Judge boosts Kwame Kilpatrick's debt to $11.5M

Robert Snell | The Detroit News

Detroit — A federal judge sent former Detroit Mayor Kwame Kilpatrick a prison cell-warming gift Wednesday: a $552,862 bill stemming from another City Hall scandal.

Kilpatrick, 48, who was recently transferred from an Oklahoma prison to a New Jersey lock-up, was ordered to pay the money to the U.S. Securities and Exchange Commission. The SEC claimed Kilpatrick was part of a scheme to strong-arm a city pension fund businessman for $125,000 worth of private flights, Prince concert tickets, steakhouse dinners, golf trips and VIP hotel rooms in Las Vegas.

The order from U.S. District Judge Victoria Roberts boosted Kilpatrick's debt to more than $11.5 million, which includes taxes, restitution related to various criminal convictions, attorney fees, loans and credit card bills.

Collecting could be difficult. Kilpatrick claimed he was broke before being convicted of racketeering conspiracy in 2013 and recently said he had 96 cents in his prison commissary account. Kilpatrick isn't scheduled to be released from prison until August 2037, though his family is pushing for clemency from President Donald Trump.

Kilpatrick’s finances came into sharper focus April 19. That’s when U.S. District Judge Arthur Tarnow ended a six-year legal battle by issuing a nearly $7.5 million judgment to a firm owned by minority contractor Willie McCormick.

McCormick sued the former mayor and contractor Bobby Ferguson in 2012, alleging they ran a secret scheme to steer water department work to favored firms.

McCormick’s lawsuit mirrored allegations that were central to the racketeering conspiracy case against Kilpatrick and Ferguson. Ferguson was sentenced to 21 years in federal prison.

Kilpatrick, Ferguson and former mayoral aide Derrick Miller never responded to the civil lawsuit and McCormick received a default judgment in 2016. A federal magistrate judge in March issued a recommendation that McCormick receive $7,477,874, which represents lost profits on three Detroit Water and Sewerage Department contracts.

The McCormick lawsuit was filed the same year as a separate civil complaint filed against Kilpatrick and others, including former Detroit Treasurer Jeffrey Beasley.

The SEC alleged the city officials received extravagant gifts in exchange for approving pension fund deals pitched by Detroit businessman Chauncey Mayfield, whose firm reaped millions in fees tied to about $115 million in investments made by the city’s pension funds.

Kilpatrick and Beasley never responded to the civil lawsuit and a judge later issued an approximately $700,000 default judgment against the pair.

In April, the SEC’s lawyers asked Roberts to issue a final judgment.

Beasley, 49, was sentenced to 11 years in federal prison in 2015 for pocketing bribes while serving on the city’s pension fund boards.

Beasley was the lead defendant in a widespread corruption case that provided insight into a system of businessmen bribing pension trustees for their vote on investments that were supposed to raise money for retiree benefits. Instead, two Detroit pension funds lost more than $95 million in corrupt deals.

On April 16, six years after the SEC filed the lawsuit, Kilpatrick responded and asked to have the judgment set aside.

Kilpatrick wrote that he did not recall anything about the lawsuit and was preoccupied with the criminal corruption case.

In a letter sent from federal prison in Oklahoma, Kilpatrick asked the judge for an “opportunity to zealously and vigorously defend myself.”

In response, the SEC blamed Kilpatrick for ignoring the lawsuit, a copy of which was served on the former Detroit mayor at his rental home in May 2012 in Texas.

“Although he indisputably knew about the complaint, Kilpatrick never answered, pled, appeared, or otherwise defended the SEC’s charges,” the commission’s attorney Timothy Leiman wrote in a filing.

On Wednesday, the judge said Kilpatrick's excuses for failing to respond to the SEC lawsuit were illegitimate.

The judge ordered Kilpatrick and Beasley to pay $122,923 plus $39,939 interest.

Kilpatrick also was ordered to pay a $390,000 civil penalty.

Here is a breakdown of Kilpatrick's other debts awaiting his release from federal prison:

■ $1,520,654 in restitution to the city water department from the city hall corruption scandal.

■ $854,062 in restitution to the city stemming from the text-message scandal that ended his political career. Kilpatrick hasn’t made a payment since before being sent to prison.

■ $650,000 in attorney fees.

■ $240,000 in loans from Compuware co-founder Peter Karmanos Jr. and businessmen Roger Penske, Dan Gilbert and James Nicholson.

■ $195,000 in federal taxes.

■ $53,577 in student loan and credit card debt.

rsnell@detroitnews.com

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Twitter: @robertsnellnews