Tresa Baldas

Detroit Free Press

At the Ace of Spades strip club, Detroit Police Lt. David Hansberry was treated like a VIP: He threw money in the air, racked up thousand-dollar tabs on his American Express and kept the dancers happy, club employees testified.

And he did this, a federal agent said, with the help of unexplainable cash deposits that allowed the one-time narcotics officer to live beyond his means for years, spending tens of thousands of dollars on luxury cars, including strippers, hair-restoration treatments and shopping sprees at Saks Fifth Avenue and Neiman Marcus.

Thursday, Hansberry's spending habits and lifestyle were fully exposed in a federal courtroom as the government started wrapping up its corruption case against him by telling the jury about his spending habits and his collection of vehicles, including two Cadillacs, a Corvette and an exotic British sports car — all of which he bought while he investigated drug crimes for the Detroit Police Department.

Hansberry, who is accused of running a crew that allegedly stole drugs and money seized during police raids, sat in court Thursday and rubbed his forehead as he listened to testimony that he bankrolled his lifestyle with $157,000 in mysterious cash deposits during the years of the alleged scheme: 2010-14. An IRS agent testified that the source of the cash was unknown.

According to bank and tax records, Hansberry's annual salary with the DPD ranged between $75,000 and $143,000, with overtime, though prosecutors have argued he made a lot more by stealing drugs and money seized in raids.

During the trial, which is in its fourth week, prosecutors have portrayed Hansberry as a fast-talking schemer and big spender who was motivated by greed. Thursday, they cited his bank and tax records to bolster that claim, showing jurors how Hansberry spent his money while working for the DPD:

$114,000 in car payments for an Aston Martin sports car, a Cadillac Escalade, a Cadillac ATS, a Corvette, and a Mazda 6.

$15,947 at the Ace of Spades/Cheetah’s strip club

$4,555 at a hair-restoration doctor

$14,293 in retail purchases at stores including Louis Vuitton, Saks Fifth Avenue, Neiman Marcus and Uggs

Hansberry's purchase of the Aston Martin in particular raised red flags because of how he paid for it. According to financial records, Hansberry made three initial cash payments for the car: one for $10,000; one for $5,000; one for $3,800 — all of which avoided being flagged under a federal reporting law that requires financial institutions to report any cash transaction over $10,000 to the federal government. A day after making two cash payments, he wrote a check for $15,000.

That looked like financial structuring, which is illegal, testified IRS agent Kevin Nalu, who was scolded by the judge for offering his opinion.

Nalu, who analyzed Hansberry's bank and tax records, testified that Hansberry consistently spent more money than he brought in during the years he ran the alleged scheme, but made up for the shortfalls with unexplained cash deposits.

For example, in 2010, Hansberry spent $140,000, when he only had $112,000 available — creating a $28,000 shortfall. That same year, he made $30,000 in cash deposits to cover the shortfall, the agent testified.

In 2011, the same thing happened: Hansberry had about $100,000 on hand, but spent roughly $148,000. He covered the shortfall with $66,000 in cash deposits,

“You don’t know where the cash deposits came from?” Assistant U.S. Attorney Sheldon Light asked Nalu.

“No,” the agent answered, noting without the cash, “he couldn’t cover his expenses.”

On cross-examination, Hansberry's attorney, Michael Harrison, argued that the government's financial analysis made assumptions that don't prove anything. For example, he said, the IRS agent assumed that whenever Hansberry withdrew cash from the bank, that he spent it all. For example, in 2010, Hansberry made nearly $87,000 in cash withdrawals. Isn't it possible, he argued, that Hansberry kept that money on hand and deposited it later as he needed it?

"Couldn't he have done that?" Harrison asked.

"He could have," answered Nalu.

Hansberry's codefendant, former narcotics officer Bryan Watson, who is also charged with stealing drugs and cash seized during police raids, also saw his financial records scrutinized Thursday.

According to trial testimony, Watson's financial situation was similar to Hansberry's: he spent more than he made, and he made more than $211,000 in unaccountable cash deposits to make up for the shortfalls, Nalu testified. During the years of the alleged scheme, Watson's salary with the department ranged between $44,000 and $96,000 a year.

One deposit in particular raised red flags: It was a $54,000 cashier's check that had been written to him in 2012. Nalu investigated the source of the check, and determined that it came from Watson's mom, who had previously made a $59,700cash deposit into her own bank account.

Nalu determined that Watson's mysterious cashier's check came from his mom, but he couldn't determine where his mom got the cash from.

On cross-examination, Watson's lawyer, Steve Fishman, argued that the government did not take into account that Watson's ex-wife — a Detroit schoolteacher — likely contributed to the family's expenses. He also argued that there's no proof that Watson's mom obtained the cash unlawfully. For example, he said, Watson's mom could have found the money, or won it at a casino.

Nalu said he ruled out the latter argument: That she won it at a casino. But, he conceded, he has no idea where it came from.

The bottom line, prosecutors argued, was that every year, Watson spent more money than he made as a cop.

"The cash was coming from somewhere," Nalu testified. "It's unexplained."

At the heart of the case are claims that Hansberry and Watson stole drugs and money during raids, then gave the drugs to dealers who would resell them on the street and split the proceeds with the officers. The scheme also involved fake busts, prosecutors contend, claiming Hansberry and Watson created phony search warrants and rolled up on unsuspecting drug buyers and sellers with lights flashing. They did this, prosecutors allege, with the help of other drug dealers.

A fellow officer, Arthur Leavells, also was involved in the alleged scheme and has since cut a deal in the case. He, along with several drug dealers, has testified against the officers, but the defense argues the government's witnesses are scheming liars who are only turning on Hansberry and Watson to save themselves.

Hansberry and Watson have adamantly denied any wrongdoing, claiming they were good officers trying to take down major drug organizations in Detroit. The FBI has obtained wiretap evidence in the case, in which the defendants are heard planning what prosecutors claim are phony drug busts. But the defense argues the police officers were only engaged in puffery, and that they were really working to get more information out of drug dealers in their conversations.

If convicted, the officers — along with an associate who is also on trial for allegedly being involved in one phony drug bust — could face up to 20 years in prison.

The trial is scheduled to resume Friday in U.S. District Court in Detroit.

Contact Tresa Baldas: tbaldas@freepress.com