DETROIT -

12:47PM Judge Edmunds tells jurors that a possible witness, Denise Fountain, will not be testifying in the trial due to an evidentiary ruling that occurred during sidebar. Ms. Fountain was called by the government to testify at end of session Tuesday but never made it to the stand after the ruling. The judge also reminded jurors to avoid media coverage over the weekend. And lastly, Judge Edmunds told jurors to have a great weekend. "Go Tigers!"

12:45PM Bullotta redirects. Bullotta asks what she means about the retraction of the amount for $37,500 on Vanguard. Bullotta asks if Vanguard submitted how they would pay for the $37,500. Shoemaker says it is her recollection that U.N.I.T.E and the $37,500 were subsequently removed from the statement and then the second installment was made, Shoemaker says she can't remember if the SBO asked Vanguard to remove U.N.I.T.E from statements or if they opted to do it themselves. Bullotta ends. 

12:20PM Jim Thomas lawyer for Kwame Kilpatrick cross-examines. Shoemaker has worked through 3 administrations. Thomas asks if Shoemaker was aware of austerity moves under Governor Granholm in 2002. Yes says Shoemaker. Shoemaker says she does remember that Vanguard and 3D included conflict resolution in their applications. Thomas says he wants to speak specifically to peer mediation and conflict resolution. Shoemaker says when state gives grants they have a specific goal in mind for the resolution of those projects. Thomas asks if she knows if the conflict resolution services were rendered. Shoemaker says she didn't know if they were or not. Thomas asks if she thought the U.N.I.T.E. costs were appropriate. Shoemaker says she had concerns about then Representative Kwame Kilpatrick's link to U.N.I.T.E through his wife Carlita. Shoemaker says that Vanguard was a better known organization. Thomas says the sole discretion on how the grant is spent is up to the grantee as long as it meets within the parameters of the grant. Correct says Shoemaker. Thomas asks when the grantee decides to contract, it is up to their discretion. Correct says Shoemaker. Thomas asks if advance payments not unusual. He asks to see Exhibit SG 18. Thomas asks if she knew that prior to 2002 Alderfer and Lannoye had come to some conclusions about the grants of Vanguard and 3D. Thomas asks if she was in the State Budget Office at that time- July 2001. Shoemaker says yes. At that time, Alderfer had concerns about real estate for both Vanguard and 3D. Thomas says are you aware of Vanguard being funded. Yes says Shoemaker. Thomas admits D SG 11 into evidence: an email from Philp Alderfer to Mary Lannoye in the State Budget Office. D SG 12 and D SG 13. The first and second installments of $150,000 each for the Vanguard grants. No reduction for $37,500 asks Thomas? Correct says Shoemaker. Thomas asks if Carlita was ever asked to return the $37,599 from Vanguard. Not from the State Budget Office says Shoemaker. Thomas says obviously you were concerned about the connection of Mr. and Mrs. Kilpatrick to the grants. Yes says Shoemaker. But obviously not enough to not give Vanguard their second installment. Shoemaker says they made the second installment with the stipulation to not use U.N.I.T.E. Shoemaker says one initial expenditure documentation was submitted that had U.N.I.T.E. Then a second came in without the U.N.I.T.E expenditures. As relates to Detroit 3D, the SBO did acknowledge receiving information from them. Yes says Shoemaker.

Thomas asks Shoemaker if she was aware of a document with specific criteria for the awarding of arts and culture grants. Bullotta objects and Judge Edmunds sustains. Thomas done.

12:19PM Back in session.

10:41AM Susan Van Dusen gets up for cross-examination. Asks about the Google search on organizations that received grants. Yes says Shoemaker. Shoemaker says they did internet search and went to Department of Commerce services to look for the groups. Detroit 3D filed incorporation papers as early as 1994, 6 years prior to grant application says Van Dusen. SG 11-2- description of grant. To provide services to residents generally and more specifically to seniors and youth. SG 11-4- description of target clientele. Economic development is selected. D SG 10 introduced into evidence. Documents handed to Shoemaker. Shoemaker said it was in grant file for Detroit 3D.Van Dusen says the document sets forth general conditions. Shoemaker agrees. Van Dusen asks to put up document on the overhead screen. The first portion is about grant award. The second is about Budget/Reports- Detroit 3D agrees to provide invoice documentation to State Budget Office due within 60 days after project completion and no later than 3 years after distribution of grant fund, which ever happens first. Also mentions Project Zuration/Management/Inspections. Van Dusen says the only stipulation in agreement is that funds must be spent within 3 years of distribution and that Detroit 3D has sole responsibility for project management but agrees that the SBO can check in during project management and at project completion. Van Dusen says that it doesn't prohibit buying a dwelling. Shoemaker carefully reads the document. She says that the intent of the agreement is to support the grant application. Which is specifically to youth and seniors. Van Dusen says overall purpose of grants very general. Yes says Shoemaker. Van Dusen asks if it makes sense if there are many applicants. Presumably yes says Shoemaker. Van Dusen says that the was sort of all new to the Michigan State Budget Office. Shoemaker says yes but generally knew how the administering of grants worked. Van Dusen asks witness to recall series of correspondences between Alderfer, Shoemaker and Marilyn Johnson of 3D. Van Dusen references letter from August 24th 2001 from SBO to Marilyn Johnson saying that materials have been submitted with her letter. Exhibit SG 14 Van Dusen also references another letter from Exhibit SG 13 that appears to be missing an attachment. Missing claims Van Dusen are possibly materials referenced in SG 14. Also from SG 14- Alderfer advises Ms. Johnson that it appears to him that some funds may have been used outside of the scope of the grant agreement.

But says Van Dusen, isn't that the very general agreement? Yes says Shoemaker but it specifies services for seniors and youth. And economic development says Van Dusen, according to box checked on grant application. Van Dusen references letter from SBO dated December 11th 2001 to the address on Military street. Van Dusen says that on December 17th 2001 SBO sent a letter to 14365 Wyoming. Shoemaker says she got the address from a cancelled Merrill Lynch check. Van Dusen says there was no attempt to hide Wyoming address. Shoemaker says she had no idea why 3D would have switched locations. Response from 3D to December 17th 2001 letter. Letter lists how Detroit 3D used the funds- presentation of 4 distinct areas in which funds have been spent. Van Dusen highlights number 2: 3D established a trading area at cost of $79,246.

Van Dusen says it doesn't mention a house or senior residence does it? No says Shoemaker. Van Dusen says that on attached documentation there was exactly $79,246 invoicing for training area. Shoemaker says it was hard to decipher what all the invoices went towards. Van Dusen asks to look at exhibit SG 20-4. Looking specifically at item 3. Van Dusen suggests that Shoemaker took the $74,000 and change and put it under senior housing shelter on her spreadsheet. Van Dusen says that was an assumption. Shoemaker says that upon review, it was a conclusion. but Shoemaker never went to the site. Van Dusen said that the invoices clearly stating training area went under senior housing. Shoemaker says there wasn't that degree of clarity on the invoices.. Van Dusen says that the invoices reflect work done at the Wyoming address. Shoemaker says she can't agree without reviewing documents. Van Dusen goes back to SG 17, paragraph 2. Asks Shoemaker if she is comfortable with Van Dusen representing that the invoices attached to that letter for work done add up to exactly $79,246. Shoemaker hesitates. Says she needs a calculator. Van Dusen asks if she wants to go through the numbers. Not really says Shoemaker. Judge Edmunds asks Van Dusen if there is really an issue with the total of the numbers. Move on please. So Van Dusen says, this money has been used to establish a training area. There is a separate topic, #3, which references senior housing. #4 is for professional fees. #1 is for the U.N.I.T.E program. Van Dusen claims that a letter that appeared in the grand jury that had a lot of attachments no longer has those same attachments. Van Dusen asks if documents are in secure environment. Shoemaker says they are held in an open environment. Van Dusen suggests that the signing page on the U.N.I.T.E. contract with 3D could still be in those files. Van Dusen asks were you not aware that in 2001 Carlita Kilpatrick's involvement in U.N.I.T.E. was a subject of concern for Mary Lannoye, your boss at the SBO.

Van Dusen asks when Shoemaker discovered the link. Shoemaker says it would have been in the fall of 2001. Van Dusen says you would not be aware then that Mary Lannoye had discussed it with members of the office in June 2001. Obviously Van Dusen trying to point to SBO inconsistencies. Lannoye testified yesterday that it was Shoemaker who told her about Carlita's involvement with U.N.I.T.E. Van Dusen asks Shoemaker do you know see the 4 points clearly outlined in the 3D letter. Yes I do says Shoemaker. Van Dusen says do you understand training area was completely separate from senior housing. Shoemaker says it was difficult to conclude that from the invoices. "This is probably just a huge misunderstanding" says Van Dusen. I'm not sure I would accept that says Shoemaker. "These grantees are not accountants" asks Van Dusen. No says Shoemaker. Van Dusen says there was nothing in your review of Detroit 3D that would inform you they had a huge office staff. No says Shoemaker. Van Dusen says we can assume that they are just trying the best the can to comply with demonstrating expenditure of these funds. I guess so says Shoemaker. Van Dusen asks for SG 18 and 19. Van Dusen says you don't bring to the attention to Ms. Johnson that it appears a page is missing. No says Shoemaker. Van Dusen- If it was important, wouldn't you have asked for it? I guess so says Shoemaker. Van Dusen says we see the reason why there are 2 deeds and not just 1 deed. The writer of the letter, Marilyn Johnson, was told they should have the deed in their name and then have the quick claim to 3D. Shoemaker says she doesn't remember. Looks at SG 21. Shoemaker corrects herself, says there were 2 deeds. Van Dusen says you didn't need any more documentation on the deeds. Shoemaker said she made several requests for it and finally got it in April 202. Doesn't believe she made any more requests on it. Exhibit SG22-2. Letter mentions trading services. Letter also talks about enhancing students creative techniques with heavy machinery. Van Dusen says Ms. Johnson is telling you again what the organization is attempting to do. Yes says Shoemaker. Exhibit SG 23 goes up on the overhead. Van Dusen hands Shoemaker a copy of the letter. Van Dusen says is this the notification that the second half of installment not granted. Correct says Shoemaker. First reason given for not giving the second portion of grant is that the purchase and rehabilitation of the building fell outside of the scope of agreement. Correct says Shoemaker. The second reason given, says Van dusen, was they had not spent the total $250,000. Not just that they hadn't spent it all, says Shoemaker, but because there was no supporting documentation on the expenditures. Van Dusen says U.N.I.T.E not listed as reason why second installment not made. Correct says Shoemaker.

Shoemaker says they were concerned direct services were not being provided. Van Dusen says but Vanguard got its second installment. Yes says Shoemaker. Shoemaker says April 2002 was last communication we received from Detroit 3D. Van Dusen says did you know that Detroit 3D continued in 2003, 2004, through the years despite not getting second half of the grant. Did not cease 3D from pursuing charitable endeavors. Shoemaker didn't know that. Shoemaker says they didn't seek restitution of initial grant funds to get conclusion. There was much discussion what to do with this particular grantee. Shoemaker's recommendation was that it would be protracted process to get it back and in order to minimize further exposure to just let it go. Van Dusen says is it safe to say if you thought there was some wrongdoing, you would have sought the money?

"We didn't know what we had" answers Shoemaker. "We did have concerns and issues." Van Dusen done with witness.

 Judge calls for 10 minute break.

10:38AM Witness retakes the stand.

9:10AM New witness on the stand from State Budget Office. Lisa Shoemakerwho replaced Philip Alderfer managing state grants. Michael Bullotta for the government questions the witness. Check for $250,000 to Detroit 3D. First installment of $500,000 grant. Exhibit SG 13 admitted into evidence. June 11, 2001- letter from Detroit 3D stating they'd used first half of the grant. Used to mediate peers, conflict resolution in schools and bought a multi-unit house for community housing. Submitted by Marilyn Johnson-Bobby Ferguson's wife- at Detroit 3D. Bullotta gives witness another document. It's a letter from Philip Alderfer where he raises concerns with the spending of initial installment. Exhibit SG 14. Alderfer says in letter based on his review of documents provided wanted more documentation. Firstly, he felt that Detroit 3D had used the funds outside of the original scope. Secondly, June 21 submission doesn't show enough for the expenditures. The purchase of multi-unit dwelling may violate terms of the agreement states Alderfer in the letter. He also references more than $249,000 in expenditures that aren't properly invoiced. After the letter went out, the witness became involved. As Alderfer transitioned out of position and witness transitioned in, one of the open issues he made her aware of was this particular grant. He shared his concerns with her. Made her aware Exhibit SG 15- letter sent to Marilyn Johnson by Shoemaker. Letter basically reiterated Alderfer's concerns and was requesting additional paperwork before releasing more funds. CC'ed Kwame Kilpatrick as a courtesy to him since he sponsored the grant. The difficulties included the purchase of a dwelling and not submitting satisfactory documentation. State Budget Office concerned that money was supposed to be for seniors, rec services and the community. December 11th letter was sent certified mail to. It was returned "Moved- no new address." Shoemaker made more attempts to communicate with 3D. SG 16 admitted into evidence- same letter sent to another address. 14365 Wyoming. Got the address from other documents. Shoemaker thought that must be the address for Detroit 3D. She did get a response to the letter. Received a letter from Detroit 3D on January 15th 2002. Included documentation, invoices, checks on how money from 1st installment spent. Exhibit SG 17 admitted into evidence. Detroit 3D funded character and conflict resolution through U.N.I.T.E. for $100,000 per the letter. There were 3 pages of a contract between 3D and U.N.I.T.E.  The contract did not contain a signature page so did not appear complete, unclear if it was actually executed. There were also some financial documents attached with the letter- a wire transfer out of Merrill Lynch account for $100,000 to U.N.I.T.E. at Comerica Bank. Per document, 3D "established a training area for skill training" for $79,246. Payment to Airtec for $10,000 on June 1st 2001. Witness thought it was representative of sub work to training area being established. There were a series of invoices for Airtec Corp. One for $6,927.49. Another for $2,208. Another for $546.05. So just a series of invoices with different amounts. On several invoices, description of services extremely technical. Check for $22,055 to Joseph Anthony Inc. along with a contract to "supply necessary duct work and registers." There was also a check to Detroit Interiors for $37,000 on June 1st 2001. There was a subcontract between Detroit 3D and Detroit Interiors and that indicated a total of $71,500. To "provide floor prep for installation of floor tables", "provide work station partitions". State Budget Office still struggling to figure out what this grant money. "Grant money not intended to benefit private entity" says Shoemaker about how she felt if she'd known the grant money was going towards the refurbishment of a contractor's office. Check for $2,001 to Valcon construction. State Budget Office says they received invoices and no payment documentation.Another check for $4,697.57. Alderfer and Shoemaker noticed that most of these payments were made out of the same account, on the same date for small amounts in sequential order.

Bullotta hands witness letter sent by Shumacher to 3D after reviewing materials sent of January 15th. Exhibit SG 18. Shoemaker said in letter not enough explanation for purchase of dwelling, purchase agreement not attached. The current packet indicated only $224,000 and not upwards of $249,000. Asked for more supporting documentation. In this letter, gives a deadline of February 8 2002. "This will be final opportunity provided to Detroit 3D". If not complied, Office would seek reimbursement of funds. Witness got a letter from Detroit 3D dated February 7th 2001, however received February 12th 2002. Exhibit SG 19. Letter says it is the intent of Detroit 3D to improve quality of life for seniors and youth. An looking to providing hosing for displaced seniors and runaway youth. Not clear if this was what the dwelling purchased was for or if another would also be purchased. What would have been concerning to State Budget Office was that 3D was looking to expand beyond already broad parameters of grant.

There is a paragraph in the letter which references the discreption in funds- saying they were simply to decrease costs by working for suppliers and contractors. There was a page of checks with handwritten lines through them that said voided. Invoice for B-Safe Security for $4,697.50. Another one for $14,514 for accounting. And another invoice for $5,950 for tax accounting services. Exhibit SG 20 introduced- a letter dated March 19th 2002 drafted by Shoemaker to Detroit 3D. Again informing them that information remains incomplete, housing purchase agreement not included, not apparent also how many seniors are housed in the building. Gave them a deadline to April 30th 2002 to try to assist the organization and provide some clarity on what they were seeking, Shoemaker provided 2 attachments include a spreadsheet of what they had received to date. Shoemaker specifically requested a purchase agreement of dwelling, information on renovation costs, all sources of finance costs if there was money additional to the grant funding and what services would be provided to the seniors. Initially 3D had indicated they would be feeding seniors. Shoemaker says she doesn't typically have to do this kind of spreadsheet. 3D the most difficult correspondence she ever remembers encountering. April 23rd 2000-incorrectly dated- fax from Detroit 3D- Exhibit SG 21. There was a letter attached- a quit claim deed. It indicates the names Bobby Ferguson and his wife Marilyn. The amount of the deed is $1 on June 25th 2001. There was also a deed attached for a property at 19791 Myers St for the sum of $25,000. Shoemaker assumed that this was the dwelling purchased by 3D with the grant money. Shoemaker still didn't know why they had bought the building or what its use was. Exhibit SG 22- Shoemaker received another fax from Marilyn Johnson April 30th 2002. Letter says they are concluding their documentation. They state their intent and explain purchase of dwelling. They talk about youth in particular- an opportunity to provide skills on attitudes and awareness. Talked about vocational training for youth. Did not attach additional invoices. Exhibit SG 23. Letter date November 14th 2002 from Shoemaker signed by the Budget Director saying they will not release the second half of funds. Not enough documentation for expenditures of first installment and still no clarity on purchase of dwelling. Alderfer and Shoemaker had done their own sleuthing on the internet and found connection of U.N.I.T.E, Carlita and Kwame. They never sought recovery but did not allow for the release of second half. Shoemaker's recommendation was that seeking of funds would be long and protracted funds, they probably wouldn't get much back so best course of action was to cancel second installment.

9:04AM Video screen still black. All hoping that Judge Edmunds didn't forget to flick the switch for the video monitors in her courtroom. Apparently there is a witness on the stand but we're not getting a feed in the media room.

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.