An attorney for Compuware Corp. testified Tuesday that ex-Detroit Mayor Kwame Kilpatrick did not sign a promissory note on a $240,000 loan until IRS and federal agents asked to see the documents.
Kilpatrick received an initial $150,000 payment on the loan from Compuware Chairman and CEO Peter Karmanos and three other top business executives Feb. 4 and a second $90,000 installment in June, but only signed a document about paying them back following the Aug. 10 visit by agents, said Dan Follis, general counsel for the Internet technology giant.
Karmanos, Roger Penske, Jim Nicholson and Dan Gilbert each agreed to chip in $60,000 to Kilpatrick, but Karmanos forgot to get the notes signed by the former mayor, Follis said during the second day of testimony in Kilpatrick's restitution hearing.
Penske is CEO of Penske Automotive Group. Nicholson is president and CEO of PVS Chemicals Inc. Gilbert, founder and chairman of Quicken Loans Inc., owns the NBA's Cleveland Cavaliers.
Follis said he sent the documents by overnight delivery to Kilpatrick to get his signature. At the time Kilpatrick, a sales representative for Compuware subsidiary Covisint, was in Philadelphia on business for the company.
"The promissory notes were drafted from the very beginning," Follis said under questioning by Assistant Wayne County Prosecutor Athina Siringas. "When I found out they weren't signed, I had them signed."
The original loan amount was to have been $300,000 and included prominent contractor John Rakolta as one of the lenders. But Rakolta, chairman and CEO of Walbridge Aldinger and a strong backer of Mitt Romney in his Republican presidential bid last year, backed out of the deal, Follis testified.
Gilbert and Penske have said the loan was an incentive to help persuade Kilpatrick to step down as mayor.
Kilpatrick resigned as mayor in September 2008 after pleading guilty to obstruction of justice and pleading no contest to assault related to the January 2008 release of sexually explicit text messages between him and his former chief of staff. Those messages contradicted testimony Kilpatrick, a Democrat, had given in an earlier police whistle-blowers' lawsuit.
He spent 99 days in jail and was ordered to repay the city $1 million. As of last month, he owed the city $914,000.
Follis testified Tuesday that Karmanos asked him in October 2008 to draft the loan agreement.
Kilpatrick was jailed late that month. He was released Feb. 3, received the first loan installment the next day and was hired Feb. 10 by Dallas-based Covisint. He wants Wayne County Circuit Court Judge David Groner to reduce his $6,000 monthly payments to the city to $3,000.
Kilpatrick's salary was reduced after his first six months on the job to a new monthly base pay of $10,000.
"It's very tough making this payment every month," Kilpatrick testified Tuesday of the current restitution amount.
The hearing started last month and resumed Tuesday with Kilpatrick on the stand answering questions about his finances and those of his wife, Carlita.
Kilpatrick reiterated that he had no control over Carlita Kilpatrick's finances or bank accounts.
"I have my account. I give money to my wife. I don't know where that money goes," he said.
Prosecutors are trying to prove that Kilpatrick has not reported all of his income and finances as ordered by Groner. They accuse the former mayor of trying to circumvent the order by putting money into various accounts bearing Carlita Kilpatrick's name.
The couple and their three young sons live in a leased mansion in an affluent Dallas suburb. He and his wife both drive luxury sport utility vehicles.
"He's spending money like he is a multimillionaire," Siringas said in court.
Groner agreed with Siringas that Kilpatrick never supplied information on bank accounts and other financial documentation. Defense attorney Michael Alan Schwartz has fought the filing of such information on the Kilpatricks' finances as evidence.
"Maybe your client can explain why he didn't give this court certain documents from his bank account and his wife's bank account," Groner told Schwartz.
Groner adjourned testimony until Wednesday afternoon.