In The Detroit News, Robert Snell ties together strands from several Detroit narratives for a tale that underscores how the rampant corruption of the Kilpatrick years is intertwined Detroit's bankruptcy.
Relying on federal court records and pension officials, Snell writes how the Wall Street deal backed by former Mayor Kwame Kilpatrick that helped push the city into bankruptcy bankrolled a three-year spree of alleged corruption.
The spending cheated Detroit retirees out of more than $84 million, led to criminal charges against six people and compounded the impact of a money-losing Wall Street deal, which could eventually cost the city more than $2.7 billion.
Federal prosecutors allege city pension officials started approving a series of shady transactions with businessmen in January 2006, six months after the Wall Street debt deal started injecting $1.44 billion into the Detroit pension funds.
Flush with that cash, Snell writes, pension fund trustees loaned more than $200 million to businessmen accused of paying bribes and kickbacks between January 2006 and April 2009, according to federal prosecutors. The businessmen included a Georgia man charged with embezzling more than $3 million with the help of a former Detroit Lions wide receiver and spending some of the cash on an $8.5 million mansion in Atlanta.
Some of the money was squandered on riskier alternative investments, including real estate and private equity deals that were approved when Kilpatrick and his appointees — including a childhood friend and fraternity brother — held considerable influence over the pension funds.
The money-losing Wall Street deal has exposed the city’s pension funds to a possible takeover by Emergency Manager Kevyn Orr. He says the retirement system is significantly underfunded and wants to cut retiree pensions to help reduce the city’s overall $18 billion debt.
The timing of the Wall Street deal and almost immediate decision by pension officials to spend the money on allegedly corrupt investments did not surprise Orr spokesman Bill Nowling.
“This is a shocking coincidence,” Nowling said sarcastically. “I think every Detroit pensioner should be demanding from their union leadership and pension leadership, ‘Where is that money?’ ”
