IRS squeezes Kilpatrick, wife over cash, land deals

Robert Snell
The Detroit News

Detroit — The feds aren't finished with former Detroit Mayor Kwame Kilpatrick — or his wife.

The Internal Revenue Service is investigating the Kilpatricks' real estate deals and is trying to track down everyone who gave money to the disgraced former mayor from 1992 to 2008, the year he resigned amid the text-message scandal.

The sweeping investigation emerged in a federal court filing late Monday. Kilpatrick's lawyer, Harold Gurewitz, is fighting an IRS summons seeking records of all bank accounts and real estate deals involving Kilpatrick.

Gurewitz says he cannot produce the records because doing so would violate attorney-client privilege. Regardless, the U.S. Attorney's Office likely has those records because Kilpatrick was convicted of tax-related crimes during the City Hall corruption trial, Gurewitz wrote in the court filing.

Gurewitz believes the investigation is unrelated to Kilpatrick's criminal case.

"They're doing some review or audit or investigation — whatever way you want to characterize it," Gurewitz said. "Generally … they're trying to determine if there should be more income tax assessed."

IRS spokesmen declined comment.

In December 2012, four months before he was convicted of racketeering and other charges, Kilpatrick said he was $1.8 million in debt. That debt included $240,000 in loans from Compuware co-founder Peter Karmanos Jr. and businessmen Roger Penske, Dan Gilbert and James Nicholson.

The IRS investigation is emerging while Kilpatrick waits to hear if a federal appeals court will vacate his conviction and order a new trial.

Kilpatrick was found guilty of 24 counts in March 2013, including racketeering conspiracy. The 44-year-old former Detroit mayor is serving a 28-year sentence in an Oklahoma medium-security federal prison.

Kilpatrick was ordered to pay almost $4.6 million to the city's water department, which was victimized by the mayor's racketeering conspiracy, and more than $195,000 to the IRS.

The IRS investigation is premature considering the pending appeal, Gurewitz said.

According to the summons, IRS agents want records of all bank accounts Kilpatrick and wife Carlita Kilpatrick held from 2003 to 2008. The records include bank statements, deposit details and canceled checks.

The IRS also wants documents related to the sale of two Kilpatrick homes in Detroit, on Santa Rosa and Leslie.

And the IRS wants Kilpatrick's lawyer to turn over records that would "identify each person who gave money (in cash, check, other) to Kwame Kilpatrick from 1992 through 2008."

Carlita Kilpatrick was not charged in the City Hall corruption case but her name was mentioned regularly during the government's case.

According to trial testimony, she received more than $100,000 in state tax dollars from grants steered to Detroit nonprofits by her husband when he was a state representative.

The money was so Carlita Kilpatrick's company UNITE could teach conflict resolution to children. A nonprofit leader said Carlita Kilpatrick did little work for some of the grant money.

The couple's finances played a key role in sending Kilpatrick to federal prison.

Federal agents showed Kilpatrick deposited $840,962 into his bank accounts on top of his mayoral salary.

Prosecutors said the money was from kickbacks, bribes and cash generated by a criminal racket that plagued City Hall.

The Kilpatricks once enjoyed a luxury lifestyle that has since spiraled downward. They lived rent-free in the Manoogian Mansion during Kwame Kilpatrick's tenure as mayor, owned a Florida vacation home and moved to a $1 million Texas mansion after he resigned in 2008.

With Kwame Kilpatrick in prison, Carlita Kilpatrick and her three children were living in a 3,000-square-foot rental near Dallas.

The family moved into the rental after Carlita Kilpatrick was fired in 2013 from a municipal job in Duncanville, Texas. She was fired after coworkers discovered hundreds of dollars in undisclosed cash in one of her desk drawers.

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