August 1, 2014 at 1:05 pm

Judge: Kilpatrick, frat brother must pay SEC $700K over lavish gifts, trips

Detroit Mayor Kwame Kilpatrick, Bermuda Premier and Minister of Tourism and Transport Dr. Ewart F. Brown and comedian Steve Harvey play golf for the documentary 'Original Tee to Green' at Tucker's Point Club on October 5, 2007 in Bermuda. (Amy Sussman / Getty Images)

Detroit — A federal judge ordered former Mayor Kwame Kilpatrick and his fraternity brother to pay almost $700,000 to the Securities and Exchange Commission for receiving extravagant gifts from a businessman while serving on the city’s pension funds.

U.S. District Judge Victoria Roberts ordered the payment Thursday, adding to Kilpatrick’s financial problems while he is serving a 28-year corruption prison sentence.

The SEC alleged Kilpatrick and fraternity brother Jeffrey Beasley, the city’s former treasurer, were part of a scheme to strong-arm a city pension fund businessman for $125,000 worth of private jet flights, Prince concert tickets, steakhouse dinners, golf trips and VIP hotel rooms in Las Vegas. In return, Kilpatrick and Beasley approved deals pitched by Detroit businessman Chauncey Mayfield, whose firm reaped millions in fees tied to approximately $115 million in investments made by the city’s pension funds, the SEC alleged.

“From January 2007 through October 2007, Kilpatrick and Beasley solicited personal gifts of private jets and entertainment from Mayfield,” and his firm, the judge wrote in an order. “Kilpatrick and Beasley had a duty to disclose these gifts to the (pension fund boards). They did not.”

Collection is unlikely. Kilpatrick was $1.8 million in debt before he was sentenced to prison last year and ordered to pay $4.6 million in restitution to Detroit. Beasley, meanwhile, is awaiting trial in a separate corruption case in federal court.

The men never responded to the SEC’s lawsuit, which was filed two years ago.

Kilpatrick was ordered to pay a $390,000 civil penalty; Beasley $130,000.

They also were ordered to repay $162,862 — the value of the flights and perks, including interest.

Among the free travel were trips to North Carolina, Florida and Bermuda, according to the commission.

In one instance in April 2007, Kilpatrick, Beasley and friends along with Mayfield took a private jet from Pontiac to Las Vegas for a three-day vacation where the SEC said they received massages, attended Toni Braxton and Prince concerts and played golf. No business was conducted during the trip, the SEC alleged.

A month after the trip, the SEC said the police and fire pension board voted to increase its business with Mayfield and his firm "without the knowledge that their advisers had just wooed Kilpatrick and Beasley with a $60,000 vacation."

The violations corrupted the integrity of the pension funds' investment process and could have caused a catastrophic loss for pensioners, the SEC wrote.

rsnell@detroitnews.com
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Jeffrey Beasley