$5 for 3 months. Save 83%.
$5 for 3 months. Save 83%.

Indicted Detroit pension official admits taking cash

Robert Snell
The Detroit News

Detroit — Federal prosecutors portrayed a retired Detroit police officer Tuesday as a corrupt liar who traded his vote on a city pension board for bribes, private jet flights, a $5,000 casino chip and a Christmas basket stuffed with cash.

The portrayal of former Detroit Police and Fire pension trustee Paul Stewart came during a trial that also involves former Mayor Kwame Kilpatrick’s fraternity brother Jeffrey Beasley and former pension fund lawyer Ronald Zajac. Kilpatrick is an unindicted co-conspirator who factors into many of the criminal allegations against the three, who face 20 years in prison if convicted.

The case explains what happened to money from a controversial $1.4 billion Wall Street deal blamed for helping plunge Detroit into bankruptcy. The city borrowed the money to pump up Detroit’s two pension funds but prosecutors allege the cash ended up in the pockets of businessmen who bribed pension officials.

Stewart testified in his defense Tuesday and admitted receiving gifts and valuable items from people who were pursuing loans or investment money from Detroit’s pension funds, including Greektown mogul Jim Papas. The funds are responsible for overseeing billions of dollars that pay for municipal retiree pensions.

In December 2007, Stewart received a Christmas card from Papas, who was involved in several pension fund investments. Hidden inside was a $5,000 casino chip.

“He said ‘Merry Christmas,’ ” Stewart said.

The same month Stewart pocketed the alleged bribe, Papas made $600,000 off a Detroit pension fund investment, according to testimony.

The pension fund trial is the first major public corruption case in Detroit since Kilpatrick was convicted and sentenced last year to 28 years in federal prison.

The trial continues Wednesday in federal court. Beasley is expected to testify. He is accused of pocketing bribes and kickbacks in return for approving more than $200 million in pension fund investments. The city’s two pension funds lost more than $84 million on the deals, prosecutors allege.

Despite receiving the casino chip, Stewart insisted he did not trade his vote for money or gifts.

“Nothing I did was illegal or wrong,” said Stewart, who served on the pension fund through his position as vice president of the Detroit Police Officers Association.

During cross-examination, Assistant U.S. Attorney Stephanie Davis asked Stewart about a Christmas basket he received in December 2007 from pension fund Georgia businessman Roy Dixon. Dixon pleaded guilty last month and admitted bribing Beasley with $2,000 and a free family trip to the Turks & Caicos islands in 2007.

“How much money was in the Christmas basket?” Davis asked.

“$1,000,” Stewart said.

Dixon was charged with embezzling more than $3 million from Detroit and Pontiac pension funds 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.

On New Year’s Eve 2007, Stewart and his girlfriend flew to Naples, Fla., for a party at Dixon’s $2.7 million vacation home.

“Did (Dixon) pay for both flights?” the prosecutor asked Stewart.

“He did,” Stewart said.

“And your hotel?” the prosecutor asked.

“He did,” Stewart said.

Months later, during a pension board meeting, Stewart recommended that pension officials study another deal involving Dixon.

Prosecutors tried to undermine Stewart’s credibility. They focused on Stewart’s tax returns from 2006-08.

Stewart worked as a private security officer at the North American International Auto Show in Detroit during those years. But Stewart had the money he earned paid to his wife and sister so the income did not show up on his tax returns, according to testimony.

“They got the money,” Stewart said.

“So if your sister said she signed the check over to you, she would be lying, correct?” the prosecutor asked.

“They got the money,” Stewart said.

(313) 222-2028