December 16, 2010 at 1:00 am

Kilpatrick, dad charged in City Hall racketeering case

Former Mayor of Detroit Kwame Kilpatrick and other...
Former Mayor of Detroit Kwame Kilpatrick and other...: Former Mayor of Detroit Kwame Kilpatrick and others indicted on 38 counts

Detroit — Federal investigators delivered a staggering blow to a once-powerful political family Wednesday, uncovering what they called a criminal enterprise that robbed taxpayers of millions of dollars and instilled a culture of corruption in one of the nation's poorest cities.

A federal grand jury issued a 38-count federal indictment Wednesday that portrayed Kwame Kilpatrick's career in public service — from the state House in Lansing to City Hall — as a racketeering conspiracy.

The alleged scheme, which the U.S. Attorney's Office dubbed the Kilpatrick Enterprise in the 89-page indictment, used a series of deals to extort tens of millions of dollars through contracts funded with taxpayer dollars — money that lined the pockets of his family, pals and cronies.

Kilpatrick headed the enterprise that stretched from his family tree to his friends, the indictment says.

Members of the alleged conspiracy included his father, Bernard Kilpatrick, close friend and city contractor Bobby Ferguson, former Detroit Water and Sewerage Department director Victor Mercado and former aide and close friend Derrick Miller.

The group faces federal charges that include racketeering, extortion, bribery, fraud and tax evasion. The charges are punishable by three to 30 years in prison, if they are convicted.

The indictment caps a six-year federal investigation into City Hall corruption that has netted 15 felony convictions and confirms for many how Kwame Kilpatrick wielded power.

"He tried to make everybody's life as miserable as possible as if he were the king and (tried to) run everybody out of Detroit who did not come to play," said Eric Foster, who has provided government and political consulting services in the city for years. "It's a blessing now to have this fully exposed."

The Kilpatricks, prominent Democrats, were always the biggest targets and the charges illustrate the depth, scope and impact of the ex-mayor's actions, which continue to haunt him more than two years after being chased from office amid a text-message scandal.

"Getting out of office doesn't get you off the hook," U.S. Attorney Barbara McQuade said Wednesday.

Kwame Kilpatrick allegedly received more than $590,000 in cash from the conspiracy, which he spent paying credit card bills, buying clothes, repaying loans and purchasing cashier's checks.

His attorney, James C. Thomas, promised a vigorous defense and said his client is presumed innocent.

"He's resolute and he's up for the fight," Thomas said.

As first reported by The Detroit News, the indictment revolved around the extortion of Detroit Water and Sewerage Department contractors. The public utility was a cash-rich department in which Kilpatrick once had broad powers to award multimillion-dollar contracts without City Council approval.

John A. Shea, Bernard Kilpatrick's court-appointed attorney, said the charges are a relief in one sense because his client's name has been publicly connected to the investigation for years.

"It's a difficult cloud to have hanging around you while people are talking about you … and vilifying you," Shea said. "At least it's out in the open now and we know what we're facing."

The indictment is jeopardizing Mercado's new job. He left the city in 2008 and is the general manager of the Bexar Metropolitan Water District in San Antonio, Texas, where board members have scheduled a meeting tonight to consider firing him.

Ferguson's lawyer, Gerald Evelyn, could not be reached for comment and an attorney for Miller could not be reached Wednesday.

It was unclear late Wednesday when the five defendants would appear in federal court.

McQuade said the investigation continues though additional charges are not expected against Kilpatrick's inner circle.

Sewer contracts a focus

The indictment should alleviate concerns from residents and others who complained about the amount of time spent investigating Kilpatrick, said Alan Gershel, former head of criminal prosecutions in the U.S. Attorney's Office in Detroit.

"It is perhaps the most comprehensive, multi-dimensional corruption investigation I have seen in my almost 30 years in the U.S. Attorney's Office," said Gershel, now a professor at Thomas Cooley Law School's Auburn Hills campus.

The sweep of corruption alleged in the indictment involving the utility impacts nearly every household in Metro Detroit because the department, while owned by the city, is funded by more than 4 million water and sewerage customers across southeastern Michigan.

The indictment and focus on Detroit Water and Sewerage follows years of complaints from suburban leaders over the utility's business decisions.

"What has transpired is not only a disservice to Detroit residents, but suburban residents as well," Oakland County Water Resources Commissioner John McCulloch said.

The contract dealings happened despite a federal judge's oversight of the Water and Sewerage Department.

U.S. District Judge John Feikens gained broad oversight of the department following a 1977 federal consent judgment that settled a pollution lawsuit. In turn, Feikens hired a company called Infrastructure Management Group to review contracts, contract change orders and contract amendments worth more than $500,000.

"They were victims of the fraud just like the rest of us," McQuade said.

Some not indicted

The indictment was revealing not just for who was charged but for who was not.

Some members of Kilpatrick's family and inner circle avoided criminal charges, including: Former Chief of Staff Christine Beatty, the mayor's ex-mistress, whose steamy text messages with the mayor revealed their relationship and resulted in earlier charges of perjury for her and the mayor. McQuade would not comment on her cooperation or culpability.

McQuade said some witnesses were granted immunity in exchange for cooperating with investigators, who are armed with hundreds of cooperating witnesses and hundreds of thousands of documents, including text messages, bank records and water and sewerage documents.

Carlita Kilpatrick, the ex-mayor's wife. While the indictment accuses Kilpatrick of enriching his family, the former first lady was not indicted because there was not enough evidence, McQuade said.

Carolyn Cheeks Kilpatrick, Kwame Kilpatrick's mother and a congresswoman for 13 years. She testified twice before the federal grand jury in the City Hall corruption probe, as did her aide Andrea Bragg. Neither was a target of the probe.

McQuade said Kwame Kilpatrick, his father and Miller solicited bribes from people who wanted city business. The trio received $1 million in cash, flights on private jets to Las Vegas and Mackinac Island, and tickets to heavyweight fights in Las Vegas.

In one instance, Kilpatrick demanded $10,000 cash from homeless shelter operator Jon Rutherford so he would have spending money during a 2002 trip to the United Arab Emirates, according to the indictment.

The indictment accused Ferguson of funneling at least $424,000 in cash, gifts and other benefits to Kwame Kilpatrick while Bernard Kilpatrick pocketed more than $600,000 in cash.

Elsewhere, the indictment quotes from a2008 meeting at a Detroit restaurant between Bernard Kilpatrick and former Cobo Center contractor Karl Kado. At that time, Kado was cooperating with the FBI, which apparently secretly recorded the meeting.

"You don't even wanna pay me, huh?" Bernard Kilpatrick told Kado in an alleged reference to his getting paid for what the city owed him. "It would take you two years to go through lawyers to get your money man."

After the contractor declined to pay Bernard Kilpatrick, the city refused to pay Kado, the indictment says.

The indictment alleges Rutherford paid more than $500,000 to the two Kilpatricks in return for the former mayor's support of a waterfront casino Rutherford was backing. Rutherford has pleaded guilty to tax evasion. The casino never materialized.

Text messages quoted

Parts of the indictment quote from text messages sent to and from Kilpatrick.

In 2004, while discussing the Book Cadillac hotel project in downtown Detroit, Bobby Ferguson texted Kilpatrick: "I am famous now. just need to get some money."

"Lol!" Kilpatrick texted back. "Right. Let's get you some." Ferguson's text in response corrected Kilpatrick. "Us," he said.

The indictments mark the conclusion of the U.S. probe into the Kilpatrick family, McQuade said, and it is another low point in the clan's fall from power. Just two years ago, it counted the mayor of a major city and a congresswoman among its members.

Now, Kwame Kilpatrick is in prison and his mother, U.S. Rep. Carolyn Cheeks Kilpatrick, will soon leave Congress, following her primary defeat in August in what experts say was a backlash over her son's legal issues.

While Kilpatrick's inner circle likely will avoid additional charges, the U.S. Attorney's Office and FBI said the investigation into others continues.

"It would be nice to say it's done, but this is the real world, and it's not done," said Andrew Arena, special agent in charge of the FBI in Detroit.

"It's not going to be done until we say it's done."

Detroit News Staff Writers Darren Nichols and RoNeisha Mullen contributed.

Detroit News Staff Writers Darren Nichols and RoNeisha Mullen contributed.

Victor Mercado
Bernard Kilpatrick is in court for his son Kwame's sentencing by ...
Bobby Ferguson