May 9, 2012 (PLANSPONSOR.com) - The Securities and Exchange Commission (SEC) charged former top Detroit officials in an influence peddling scheme.
Former Detroit Mayor Kwame M. Kilpatrick, former city treasurer Jeffrey W. Beasley and the investment adviser to the city’s public pension funds were charged with being involved in a secret exchange of lavish gifts to peddle influence over the funds’ investment process.
The SEC alleges that Kilpatrick and Beasley, who were trustees to 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 (REIT) controlled by the firm. Despite their fiduciary duties, neither Kilpatrick and Beasley nor Mayfield and his firm informed the boards of trustees about these trips and the conflicts of interest they presented. The funds ultimately voted to approve the REIT investment, and MayfieldGentry received millions of dollars in management fees.
“It is a disappointing day when pension fund trustees such as ex-Mayor Kilpatrick and others corrupt the investment process by selling out hardworking police officers, firefighters and other municipal employees for the price of a few vacations and paltry extras like concert tickets and rounds of golf,” said Robert Khuzami, director of the SEC’s Division of Enforcement.
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Michigan, members of Kilpatrick’s administration began to exert pressure on Mayfield in early 2006 after he supported Kilpatrick’s opponent in his 2005 re-election and hired that candidate’s daughter at MayfieldGentry. Beasley met with Mayfield in February 2006 and told him he was “in the dog house” with Kilpatrick and offered to help him “clear the air.” Throughout 2007, Mayfield appeared before the boards of trustees for Detroit’s public pension funds recommending the REIT investment.