Kilpatrick legal fund donors owe taxes
Robert Snell and Mike Wilkinson / The Detroit News
DETROIT -- Three of the 31 companies and individuals that donated money to Mayor Kwame Kilpatrick's legal defense fund owe more than $820,000 in state and federal taxes, public records show.
Among the tax delinquents is the company that owns Sheraton Detroit Riverside hotel, formerly the Hotel Pontchartrain, which gave $3,000 despite owing $501,299 in various state taxes. Brian Jeffries, an investment manager from Lathrup Village, gave the mayor $10,000 and, along with his wife, owes the Internal Revenue Service $290,803 in federal income taxes, according to records filed in the Oakland County Register of Deeds office.
The contributions could pique the interest of state and federal tax collectors if the donors are not repaying their debts or claiming they don't have enough money to pay off the unpaid taxes.
"It's certainly a cautionary flag," said Eric Nemeth, a Novi tax lawyer and former senior trial lawyer for the IRS in Michigan. "They might wonder why all of a sudden (the donors) are making some kind of contribution like this."
The revelation comes amid questions about other donations made to the defense fund. On Wednesday, the fund's leaders agreed to return a pair of donations totaling $4,500 made by owners of a strip club on West Eight Mile and the owner of Advanced Air Services, who said he mistakenly believed the money was to go to children's programs.
Jeffries, the hotel owners and others helped the mayor raise $185,600 for his legal defense since April 4. All but $20,000 of that money has been spent on the mayor's vast legal team.
Last month, the fund raised $800 after raising $126,000 during its first month.
The following donor companies and individuals have had tax liens filed against them in recent years by the IRS or state. A lien is filed when taxes haven't been paid and give the government a legal claim to a person's or company's property. Liens serve as security or payment for the tax debt.
• Shubh Hotel Detroit LLC: The state says owners of the former Hotel Pontchartrain owe $501,299 in state taxes. There have been two unpaid liens filed against the company since October 2006 for sales, use and convention facilities taxes, according to the Wayne County Register of Deeds office.
The hotel has had a string of financial woes since undergoing renovations. Last year, 15 contractors filed liens against the property, claiming they were owed $557,000 for helping renovate the hotel, according to county records.
"Really, they owe everybody and their brother under the sun and they're paying Kwame? Huh," said Bill Hemphill of Lincoln Fire Protection, a South Rockwood-based company that worked on the hotel's renovation but was owed about $36,000. "Nothing surprises me."
Hotel lawyer Bruce Sucher said renovations to the hotel forced the company to pay some bills and delay paying others. The hotel owners contributed to Kilpatrick's defense fund to thank him for his support of tourism, Sucher said, noting the mayor attended the hotel's grand opening last winter.
"There's nothing tied to that contribution whatsoever," he said.
The owners have no city contracts, he added.
Most of the state taxes have been paid, Sucher said, and he is negotiating with state officials over potential penalties.
As for his own $50,000 lien against the hotel for nonpayment of legal bills, Sucher said he is being paid and the lien was a formality.
"We're not enforcing the lien," he said.
• The IRS has filed liens totaling $290,803 against Jeffries and his wife, according to the Oakland County Register of Deeds office. According to the liens, the couple owe income taxes for 2002-05.
Jeffries, president and chief executive officer of Ambassador Capital Management, did not return calls and an e-mail seeking comment.
• Medici Homes Inc., a Clinton Township development company, gave Kilpatrick $50,000. The IRS filed a $28,468 lien against the company's president, Salvatore A. Cavaliere, and Laura Cavaliere in July 2001 for unpaid income taxes, according to the Macomb County Register of Deeds office.
On Friday, there was no record that the tax debt had been paid off and Cavaliere could not be reached for comment.
Donors bidding on city land
Meanwhile, two of Kilpatrick's legal defense donors have deals to buy land pending before the Detroit City Council.
Jerome Morgan, who heads Morgan Development, wants to buy a piece of vacant city land near East Jefferson and Dickerson for about $1.4 million. And banker Donald Davis has teamed up with another developer in a bid to buy a section of Tolan Park, at 701 Mack, for $900,000, although the Detroit Medical Center also has bid on the property.
City officials are still negotiating both land sales.
Detroit News Staff Writer Christine MacDonald contributed to this report. You can reach Robert Snell at (313) 222-2028 or rsnell@detnews.com.