September 5, 2014 at 3:44 pm

Jury selection begins for criminal case involving Kilpatrick's fraternity brother

Jeffrey Beasley (U.S. Department of Justice)

Detroit — Jury selection began Friday in a criminal case against Kwame Kilpatrick’s fraternity brother and three others accused of participating in an alleged corruption spree bankrolled by a soured Wall Street deal that is central to Detroit’s bankruptcy case.

The timing is notable because jury selection got underway in federal court while Detroit’s bankruptcy trial continued with a fourth day of testimony on a different floor inside U.S. District Court in downtown Detroit.

About 300 potential jurors filled out questionnaires Friday that will determine whether they get chosen to serve in the case against Kilpatrick’s fraternity brother, former Detroit Treasurer Jeffrey Beasley, former Detroit pension fund lawyer Ronald Zajac and two others.

Federal prosecutors allege city pension officials started approving a series of transactions with businessmen in January 2006, six months after a Wall Street deal backed by Kilpatrick started injecting $1.44 billion into the Detroit pension funds.

Flush with cash, pension fund trustees loaned more than $200 million to businessmen accused of paying bribes and kickbacks between January 2006 and April 2009, according to federal prosecutors.

The alleged bribes and kickbacks included free vacations, casino chips and a Christmas basket stuffed with cash.

U.S. District Judge Nancy Edmunds has said jurors in the high-profile case will be anonymous. The trial is set for Oct. 7.

Also on trial is former pension fund Trustee Paul Stewart and Georgia businessman Roy Dixon. Dixon is accused of embezzling more than $3 million with the help of former Detroit Lions wide receiver Mike Farr and spending some of the cash on an $8.5 million mansion in Atlanta.

Mike Farr’s father is ex-Lion Mel Farr Sr., the “superstar” Detroit-area auto dealer.

The alleged corruption flowed from a controversial deal in 2005 pushed by Kilpatrick. At the time, he wanted to borrow $1.44 billion to prop up the city’s pension funds.

City leaders financed the pension debt by swapping its variable interest rate for a fixed rate, effectively betting the variable interest rates would exceed the fixed rate of about 6 percent.

Just the opposite happened. Variable interest rates plummeted in 2008-09 and have remained low since, costing taxpayers tens of millions in additional borrowing costs, city financial records show.

The soured Wall Street deal was insured by two firms that are fighting Detroit’s plan to shed about $7 billion in bankruptcy court.

rsnell@detroitnews.com
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Ronald Zajac (Detroit News file photo)
Paul Stewart (Detroit News file photo)