The Security and Exchange Commission today charged the former mayor of Detroit Kwame Kilpatrick with secretly exchanging lavish gifts to peddle his influence over the investment process of the city's pension funds.
The SEC also charged Jeffrey W. Beasley, the former city treasurer and investment adviser to the pension funds along with Kilpatrick.
The complaint alleges Kilpatrick and Beasley, who were trustees of the pension funds, solicited and received $125,000 worth of private jet travel and other perks paid for by MayfieldGentry Realty Advisors LLC, an investment adviser whose CEO, Chauncey Mayfield, was recommending to the trustees that the pension funds invest approximately $117 million in a real estate investment trust controlled by the firm.
Neither Kilpatrick and Beasley nor Mayfield and his firm told the boards of trustees about these trips and the conflicts of interest they presented. The funds ultimately voted to approve the investment in the trust, and MayfieldGentry received millions of dollars in management fees.
"We look at this as a two-way betrayal," John Sikora Jr., assistant director of the SEC's regional office in Chicago told The Detroit News. "Former Mayor Kilpatrick and former Treasurer Beasley betrayed the trust of the public workers of Detroit. At the same time, MayfieldGentry and Chauncey Mayfield betrayed the trust of the pension funds."
The News' story got reaction from Gregory Davis, a firefighter who is running for a seat on the pension board. "I am appalled," Davis said. "I am thinking this is just the tip of the iceberg. My overall concern is to stop this from happening ever again."
Among the details in the SEC release:
- In April 2007, MayfieldGentry paid for Kilpatrick, Beasley, and their associates to travel by private jet to Las Vegas, where they enjoyed luxury hotel accommodations, two concerts, three rounds of golf, meals and massages. The Las Vegas trip cost more than $60,000.
- In July 2007, MayfieldGentry paid more than $24,000 for a private jet to take Kilpatrick, Beasley's son and others to Tallahassee, Fla., where Kilpatrick had a second home.
- In October 2007, MayfieldGentry paid more than $34,000 for a private jet to fly Kilpatrick and his wife to and from Bermuda, and Kilpatrick's father and his father's girlfriend back from Bermuda.