Kilpatrick trial Day 60 recap: IRS says Kilpatrick was living beyond means

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DETROIT - $840,962.33: That was the number the Internal Revenue Service came up with to prove that defendant Kwame Klpatrick was clearly and flagrantly living well beyond the means of his salary as the mayor of the city of Detroit.

IRS agent Ron Sauer took the stand again on Day 60 in the Kwame Kilpatrick federal corruption trial. Sauer testified to looking at all financial records he could obtain relating to Kwame Kilpatrick for the period encompassing 2002 through 2008.

That included looking at various bank accounts, whether individual or joint with wife Carlita, at several financial institutions including NuUnion Credit Union, JP Morgan Chase and First Independence Bank. 

Sauer told the court that the purpose of his investigation was to uncover any potential unreported income or a lifestyle beyond the income that had been reported. 

Yesterday the government alleged that Kilpatrick had $531,401 in income that he had neglected to report to the IRS for the same period.

The IRS agent broke down the total cash deposits and payments Kilpatrick made into his various accounts over the 6 years: $282,150 in cash payments on a First Independence Bank Mastercard, $194,350 in cash deposits into 3 accounts, 2 personal and 1 joint with Carlita, at JP Morgan Chase, $34,546.46 in cashier's checks purchased at the First Independence Bank, $8,833 in cash deposits into a joint Comerica Bank account, $6,677.26 in cash loan payments at the First Independence Bank and $3,000 in cash deposits at the Premier Bank in Tallahassee, Florida.

Sauer stated that they looked into Carlita individually to see if she could have been a source of cash income for Kilpatrick.

An IRS probe into an account that Carlita had at Comerica Bank revealed that the maximum amount of cash she could have accessed was $17,021.

Sauer said that their investigation also showed a significant change in banking activity for Kilpatrick after he became mayor. Before 2002, Kilpatrick would deposit his wages as Michigan state representative into his account at NuUnion Credit Union. His banking activity mostly involved salary deposits and small cash withdrawals but no cash deposits.

But that changed when he became mayor.

Starting In 2002, and more more so from 2003, Sauer testified that there were many cash deposits and few withdrawals from the JP Morgan Chase accounts where Kilpatrick received his mayoral remuneration. 

In the period between 2002 and 2008, Kilpatrick's wages totaled $605,777.57. But the expenditure outflows were $1,4448,739.90, essentially $840,962.33 in excess of Kwame's net wages. 

"Kwame Kilpatrick was living beyond his means on a city of Detroit salary," explained Sauer. 

The IRS also decided to take a look at the Kilpatrick Civic Fund to identify any expenses that were for the personal benefit of Kilpatrick and his family. Sauer testified that any such expenses would be considered taxable income.  

Some of the identified Kilpatrick personal expenses paid by the Kilpatrick Civic Fund included: $900 for the Center of Yoga, $8,605 for the Lacosta Resort and Spa in California, 2 payments totaling $70,464 towards crisis management group Impact Strategies, 2 payments totaling $7,140 for Super Camp and $15,000 in cashier's check to pay University Moving. 

All told, Kilpatrick's personal expenses out of the Kilpatrick Civic Fund came to $152,095.86. 

In an attempt to underline Kilpatrick's understanding of taxes, U.S. Attorney Michael Bullotta asked Sauer if he had looked into Kilpatrick's law school transcripts. Sauer said he had and found that the former Detroit mayor had taken a tax class in the fall semester of 1997. 

His grade for the course was a C+. 

James Thomas, Kilpatrick's lawyer, argued that Sauer's analysis of Kilpatrick's financials was not complete because he had not taken into account all of Carlita's financial information. 

Sauer responded that as she had not generated income since 2003, Kilpatrick's wife was not a source of additional income for him. 

But, countered Thomas, the Kilpatricks could have accumulated a cash stash before Kwame became mayor. 

Sauer denied that assertion stating that they both made frequent, small cash withdrawals prior to 2001 and that behavior was not typical of people with a "cash horde." 

Thomas then referenced loans and gifts made to the Kilpatricks in 2008 that would have been considered non-taxable income. Four prominent Detroit businessmen wrote checks to Kilpatrick for $240,000 and another Detroit business man, Manuel "Matty" Moroun, gifted $50,000 in cash to Carlita and the Kilpatrick children. 

Sauer pointed out that the loan from the four businessmen was made in checks that were only deposited into Carlita's account in 2009. 

Thomas then produced a series of checks made out to Kilpatrick around June 9th 2006 when the former mayor celebrated his 35th birthday with the "Splash of Red" party at the Athenaeum hotel. 

The defense lawyer argued that this was ample substantiation of the fact that financial gifts were being made to Kilpatrick. 

When Sauer responded that these gifts were checks and not cash, Thomas asked him: "If checks are being gifted, isn't it logical to assume that cash is being gifted too? 

"It's possible," replied the IRS agent with a shrug of his shoulders. 

Court resumes Friday morning 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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