(March 21, 2013) - A former trustee and a current general counsel for Detroit pension funds were charged yesterday with participating in alleged bribery and kickback schemes, amounting to pension asset losses of an estimated $84.18 million.
Paul Stewart served as a trustee of Detroit's Police and Fire Retirement System from 2004 to 2011. The fund's board terminated Ronald Zajac as general counsel last year, but he still serves as the main attorney for Detroit's $2.6 billion General Retirement System.
The two men were added to ongoing fraud litigation against the former city Treasurer Jeffrey Beasley and investment adviser Roy Dixon, who also founded private equity firm Onyx Capital Advisers, according to recently unsealed court documents.
Government attorneys claim that Beasley and Stewart "used their positions as trustees of the retirement systems to personally enrich themselves and other co-conspirators by demanding or accepting bribes and kickbacks." According to court documents, these included cash, designer watches, Playboy party tickets, private plane flights, massages, hotel stays, meals, golf clubs, drinks, and gambling money, among others.
"Those who are fortunate enough to serve in positions of public trust are expected to act with honesty and integrity at all times," said Robert Foley, the special agent in charge of the case for the Federal Bureau of Investigation (FBI). "The FBI is committed to holding these individuals accountable for abuses including acts of bribery, kickbacks, and other serious crimes."
The 13-count indictment-filed yesterday in Eastern Michigan's district court-claims that between January 2006 and April 2009, Beasley, Dixon, Stewart, and Zajac "did unlawfully and knowingly conspire and agree with each other" and others to commit honest services mail and wire fraud.
"Honest services fraud" specifically refers to schemes that deprive another person or group of their right to honest service. It is commonly charged in cases of public corruption or breaches of fiduciary duty.
Zajac's attorney, Christopher Andreoff, told the Detroit Free Press on Wednesday that the indictment was unexpected. "The indictment has caught both me and my client by surprise," Andreoff said. "We have not had an opportunity to review the content of the indictment but will do so in the very near future."