Greed and Corruption in Metro Detroit

Story first appeared in the Detroit News.

Detroit— A failed $10 million pension fund loan that led to a businessman's suicide and an international manhunt started with a $100,000 bribe to the ex-Mayor's father, the dead man's partner said.

A Businessman said he told a federal grand jury in January about the alleged payment and a second $80,000 bribery demand from a powerful Detroit businessman.  The response he received indicated that they were already aware of both instances.

The allegations offer insight into a secretive, ongoing FBI investigation of the city's pension funds, which in February resulted in the indictment of the former city Treasurer. The allegations emerged as a businessman and his wife were on the run and holed up at a Caribbean resort while federal investigators and lawyers hunted for the South Carolina couple and the pension fund's money.

The alleged bribe payment is the latest accusation against the ex-Mayor's father, who is awaiting a September trial date along with his son, the ex-Mayor, on federal racketeering conspiracy charges. A Dayton Criminal Lawyer has been following the case.

The father's consulting firm Maestro Associates was hired by a Detroit businessman, and the father's lawyer said his client did not receive a bribe. The Detroit businessman who hired them killed himself in August amid accusations he was involved in a Ponzi scheme that defrauded the pension fund.

Detroit police and fire pension fund members knew about the ex-Mayor's father's involvement.  However, some pension fund members were surprised to learn about the ex-Mayor's father's involvement.

In a June 2007 letter, the Detroit businessman told pension members that no loan money would be used to pay consulting fees or commissions in connection with a $10 million loan to his company Paramount Land Holdings.  Criminal Lawyers in Cincinnati say that the prosecutors previously have accused the father of wrongdoing related to the city's pension funds.

The father, his son the ex-Mayor and a former city official are charged in the racketeering conspiracy indictment with soliciting and pocketing more than $1.2 million in cash and property from people seeking deals with the city's pension funds. The money was paid in return for official acts and favorable treatment from the ex-Mayor, according to the indictment.  In addition, these men also obtained items from some of these individuals through the fear of economic harm.

The indictment does not mention the Paramount deal.

The father's lawyer is prohibited from talking about evidence uncovered during the racketeering investigation. But he said he has not heard anyone characterize the Paramount payments as a bribe.

The father's lawyer said there was nothing improper about his client consulting on a deal pitched to a pension board whose members included appointee and fraternity brother of the ex-Mayor.

The loan was intended to buy and restore more than 1,400 foreclosed homes in Metro Detroit.  The loan went into default last year, the Detroit businessman committed suicide in August, and the pension fund is trying to recover money from the $10 million deal.

The Detroit businessman was concerned an $80,000 bribe demand made by a Detroit businessman scuttled a second pension fund deal.  He was in talks with the police and fire pension fund about a second $10 million loan in 2009.  He was told to meet with the businessman in late summer or early fall 2010. During the meeting, the businessman claimed he could ensure the loan's approval in return for an $80,000 bribe.

Pension fund officials dispute the allegation. He had withdrawn his request for a second $10 million loan months earlier, in spring 2010, according to the police and fire pension fund chairman.

A review, however, discovered questionable financial issues involving the first Paramount deal, and those questions led to a lawsuit in May 2011.

The Detroit businessman refused the alleged $80,000 demand and talked to the FBI.

Within weeks, not only did the second loan disappear but the pension fund issued a letter of default on the first loan.

The ex-Mayor's father received the $100,000 bribe in spring or summer 2007.

The Paramount deal has drawn federal scrutiny.

A pension fund lawyer was subpoenaed to testify twice before the federal grand jury, according to copies of subpoenas obtained by The News. She was instructed to bring all records relating to the Paramount deal in March and July 2011.

The July subpoena instructed her to produce records involving the two businessmen involved with the pension loan, including the dead man.

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