In 2008, former Detroit Mayor Kwame Kilpatrick was charged in state court with 8 felonies related to perjury, misconduct in office, and obstruction of justice. In On September 2008,he pleaded guilty to two felonies for obstruction of justice and was sentenced to four months in the Wayne County Jail and ordered to pay $1 million of restitution to the city of Detroit.
The fun didn’t stop there. Kilpatrick has been accused of hiding money that could be used to pay $855,000 restitution owed to the city of Detroit, stemming from the conviction. Despite claiming poverty and an inability to pay the restitution he owes, money has been magically appearing! Money was transferred to his wife, and Kwame himself received $4,000 from a mystery source. None of these funds were disclosed to the state by Kilpatrick, despite being required to do so under the conditions of his probation. It is suspected that Kilpatrick has money hidden, and that is the source of the funds.
And to keep things interesting Kilpatrick is currently on trial for federal charges of public corruption. He is alleged to have been involved in racketeering and extortion which netted him hundreds of thousands of dollars personally. Contractors who wanted to do business with the city were allegedly coerced into giving money under the table to Kilpatrick.
How is the government proving the financial portion of the case? It appears to be based on a lifestyle analysis, which the feds are more apt to call the net worth method of proof. As happens in many cases involving financial crimes such as drug dealing, money laundering, and bribery, the government went through Kilpatrick’s finances with a fine tooth comb.
They looked at his spending, his known sources of income, and found that there was a significant difference. The feds say that while Kilpatrick was mayor, he spent $841,000 more than he earned, according to his income tax returns. There was no explanation for where these funds came from – – no savings depleted, no assets sold, no inheritances or legitimate gifts – – so the assumption is that these funds came from the racketeering and extortion activities.
When you look at the figures that IRS Agent Carl Selz testified to, it’s pretty incredible. He calculated the cash deposits made by Kilpatrick and the personal expenses paid by the Kilpatrick Civic fund, and found the following:
- In 2003, Kilpatrick reported income of $152,000, but his real income was $230,000
- In 2004, Kilpatrick reported income of $133,000, but his real income was $194,000
- In 2005, Kilpatrick reported income of $125,000, but his real income was $201,000
- In 2006, Kilpatrick reported income of $118,000, but his real income was $217,000
- In 2007, Kilpatrick reported income of $123,000, but his real income was $219,000
- In 2008, Kilpatrick reported income of $41,000, but his real income was $291,000
Even with clever subjects, it is possible for a skilled forensic accountant to sort through the financial details and find hidden income and assets.
- Lifestyle Analysis in Criminal Cases: Proving Income Without Full Documentation
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