Pension Fund Attorney, Retirement Trustee Indicted On $200M Bribery Scheme

Posted By Urban News Hour | March 20, 2013

After 30 years of working for the city’s two pension funds, attorney Ronald Zajac was indicted today on charges he was part of a bribery and kickback scheme involving more than $200 million in Detroit pension fund investments.

Paul Stewart, a former trustee of Detroit’s Police and Fire Retirement System, also was charged with participating in the scheme, according to the U.S. Attorney’s office.

Zajac and Stewart were added as defendants in a superseding – or new — indictment that had already charged two others in the conspiracy: former city Treasurer Jeffrey Beasley, who was a fraternity brother to former Detroit Mayor Kwame Kilpatrick; and investment sponsor Roy Dixon.

“Public officials entrusted with billions of dollars in employees’ pension money cannot take bribes and kickbacks to influence their investment decisions,” U.S. Attorney Barbara McQuade said in a statement announcing the charges.

Detroit’s FBI chief Robert Foley added: “Those who are fortunate enough to serve in positions of public trust are expected to
act with honesty and integrity at all times. The FBI is committed to holding these individuals accountable for abuses including acts of bribery, kickbacks and other serious crimes.”

According to the 13-count superseding indictment, Stewart accepted thousands of dollars in cash, trips, entertainment, and other items of value from people seeking investments from the Police and Fire Retirement System. Among the perks he allegedly accepted:

• $5,000 casino chip

• A Christmas basket that included an envelope with thousands of dollars in cash

• A cash payment of $2,500 during a trip to New York City.

• A cash payment of $2,500 during a trip to Florida

• An excursion to the Bahamas for him and his mistress, and a trip to Naples, Fla., for him and his mistress.

• A “birthday present” of $5,000 in cash at a party at the Atheneum Hotel.

According to the indictment, Zajac organized the party, and Zajac solicited and collected the cash from people having business before the Boards of Trustees of the pension funds.

According to the indictment, Zajac sought to curry favor with Beasley and Kilpatrick by raising more than $70,000 for the Kilpatrick Civic Fund. Zajac allegedly directed and forced people having business before the pension funds to spend thousands of dollars to entertain trustees of both pension funds, the indictment said. Zajac forced one trustee to pay more than $10,000 for limousines for trustees during a trip to New York City, the indictment said.

Soon after giving Beasley, Stewart, and a third trustee thousands of dollars in cash at their “birthday parties,” the trustees voted to give Zajac a substantial raise as general counsel of the two pension funds, the indictment said. As a result of the raise, Zajac’s salary was more than $400,000 from the pension funds.

If convicted, both Zajac and Stewart face up to 20 years in prison and a maximum fine of up to $250,000.

Zajac served as the general counsel of Detroit’s two pension funds, the General Retirement System and the Police and Fire Retirement System, from 1982 through 2012.

In November 2012, the Board of Trustees of the Police and Fire Retirement System fired Zajac as general counsel. Zajac still serves as the general counsel of the General Retirement System.

Stewart was a City of Detroit police officer for more than 30 years and served as a trustee of the Police and Fire Retirement System from 2004 to 2011. He also served as the Vice President of the Detroit Police Officers Association, the union that represents most of Detroit’s police force.

Attorneys for Zajac and Stewart were not readily available for comment.

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