June 9, 2009 at 2:52 pm

Scandal at Cobo deepens

Ex-contractor Kado admits making illegal payments to unnamed city official, associate

Detroit -- New details emerged Monday in the contracting scandal at Detroit's Cobo Center when a former Cobo contractor admitted he made illegal payments to an unnamed city official in the early years of Mayor Kwame Kilpatrick's administration.

The illegal payments Karl Kado made to the city official and an associate of that city official are in addition to those he paid to two former Cobo directors -- Lou Pavledes and Glenn Blanton -- federal court records make clear.

Kado, 68, who held exclusive and lucrative electrical, janitorial and retail contracts at Cobo and a share of the downtown convention center's catering, pleaded guilty in U.S. District Court on Monday to filing false tax returns for the 2002 and 2003 tax years.

Kado is not charged with bribery, and he won't face such a charge under his plea deal with federal prosecutors. But Kado admitted to U.S. District Judge Marianne O. Battani that he failed to report $270,000 in cash income in those two years because he used "some or all of this unreported cash" to pay the unnamed recipients at the same time he was paying Pavledes.

It's not clear whether the cash was illegally pushed on city officials by Kado as bribes or extracted from him as a form of extortion, though some payments were "requested ... by the city official and the associate of that official," Kado's plea agreement says.

Pavledes admitted in August he took about $100,000 in illegal payments from Kado when he was Cobo director. The illegal payments to Blanton -- about $15,000 -- came later, after Blanton took over the top Cobo post from Pavledes in November 2004.

What hasn't been quantified is to what extent Kado's deals drove up the cost of doing business at Cobo -- long a sore point for exhibitors at the annual North American International Auto Show.

Contracts stood out

The Detroit News reported on unusual features of Kado's Cobo contracts in November 2005, when the newspaper was first to report that Kado was under FBI investigation.

For example, Tradeshow Electric sold its Cobo electric contract to Kado in 2003 because it wasn't making money, company officials told The News. Kado, with city approval, hiked the hourly rate charged to auto show exhibitors by 21 percent, to $88 an hour. When exhibitors complained, the city reduced the increase but slashed from 15 to 3 the percentage of electric revenue Kado had to pay to the city, resulting in an estimated $1.4 million improvement in Kado's bottom line.

Kado's plea agreement confirms for the first time that at least one other city official is implicated in the Cobo scandal besides Pavledes and Blanton.

Prosecutors would not disclose the identities of the unnamed official and that official's associate.

Kado left court without commenting and his attorney, Christopher Andreoff, would not say who received the other payments from Kado

Filing a false tax return is a three-year felony. Kado faces federal sentencing guidelines of 12-18 months, but if he continues to cooperate with federal officials and testifies truthfully as needed, prosecutors will recommend any sentence be capped at six months, Assistant U.S. Attorney Michael Bullotta told Battani.

Kado, who was charged last August, appeared for his arraignment with his wife, Julie, and one of his nine children.

Charges part of probe

The Cobo charges are part of a longstanding and wide-ranging FBI investigation of Detroit City Hall contracting that goes well beyond Cobo and Kado, including a multimillion-dollar sewage sludge contract, deals made with the city's pension funds, and the city's riverfront Asian Village development, among other areas of inquiry.

The former mayor's father, Bernard N. Kilpatrick, has described himself as a friend of Kado and ran his business consulting firm out of a building on East Jefferson owned by a Kado company. The FBI tapped Bernard Kilpatrick's home and cellular phones as part of the investigation and has been scrutinizing payments made to the consulting firm by contractors seeking city of Detroit work.

Kado, who was born in Iraq, came to the United States in 1973, and became a U.S. citizen in 1980, held Cobo contracts through his Metro Services Organization LLC and related companies. The illegal payments he made were from undeclared income taken in by his Cobo sundry shop, Rachel's Corner, during the annual North American International Auto Show, the court was told.

Pavledes, who was Cobo director from 1996 until 2004, last year admitted to taking about $100,000 from Kado when Pavledes pleaded guilty to a felony financial charge related to the way he tried to conceal the bribe payment from federal authorities. Blanton, who was Cobo director from November 2004 until February 2007, admitted to taking about $15,000 from Kado when he pleaded guilty in October to an obstruction of justice charge.

Pavledes and Blanton await sentencing before Battani.

Kado's sentencing was set for Sept. 22.

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