December 18, 2010 at 1:00 am

Feds track Kilpatrick, Ferguson cash trail

Prosecutors vow to tap ex-mayor's future pay if they win case

U.S. Attorney Barbara McQuade says Kwame Kilpatrick is being prosecuted under the RICO statute because he "conducted a thorough enterprise, so I think all the hallmarks of a racketeering conspiracy were there. (John T. Greilick / The Detroit News)

Detroit — Federal investigators are searching worldwide to find cash and track the business interests of former Mayor Kwame Kilpatrick, contractor Bobby Ferguson and others indicted this week in the City Hall corruption probe. No matter what they find, prosecutors — if they win their case against Kilpatrick — want a judgment that would give taxpayers a chunk of the ex-mayor's future earnings, U.S. Attorney Barbara McQuade told The Detroit News on Friday.

Prosecutors are devoting a "substantial amount of work" to tracing money that flowed to those accused in the racketeering conspiracy scheme, McQuade said. The goal is to find money, property and assets that could be forfeited if the government wins convictions.

"Even if all we can do is get a judgment that allows us to collect any funds (Kilpatrick) earns in the future, I think the taxpayers deserve that," McQuade said.

Meanwhile, a spokesman for the ex-mayor's wife, Carlita Kilpatrick, said Friday she stands by her husband.

"She is a Christian, she leans on her faith and on her belief in God, and she stands 100 percent by her husband," said spokesman Mike Paul. "She puts it in God's hands."

McQuade spoke in a wide-ranging interview two days after Kilpatrick was charged in a case involving millions of dollars and alleged kickbacks from city contractors. Also named in the indictment: his father, Bernard Kilpatrick; Ferguson, his close friend; former Detroit Water and Sewerage Department director Victor Mercado; and former aide and close friend Derrick Miller.

McQuade said she hopes to put the five on trial together in late 2011.

"With five defendants and busy lawyers, it's sometimes challenging to find a date they can all be free," McQuade said.

U.S. District Court records indicate the possible money trail stretches to Dubai and South Africa.

The FBI alleges Ferguson set up at least one overseas company during the time he and his companies were awarded at least $170 million in city contracts.

The FBI already has found more than $1.2 million in cash and checks Ferguson stashed in Detroit and Southfield.

That's a fraction of the city contracts — $109 million from the Detroit Water and Sewerage Department alone — Ferguson and his companies received since Kilpatrick took office Jan. 1, 2002.

The money trail is mixed regarding the other defendants.

Kilpatrick says he's broke and is relying on a taxpayer-funded lawyer despite receiving more than $590,000 in cash from the conspiracy, according to the indictment.

He's also saddled with a $1 million restitution bill he promised to pay the city in a 2008 plea deal on charges stemming from the text message scandal.

"I don't think there is any cash out there," said Kilpatrick attorney James C. Thomas. "They have to prove the allegations before they get to the point of collecting any money. (McQuade's) a long way from getting a judgment in the case."

Bernard Kilpatrick pocketed more than $600,000 in cash, according to prosecutors. He also has received a court-appointed lawyer and lost his East Jefferson riverfront condo to foreclosure.

Miller, the former Kilpatrick aide, was allegedly treated to private jet flights during the conspiracy but faces foreclosure on his Indian Village home.

Prosecutors say Mercado did not profit beyond earning a $240,000 salary. He owns a $500,000 house in Stuart, Fla., and, until being fired Thursday, was earning $190,000 a year heading a Texas utility.

Ferguson, however, is believed to have had access to millions of dollars through city deals that led to his indictment.

The federal government already has filed paperwork in federal court indicating investigators are trying to recover more than $15 million from Ferguson.

The IRS criminal division is working with the FBI and other agencies in investigating what the U.S. Attorney's Office labeled "the Kilpatrick enterprise."

If convicted, any income obtained by Kilpatrick, Ferguson or the others is subject to taxes whether the money was earned legally or illegally.

"We're going to follow that money," said Special Agent Stephen Moore, a spokesman for the IRS criminal division.

He declined comment on whether the search has led overseas.

This fall, FBI agents sought evidence Ferguson established business interests outside the United States since Kilpatrick's first day as mayor.

The indictment Wednesday was Ferguson's second round of federal legal trouble. In September, he was indicted on charges of profiting from a $12 million bid-rigging scheme.

FBI search warrants and affidavits from that case show agents were looking for records related to investments in gold and other precious metals purchased since January 2005. The search includes records tied to foreign bank accounts, wire transfers and other documents relating to international travel since January 2007.

In 2008 and 2009, Ferguson and Shakib Deria, an executive at one of his companies, made at least two trips to Dubai in the United Arab Emirates and traveled to South Africa, according to an FBI search warrant affidavit filed in U.S. District Court. They set up at least one company while in South Africa.

An FBI affidavit includes a transcript of a jailhouse phone conversation between Ferguson and Kwame Kilpatrick in November 2008, when Kilpatrick was jailed for obstruction of justice related to the text scandal.

Ferguson referred to a recent trip he made to the Middle East and discussed future trips with Deria, who in the phone call is referred to as "the African."

Ferguson: "Man, I'm tellin' you, though. I've been thinking about that trip me and the African took."

Kilpatrick: "Yeah."

Ferguson: "Oh, man. When you come home … that, that's it."

The ex-mayor's lawyer downplayed the jailhouse conversation.

"That was just a discussion," Thomas said. "It never came to fruition. While he was in jail, he had a lot of hopes and dreams. A lot of things changed after he got out."

rsnell@detnews.com

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