SEC says Kilpatrick extracted lavish gifts

Paul Sancya/AP - In this May 25, 2010, photo, former Detroit Mayor Kwame Kilpatrick is placed in handcuffs after a judge sentenced him to prison for violating the terms of his probation on an obstruction of justice conviction. The SEC alleged Wednesday that he used his influence over city pension funds to extract lavish gifts from a private money manager.

Former Detroit mayor Kwame M. Kilpatrick used his influence over city pension funds to extract lavish gifts from a private money manager, including charter flights to Las Vegas and Bermuda, tickets to a Prince concert, limousine service and massages at a spa, the government alleged Wednesday.

According to the Securities and Exchange Commission, it began with Kilpatrick associate Jeffrey W. Beasley inviting money manager Chauncey C. Mayfield for drinks and telling Mayfield that he needed to make amends after supporting Kilpatrick’s opponent in the 2005 mayoral election.

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Mayfield and his business allegedly furnished entertainment and travel worth more than $125,000. They were entrusted with more than $115 million of pension fund investments and received millions of dollars in related fees, the government said.

The SEC, which oversees investment businesses, filed civil charges accusing Kilpatrick and others of committing fraud against the pension funds by failing to disclose a conflict of interest. The SEC is trying to obtain fines from the defendants and force them to give up alleged ill-gotten gains.

Lawyers for Kilpatrick, 41, and Beasley, 43, a fraternity brother who Kilpatrick appointed as city treasurer, did not respond to requests for comment. Lawyers for Mayfield, 56, and his firm, MayfieldGentry Realty Advisors, declined to comment.

The charges are the latest blow to Kilpatrick, whose political career has imploded in scandal. He served prison time after pleading guilty to obstruction of justice and then violating his probation.

He has been awaiting criminal trial on a federal racketeering indictment that could put him behind bars for decades. The Justice Department alleges that he extorted municipal contractors and used nonprofit donations for personal expenses. As part of that criminal case, he is also accused of accepting hundreds of thousands of dollars in private jet service, some of it tied to pension fund business.

The narrative the SEC tells begins in 2006, when Beasley met with Mayfield and “indicated that Mayfield was ‘in the dog house’ ” with the mayor. Beasley allegedly offered to help Mayfield “clear the air” with the Kilpatrick administration.

In early 2007, the SEC said, Beasley called Mayfield and told him that he and Kilpatrick wanted to fly to Charlotte to inspect a building that Mayfield’s firm had acquired for a pension fund for police officers and firefighters. The city treasurer allegedly told Mayfield to pay for the hotel.

Mayfield’s firm paid the hotel bill for six people, and the group never inspected the property, the SEC said.

Months later, Mayfield chartered a plane to Las Vegas and invited Beasley to join him. Beasley informed Mayfield that several uninvited guests would also be coming — the mayor and members of his inner circle, the SEC said.

Mayfield’s firm picked up the tab, which included about $44,600 for the private jet, about $7,000 for VIP rooms at the Venetian Resort Hotel Casino, about $3,100 for tickets to concerts by Prince and Toni Braxton, about $2,700 in golfing fees, about $5,300 in limousine charges and about $300 for massages — in all, about $63,000, the SEC said.

A few months later, the SEC said, at Beasley’s request, Mayfield chartered a private jet to fly Kilpatrick to Tallahassee. Beasley allegedly told him that Kilpatrick was going to raise money for the Kilpatrick Civic Fund, a charitable group he had created.

The passengers included the mayor, Beasley’s son, “and two other individuals with the last name ‘Kilpatrick,’ ” the SEC said.

“Coincidentally, Kilpatrick and his wife had purchased a second home in Tallahassee . . . just weeks before the trip,” the SEC said.

At Beasley’s request, the SEC said, Mayfield also paid for a private jet to take Kilpatrick and members of his family to Bermuda, where they played golf, attended a music festival and were photographed with celebrities including actresses Gabrielle Union and Regina King and members of the band Earth, Wind & Fire.

The SEC said Mayfield described the $35,604.90 jet expense as a charitable donation, because Beasley allegedly told him that Kilpatrick was raising money for his civic fund.

Mayfield’s firm accounted for the money as a business expense, the SEC said.

 
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