Kwame Kilpatrick on Trial: Day 59 of testimony

Published On: Jan 30 2013 04:37:37 PM EST   Updated On: Jan 23 2013 02:04:26 PM EST
DETROIT -

Local 4 is inside the courtroom for the federal corruption trial of former Detroit Mayor Kwame Kilpatrick, Kilpatrick's dad Bernard Kilpatrick and his childhood friend Bobby Ferguson. Each day we bring you information from inside federal court as it happens.

9:03AM Monitor turns on and it looks like we are already set to go. Yesterday the last witness of the day was Doug Dalgleish who testified that Kwame Kilpatrick, freshly out of Wayne County jail in February 2009, went straight to a Detroit dealership with $13,000 towards a red blinged out Cadillac. 

It's the first day in the trial that I've seen Kwame not wear a tie to court. Guess it's casual Wednesday today. 

Judge Nancy Edmunds enters the courtroom and Kwame asks to go to the restroom. 

Judge calls counsel over to a sidebar while he is out. 

Kwame is back and talking to Bobby Ferguson and his father Bernard. 

Just noticing that Gerald Evelyn is not in the courtroom. 

9:08AM US Attorney Mark Chutkow getting ready to question a new witness. It's Gregory Terrell who is being sworn in. 

Chutkow introducing tax return exhibits. Sounds like some have to do with the Kilpatrick Civic Fund. 

Witness prepared tax returns for Kwame and Carlita from 2003 through 2007. Witness got his accounting degree in New Orleans and has worked for Arthur Andersen & Co, an international firm, and worked locally in Detroit. Started as a staff auditor for 8 years and then became an audit manager by the time he left Arthur Andersen. 

As an audit manager, he was primarily in the manufacturing division. 

Left Arthur Andersen, went to Unisys and then private practice as a CPA firm. In 1983, started his own practice as Gregory Terrell & Co. 

Witness knows Kwame. Met him before he ran for mayor. Got to know him through Bernard who he knew from basketball days in the park grounds and gyms. 

Started doing tax returns for Kwame in 2003 up to 2007. 

Terrell got tax information from Kwame and maybe on one occasion from Carlita. Typically, Kwame would call and they would talk on the phone. Then Kwame would have someone drop off documents at Terrell's office. Witness says they would discuss various sources of income and if it had changed from pervious years. 

Witness says if something was missing there would be a follow up phone call and Kwame would provide missing information. 

Most years, W2 income was main source of income for Kwame and then sometimes there were gains from stocks.

W2 is form from employer, at the time city of Detroit in his position as mayor.

Carlita had a W2 in 2003 but not in the subsequent years so Kwame was then primary source of income. 

1099 forms- witness recalls receiving at least one for a speaking engagement. 

9:20AM Looking at a 1099 miscellaneous form sent by Wilberforce University in Ohio in 2003 for services rendered by Kwame- it was for $2,500. Witness believes it was for a speaking engagement at the university. 

Witness says dividends typically come for investments, stocks, bonds and mutual funds. Kwame received some capital gains and then had some losses some years. 

Again, most of Kwame's income in those years was from Kwame's income. 

Terrell says part of the discussion is always about other sources of income in order to make sure inquiries have been made. 

Witness says he never heard of a cash gift from Karl Kado through Derrick miller. Also never heard of any cash receipts from Jon Rutherford or from gentlemen who operated Asian Village. Never heard of any cash gifts from Bobby. 

Terrell was Kilpatrick for Mayor campaign treasurer from 2001 until 2008. His role was to make sure that everything had been collected and reported. 

Talking about Emma Bell, campaign fund-raiser. Terrell never heard about money that Kwame got from Bell. Witness also never heard about Kwame using campaign money for personal purposes. 

Terrell says those things were things that they would have wanted to know because they should have been reported in tax forms.

 Talking about the Kilpatrick Civic Fund. Witnesss's firm prepared the 990s from about 2000 through 2007. 

Also never heard about Emma Bell giving cash from commissions on KCF to Kwame. Never heard about using KCF for vacations, golf clubs or anything related to personal purposes. 

Terrell never heard about any other money generating activities other than job as mayor or speaking engagements in the period of 2003 through 2007. 

If Kwame had reported additional income, it would have been reflected in a schedule C  on 1040that provides for sole proprietors to report other income and expenses.

Looking at a 1040 tax return, line 12 is for net income or loss. Typically for someone who is in business for themselves. Line 17 highlighted- number derived from schedule E typically for a partner or part owner of chapter S copor. or has real estate activity. A partner in a law firm might report there. Real estate income to go there would be for real estate investments like rental properties so any income or loss would get reported on line 17. 

Line 21- jury duty fees.

Chutkow says it's good for jury to know. Jurors like that- they laugh. Also for gambling income or losses. 

In the tax years between 2003 and 2007, witness says Kwame never declared any large gifts or gambling winnings or discharges from previous debts. also never talked about large civil judgments, like an award from a law suits or civil judgments. Witness says he never heard about unemployment compensation. 

Witness says he depends on his clients to be truthful when providing information. They sign a form acknowledging they have provided the best information they are aware of. Terrell says he takes his clients carefully through the process to make sure they jog their memory. Terrell says he did that with Kwame. Terrell says he relied on Kwame to be truthful when providing his income information.

9:40AM Now heading to the actual individual tax returns.

Looking at tax return for 2003 for Kwame Kilpatrick. Line 7 is the W2 wages for tax payers. Here it indicates $187, 617. Line 9A is dividends , here is $401. Line 10 is deductions on itemized deductions, here it is $709. Line 12 is the income from other engagements like the speaking one, here it is $2,500. Line 13 A, losses from capital investments comes to $3,000. $168,151 is listed as Kwame's wages from the city for 2003. 

2003 W2 for Carlita for Next Vision Foundation $19,465.57. This is the only year Carlita provided any W2 forms. 

Looking at another page on 2003 returns. Looking at 1099 report of $2,500 from Wilberforce University. Terrell says it is the only time he received a 1099 from either Kwame or Carlita between 2003 and 2009. 

On line 17, Kwame didn't list anything for real estate.

On line 21, didn't list more income. Line 22 is the total amount of income- his total was $188, 220. 

Looking at a summary for cash deposits and transactions for Kwame from 2001 through 2007.

For 2003, looks like Kwame made cash deposits for $77,200. 2004- $60,600, 2005- $75,300, 2006- $87,100. 

Thomas objects. Judge sustains that Thomas is right that Chutkow hasn't laid enough foundation for this line of questioning. 

9:49AM Juror needs to have a break. Judge says to go ahead and have a quick one.

9:55AM Still waiting for the juror to come back. Not sure what is going on but it seems someone made a bolt for the bathroom.

May just be my imagination but it seems like these jurors are injecting themselves more into the courtroom drama. They are asking many more questions than they did initially, indicating that they are vastly more confident and comfortable in their roles as jurors in this trial. 

This morning outside there were canine detection dogs with a pest control company in the parking lot across the street from the courthouse. Could be they are using those dogs to prevent people from bringing bugs into the building.

Last week, there were some pesky gnats or bugs that were jumping between the jurors and actually biting.

Judge Edmunds' courtroom was fumigated shortly after. 

Kwame and Bobby are enjoying the break just chit chatting away and laughing. 

Apparently a nurse has been called in to check out the juror. This could be it for the day.

10:10AM So it looks we will be continuing. We'll be taking a short break around 11:15AM. Two witnesses have tight travel schedules. 

Jurors filter back in. 

Looking at Kwame cash deposit summary again. In 2007, it was $97,050, in 2008 it was  $114, 451. The chart for 2001 through 2008, the total cash deposits was $531,401.72. 

There is a document with the statement that I am providing the information to the best of my knowledge when filling out the returns. 

Now looking at Kwame tax returns for 2004. Looking at 2004 1040, line 7 for wages is $167,830. W2 form for city of Detroit $167,830 again identified. Looking at lines 9 for $1,159 and line 13 for capital loss of $1,039. Line 12 for business income, nothing identified. Line 17 for real estate, nothing. Line 21 for other income, also nothing. Line 22 total income is $167,940. Looking at the penalty of perjury provision on the document. Signed by both Kwame and Carlita. Carlita's occupation listed as homemaker in 2004 and Kwame is mayor. 

On to 2005 returns. $153,600 is Kwame wages. W2 form for wages from city, $153,599.44, basically the same. Line 9A is $279 and line 13 is capital gain $2,480. On line 12, not other business income identified. Line 17, no real estate declared. Line 21, no other income declared. Line 22, total income is $156,329. again, shows both Kwame and Carlita's signatures. No occupation listed for Carlita, Kwame still mayor- still has penalty of perjury provision over signatures. 

On to 2006 returns for Kwame. Line 7 1040, wages listed as $150,212. W2 from city of Detroit is $150,212, basically the same as line 7.

Line 9A on dividends is $281 and line 10 is for taxable refunds is $559,  line 13 is capital gains $1,972.

About $3,000. Line 12, no other business income. Line 17, nothing identified. Line 21, no other income. Total income listed is $153,024. again signed by Kwame, mayor, and Carlita, no occupation. Provision of perjury again clearly there. 

Finally returns for 2007.

1040 line 7, $159,021. W2 from city of Detroit is $159,021.24. Line 8A is taxable interest $84 9A on dividends $114, line 10 is taxable refund $577, line 13 is capital gains which is $7,204. Comes out to about $8,000. No business income listed. Total income listed as $167,005. 

Talking about deductions for 2007. look at gift receipt for Kwame Kilpatrick in the amount of $5,000. Date is October 23rd 2007 from Florida A& M University Foundation. This was provided as a charitable contribution for the tax returns. This was to get a deduction for that tax year. 

Now looking at the check to Florida A & M Foundation from the Kilpatrick Civic Fund on October 15th 2007 for $5,000. Signatories are Christine Beatty and Derrick Miller. 

Chutkow asks if Terrell ever saw this check. no says the witness. Only saw the gift receipt from the Florida A & M foundation. Terrell says had he know the check was the KCF he wouldn't have used it towards deductions because it wasn't made by him personally. but Terrell says he didn't have that information. 

Now Chutkow shows the 2007 signature line on 2007 returns. Signed by Kwame and Carlita under the penalty of perjury provision. 

10:34AM Jim Thomas, Kwame's lawyer, cross examines. 

Thomas asks if tax returns his main business. No says Terrell- does auditing, tax and accounting. Says most of his business is auditing. 

Terrell agrees he has a very busy practice. 

Witness says he really wasn't that involved with the Kilpatrick Civic Fund except to file 990s. 

Discussing William Phillips who was an attorney. Terrell says he interacted with him from time to time on the Kilpatrick for Mayor campaign for most of the time witness was treasurer. 

Terrell says the firm did 990 for the Kilpatrick Civic Fund though he didn't handle it directly. One of his employees would get the information from William Phillips and compile and do the accounting for that year. 

Tax returns were filed for the Civic Fund . 

Now switching over to Kwame's personal tax returns. All filed in a timely fashion agrees the witness. 

"Were those signed in front of you?" asks Thomas about the tax returns. 

Terrell says they weren't signed in his presence. They were sent to Kwame and Carlita to sign them and then sent to the IRS by the Kilpatricks. 

Thomas asks about EPU officers bringing over information for tax returns. Terrell agrees that would happen. 

Terrell says he doesn't know who handed the information to the EPU officers. 

Witness says that Kwame's specific returns were done by himself and nobody else. 

Terrell says that some firms send out disclaimers that they are completely relying on taxpayers for accuracy of information. Terrell says he doesn't typically do that and agrees he didn't do that for the Kilpatricks. 

Thomas asking if sometimes taxpayers leave out information as an oversight. Terrell agrees. 

Thomas asks if witness has specific recollection over all these years meeting with Kilpatrick. 

"We never met face to face it was over a telephone conversation, " says the witness. 

Terrell says that Kwame's return was pretty basic in the past. 

Thomas asking if primary income was Kwame salary from the city of Detroit. Correct says witness. 

Thomas asks if witness noticed drop in salary in 2004. Thomas says there was a 10% pay cut because Kwame agreed to it. Terrell says he didn't know about that, may have read about it at some point. 

Witness says that in 2003, Kwame paid $33,457 in taxes for himself and Carlita. 

Gerald Evelyn just shows up to court.

 Kwame paid $27,368 in taxes in 2004. 

Now in 2005, Kwame paid total taxes of $23,819. 

In 2006, Kwame paid $21,651. And finally, in 2007, Kwame paid $22,904. 

Terrell says that for income you look at W2 wages, taxable dividends, taxable distribution from retirement plan, any capital gains, unemployment compensation, some social security tax also income, any activity related to real estate activity. 

Thomas asks if you buy a house and sell a house for a certain price, assuming you put some money for improvements, would the money from that sale be taxable. Terrell says that it is not taxable. So any profit from a house sale not taxable, good to know. 

10:55AM So if Kilpatrick lived on Leslie St and then moved into the Mansion and then sold that first house, that wouldn't be taxable. Terrell agrees with that. 

Thomas asks if Terrell remembers ever specifically detailing in his conversations what income meant. Terrell says they spoke in broad terms but he did not go over every single detail. 

Terrell says that he thinks he only talked to Carlita in what related to child care expenses. 

Terrell says he thinks his conversations with Kwame were brief about deductions and income with maybe a follow up conversation. 

Thomas asks if a gift is income. Terrell says no. A gift is giving something of value that is not earned. 

Thomas asks if someone gave someone suits is that income. No says Terrell. 

If someone gives money is that income. No says Terrell. 

Thomas says so there is only tax consequences to person giving the gift but not the one receiving. Terrell agrees. 

Talking about loans. Terrell saying also not income. 

Thomas saying so there would have been no need to declare that. Terrell says correct. 

Whether money, suits or travel. Terrell agrees. 

Terrell says he doesn't typically do bank reconciliations. 

Terrell agrees that there is difference between how business taxpayer and personal taxpayer are treated.

Kwame's got his head in his hands listening to Thomas. 

Thomas asking about hearing about Derrick Miller giving cash to Kwame. Terrell says he heard this. 

Thomas refers to Chutkow asking about various individuals giving money to Kwame. Terrell says he remembers. 

Thomas says one assumption could be that he didn't tell you because it didn't happen. Terrell seems confused by this line of questioning. 

Thomas says Kwame's receiving cash from individuals may or may not be income. Terrell agrees. 

Thomas lists gifts and loans as not being taxable. Terrell agrees. 

On to the Kilpatrick Civic Fund. Thomas says do you agree that Kilpatrick was a figurehead. No answer from witness. 

"I'm not sure if he was or not," says Terrell. 

Terrell agrees that he knew that Emma Bell was charging 10% for "pounding the bricks" (Thomas's words). 

Terrell agrees he didn't personally fill out 990s for the Kilpatrick Civic Fund. Terrell says he can't confirm they were all timely for filing because sometimes they filed extensions. 

Terrell recalls maybe one year discussing with William Phillips a late return. 

Thomas asking about 501c4. Saying do you know it can be used for political purposes. Terrell agrees that it is pretty broad but needs to be used for the general good of the community. 

Looking at a "Certified True Copy". Thomas saying the Kilpatrick Civic Fund certified by IRS as a tax exempt corporation. Terrell agrees. 

Thomas going to the articles of incorporation. Thomas loves to go back to these at every opportunity. D: "To operate and act exclusively for charitable and educational purposes." 

Thomas says you would expect people to be reimbursed for the work that they do as a CPA. Terrell wants further explanation. 

Thomas says that whatever was done for fund-raising should be reimbursed as long as there was a relation between the non-profit purposes and what the person was doing. So if Kwame was travelling and doing works that related to the articles of incorporation, that should be re-imbursable. Terrell agrees. 

Terrell says he doesn't remember really who was on the board of the Civic Fund execpt for Phillips and Christine Beatty. 

Terrell agrees that the board has a governance role over the 501c4. 

Terrell says that his role on the Civic Fund was just for the purposes of the 990.

 11:15AM Just calls for a 15 to 20 minute break.

11:37 AM

Back from break - Thomas continues cross of Terrell. 

Thomas pulls out the check which indicates a donation from the Kilpatrick Civic Fund to Florida A&M (Kilpatrick's School)  Next, the receipt for the Florida A&M Young Alumni Association.  Thomas indicates they are not for the same thing. 

The receipt is for a speaking engagement Kilpatrick had and is deductible.  The Civic Fund contribution is a separate donation.  Interesting. 

Shea, Bernards attorney has some questions.  

Shea asks if gambling winnings are taxable, or are they off-set by gambling losses?  This may be a question Bernard has for his personal taxes, not so much about this trial.  Free tax advice! 

The answer is a typical CPA type answer and not really discernible. 

Next, the Government brings out a woman who works for H&R Block in Texas and prepared Kwame Kilpatrick's taxes in 2009.  She has a very heavy accent, and it ain't from Texas.

Thomas crosses the H&R Block woman.  

Asserts Kilpatrick was just a "happy go lucky guy"  who came in and needed his taxes prepared.  Not hiding anything or doing anything illegal. 

Any money that was obtained by Kilpatrick and was not taxable did not have to be included on his tax form. 

The H&R Block woman in not an accountant or a CPA - she is a simple "tax preparer." 

Gifts are not taxable, the donor has to pay tax on the "donation" on amounts over $12,000 but, the person receiving the "gift" is not liable for tax. 

12:35PM Witness is excused to go back to Texas. 

FBI agent Bob Beeckman back on the stand. US Attorney Michael Bullotta questions. 

Discussing Capital Waste which was brought up in testimony yesterday. Capital Waste is a roll off dumpster company owned by John Ronco and John Francis. 

One of the jurors asks Bullotta to slow down. 

Between 2002 and 2008, Capital Waste paid Maestro & Associates, Bernard Kilpatrick's company, a total of $222,000. 

2007 summary of cash deposits for Bernard from Capital Waste:

01/31/07  $5,000

03/09/07 $5,000

03/16/07 $5,000

04/25/07 $5,000

06/12/07 $5,000

08/08/07 $5,000 

 

There is also a payment of $15,000 from National Media, Archie Clark's company on 04/30/07 

Bullotta says there is more but will stop with that. suffice it to say, the payments from Capital Waste were very regular. 

The FBI co0ntinued to intercept Bernard's calls in February 2008 under title III court order. 

At this time the Book Cadillac was under renovation at this time. There was demolition and debris being trucked out of the job site. 

The joint venture of Jenkins Construction and Marous brothers were handling the Book Cadillac project. 

Jenkin construction, owned by Jim Jenkins, is a minority company located on Jefferson. 

Shakib Deria was on site and he was a construction foreman for Ferguson Enterprises. 

Listening to a recorded conversation. The topic is getting Capital Waste onto Book Cadillac site. Conversation is between John Francis and Bernard. Date of the call is February 14th 2008. 

"You ain't heard from those people yet?" asks Bernard. 

"No," says Francis. 

"I just went by there and saw Americal,"says Francis. They were the competitors to Capita Waste. 

"Who is regulatory board who could give these boys trouble," asks Francis. 

"It's Gerard," says Bernard. 

"You mean our Gerard?" asks an incredulous Francis. 

Bernard says he will call Gerard and get back to Francis. 

Francis wondering why Americal is onsite when they only have about 8 trucks. Can't figure out why Jenkins is doing this. 

12:45PM Bernard mentions talking to Gerard Grant Phillips, the director of the Human Rights Department. 

Shea objects. Judge sustains. 

Bullotta asks if Gerard has any power over permitting. Yes says Beeckman with Detroit based and headquartered business certifications. 

There had been discussion about the mayor beiung weak in the conversation. In February 2008, Kwame Kilpatrick was in the midst of the text messaging scandal. 

Listening to yet another call from February 14th 2008. this time between Bernard and Bobby Ferguson. It's later in the day at 1:47PM. 

"Hey Pops!" greets a cheery Bobby. "Hey!" replies Bernard. Ferguson wants to know "What's goin on?" 

Bernard lays out the Book Cadillac scenario for Bobby. Trying to remember the name of George Jackson. 

Bernard asks "Can he make trouble for Jim Jenkins over there? Can he run him out of there?" Bernard asks Bobby. think he is talking about Jackson. 

Beeckman clarifies that George Jackson was the head of the Detroit Economic Growth Corporation which had oversight over the construction at the Book Cadillac. 

More recorded conversation to listen to. 2 jurors seem to be missing transcripts. 

It's a continuation of the Bernard and Bobby conversation from the same day. 

Bernard says, "I would really like to run him out of town...." Think he is still talking about Jenkins. 

Bobby tells him that the person he needs to talk to is "Shakib", his foreman. 

Bernard explains that "John and them were taken off." He is talking about Francis and Ronco. 

Shakib Deria worked on the project at one point and was an employee of FEI. 

Now listening to call between Bernard and Shakib Deria on February 14th at 2:56PM, about an hour after talking to Bobby. 

"I've been trying to beat off snakes," says Bernard. 

He tells Deria, "My boys were hauling the trash at the Book... Arbitrarily pulled off." 

Bernard says about Jkings, "I threatened him." 

"I don't know if George Jackson could take care of this thing," says Bernard. 

Sounds like Bernard just really wants his Capital Waste guys back on site after being pulled off. 

Deria says something about getting with a guy. Umm, that doesn't sound right. 

Bernard says that he has been working for 8 to 10 months to get Capital Waste at the Book Cadillac site. Also says that a Detroit business should not get kicked off by a suburban business. 

"They still calling me and cussing me out," says Bernard. 

1:05PM Bullotta says this is a good place to stop. Will continue with Beeckman tomorrow. Court is adjourned and will resume Thursday at 9AM.

About the author

Alexandra Harland is a Princeton undergrad and has a masters degree in International affairs with Columbia. A Montreal native, she worked with the Daily Telegraph newspaper for a few years before transitioning to TV, when she worked at ABC News with Peter Jennings. Alexandra has also worked in newsrooms in both Detroit and Boston.

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