Feds want $16.8M in restitution from ex-pension trustee

Jennifer Chambers
The Detroit News

Federal prosecutors want former Detroit pension fund trustee Paul Stewart to pay more than $16.8 million in restitution to the victims of his crimes, including pensioners, beneficiaries and employees who paid into Detroit’s retirement system.

Stewart, 57, an ex-cop and former vice president of the Detroit Police Officers Association, was sentenced to almost five years in prison last year for his role in a bribery and kickback scandal that undermined Detroit’s Police and Fire Retirement System and General Retirement System.

In 2014, Stewart was convicted in a public corruption case alongside former Detroit Treasurer Jeffrey Beasley and ex-pension fund lawyer Ronald Zajac, who has since died.

Stewart and Beasley were accused of pocketing cash, free trips and more in exchange for approving $200 million in corrupt pension fund investments.

Two Detroit pension funds lost more than $95 million in the deals, weakening a pension system that faced takeover during the city’s landmark bankruptcy case.

On Feb. 5, U.S. District Judge Nancy Edmunds ordered Beasley to pay $400,000 in restitution to the pension system as part of an agreement he reached with the government over the issue. He is serving an 11-year prison sentence.

In a restitution memo filed Jan. 11 in Stewart’s case, prosecutors say Stewart caused $14.25 million in losses from a Texas land deal and $1.18 million in losses from a deal tied to ICG Leaseback. Stewart also caused losses by voting in favor of a 33 percent salary increase to Zajac, the memo says.

In the memo, Assistant U.S. Attorney David Gardey wrote his office is not using Stewart’s gain as a basis for restitution — as federal prosecutors in Detroit had done when seeking restitution from disgraced former Detroit Mayor Kwame Kilpatrick for his conviction on public corruption charges.

Judges from the 6th Circuit vacated the $4.5 million restitution Kilpatrick was ordered to pay the Detroit Water and Sewerage Department, saying the figure was incorrectly calculated.

Instead, Gardey wrote, his office is asking only for a restitution award in three areas where the amount of the losses can be “directly and proximately attributable to Stewart’s criminal conduct.”

Stewart’s attorney, Elliot Hall, said Stewart should not have to pay restitution in any of those three areas, adding Stewart cannot be held responsible for the losses in the land deal and that he voted no in the Leaseback deal. As for Zajac, Hall says the government has the burden of proving any loss.

Stewart was a trustee on the city’s Police & Fire Pension fund from 2005-11.

During that time, businessmen pitching investments to the pension funds paid bribes and kickbacks for his vote totaling $63,750, including a Christmas basket with hidden cash, a $5,000 casino chip, trips to Florida for Stewart, limousine rides, drinks, meals and entertainment, prosecutors said.

In return, the bribe payers received $5.2 million from money-losing investments approved by Stewart that cost cops, firefighters and beneficiaries more than $47 million, prosecutors said.

Stewart was found guilty of pocketing bribes and kickbacks following a trial in 2014. During the trial, Stewart admitted accepting some cash, trips and other perks but said the gifts came from friends and did not influence his investment decisions.

Zajac died in July while awaiting sentencing. The federal government was ordered to refund $150,000 to his heirs.

A Florida businessman, Chauncey Mayfield, who stole $3 million from the Detroit pension fund avoided prison for his role in the corruption scandal.

Mayfield was sentenced to three years’ probation and ordered to perform 150 hours of community service. Since being charged in 2012, Mayfield has helped arrange repayment of the stolen money to the Detroit Police and Fire Pension fund.