, credit card payments and cashier's checks. Also no payments from the Kilpatrick Civic Fund that may have gone to the Kilpatrick Civic Fund. 

12:55PM Judge mentioning additional coverage of Kwame outside of what is going on in the courtroom. Edmunds says it is really important to continue to avoid all coverage and to not let people bend their ear about it. 

Court adjourns for the weekend and will reconvene Monday morning at 9AM. 

About the author

Alexandra Harland is a Princeton undergrad and has a masters degree in International affairs with Columbia. A Montreal native, she worked with the Daily Telegraph newspaper for a few years before transitioning to TV, when she worked at ABC News with Peter Jennings. Alexandra has also worked in newsrooms in both Detroit and Boston.

Special Coverage: Kilpatrick on Trial

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