Live Blog: Kwame Kilpatrick Trial Day 46 - Fox 2 News Headlines

Live Blog: Kwame Kilpatrick Trial Day 46

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DETROIT -

And the first day of the Kilpatrick INc. Public Corruption Trial for the new year is over.  Lot's of big numbers, dry documents, and some flurries of objections.  We'll get a look at the highlights tonight on Fox 2 news, M.L. Elrick will have the breakdown, and his unique Take Away on MyFoxDetroit.com later this evening. 

12:59

So Bernard took part of his profit sharing check, and put it back in the business account as gross receipts. Schuck says the company was responsible for issuing a 1099.

and Judge Edmunds calls for a stop for the day.  "All rise for the Jury."

12:57

Blackwell asks if she heard Shea say there was an inheritance in 2004.  Schuck says it was in 2002.  Shea objects, says we have documents for all the other stuff she looked at, where are the documents.  Judge Edmunds over rules.  Schuck says she was on maternity leave and another agent looked at the record.  Shea says now I'm objecting on hearsay.  Judge Edmunds sustains.

Blackwell asks if the 2005 return was accurate.  Schuck says no, he didn't report a profit sharing plan.  Reported income was 220,000 and was understated by $180,000.  Schuck says it was deposited in his account.

Schuck says $100,000 was deposited in the Maestro account but 180,000 went into his personal account.  Says the corrected total is $400,000 and the difference, the understatement, is $180,000.

12:50

Schuck says total income reported in 2004 was $880,000.  Schuck is now explaining she subtracted transfers between accounts, currency withdrawals Life insurance proceeds and other things.  Total gross income is $486,000.  Schuck says she also subtracted all cash withdrawals because she didn't know what they were used for and it may have been for purposes that were non taxable.

Schuck says she also subtracted the cash he paid to Tunnel Liquor because she didn't know if the payments were for reason that would have been non taxable.  SAys she did this in the most conservative way.

Schuck says Bernard underreported by $50,000, her most conservative estimate, and owed 17,000. Schuck says he did pay $91,000 for that tax year.

12:41

Shea objects again saying someone else fled Bernard's returns.  Blackwell asks to take it up on side-bar.  The attorney huddle in front of the Judge's bench.

I think we're going to get a lesson in tax law now.

They're back.  Schuck explains that each taxpayer has a PIN and the returns are all filed under penalty of perjury.  Shea objects again but Blackwell says she's moving on anyway.  Judge Edmunds sustains the objection and Blackwell moves on.

Shea objects that Schuck's testimony is her opinion as an expert and is not scientific, like a chemist who mixes chemicals and gets an expected result.  Judge Edmunds says right and she's an expert so it's not objectionable.

12:35

Blackwell asks about gambling winnings.  Schuck says the bank deposits don't match up with the deposits.

Schuck says the summary of gambling activity she got from the Casinos show a net loss of $88,000.  $87,000 in losses for 2005, $42,000 for 2007.

Schuck says any winnings would have been offset by the losses.

Blackwell asks if she determined if he reported his taxes fairly.  Schuck says he under reported, that he did not report all his income.  Says he there's additional tax owing.

Schuck says she totaled all the deposits, deducted anything that wasn't income, like transfers from other accounts.

Schuck says Bernard filed a tax return.  Blackwell asks if all tax returns are filed under penalty of perjury.  Shea objects.  Judge Edmunds says Blackwell needs to lay the foundation for why all returns are subject to perjury.

12:27

Blackwell now showing the deposit summary from 2002 through 2008, total deposits are more than 2 million. Second page is individual deposits for the years.

Blackwell asks about 2005 and Mr. Kado testifying he gave Bernard money that year.  Shea objects that Kado was all over the map.  Judge says they have to take it in smaller steps and she'll sustain the objection.

Schuck says she also looked at deposits to personal accounts to determine income that should have been reported.

Looking at all his bank accounts now.  The document shows all total of al deposits to all accounts for 2004 and 2007.  Total for 2004 is $882,000 and 2007 is $606.000.

Blackwell asks which are  personal and which are business.  Shea says he doesn't have a problem with the totals but lumping together the business and personal accounts is a problem.  Judge Edmunds agrees.

12:17

 Court is back in session. The prosecution is now calling agent Schuck to the stand.  Judge Edmunds reminds her she's still under oath.

Blackwell asks generally what she did during her investigation.  Schuck says she reviewed both personal and business accounts to get his full financial profile.

Schuck says all taxable income has to be reported on the personal return.

Says Maestro was set up as an "S" corporation is set up so the income goes to shareholders and is then taxed as personal income on the personal return.  Says the sole shareholder was Bernard Kilpatrick.

12:00

Shea says you don't even have an unsigned authorization document for 2007.  Young says that's true.

Shea says therefore we don't have BErnard's signature on any documents saying there's a penalty of perjury.  Young says that's true.

Blackwell up now, asks if he had known Bernard was depositing income in his personal account would he have asked for documentation.  Yes.

Did Bernard tell you about a retirement disbursement.  No, says he would have reported it on the form.

Blackwell asks if he would have filed Bernard's return without authorization.  Shea objects.  Blackwell makes it a general question about standard business practices.  Young says they don't e-file without approval.

And Young is excused, Judge Edmunds calls for a short break after which we'll get a new witness.

11:54

Shea says you didn't produce the authorizations not because of the three year rule but could have not had them because they were never signed.  Young says it's possible.

Shea showing Young a document now.  Shea asks if it's a fax cover sheet to IRS agent Rowena Schuck.  Yes.   IS the second page form 8879 that was filed with the IRS.  Yes.  IT's a signature authorization file, says keep this in firm records.

Shea asks if this was prepared for the 2004 tax year.  asks if the signature line is blank.  Young says that's true.

Shea asks, there is no signed authorization.  Young says that's correct.

11:47

Shea asks if Young was aware of profit sharing being deposited in Bernard's personal account.  No.

Shea asks if sometimes clients don't tell their tax preparers everything.  Young says that happens.

Shea says you were up against the 2008 deadline.  Young says that's current.  Shea asks if you had to file something to avoid the penalties.  Yes.  Asks if Jones was the one taking to Bernard.  yes.

Shea asks if Bernard had ever failed to file a tax return.  No.

Shea now asks about electronic filing authorization.  No form for 2004, you don't have personal knowledge that a form was signed.  young admits he doesn't have personal knowledge of the form being signed.  Young admits that sometimes paper work doesn't get done, but says it usually does.

11:40

Shea now asks if the returns were filed according to his firm's standard practices.  Young says that's true.

Shea asks about the 120,000 in cash, says you wouldn't be aware of that.  Young says that's correct.

asks if this suggests reported income.  Young says if that was a distribution of the previous 320,000 it may not have been income.  Shea asks if it was a loan it may not have been.  Young says a loan is not income.  An inheritance.  Young says not income.

Shea says there are many ways cash  can go into an account and not be income.  Young says that's correct.

Shea asks about profit sharing distributions in 2005, talks about being retirement age, and could have started taking retirement distributions.  Young says he imagines so.

Shea asks if a 1099 should have been generated if Maestro distributed profit sharing.  Young says they didn't prepare one because they didn't know about it.

Shea asks if he ever had a conversation with Bernard about that.  Young says the answer is no.

11:32

Shea asks if they had a conversation about keeping business and personal information separate, not his job to baby-sit.  Young agrees.

Shea asks if clients in general have different levels of sophistication in dealing with taxes and different levels of engagement.  yes.

Shea asks if some clients sweat every dollar.  True.

Asks if Bernard was in the second category of clients that aren't all that involved.  Young says that's true.

Shea says you didn't feel any need to ask for personal account information.  Young says that's correct.

Shea says it wasn't his firm's job to harp at him about keeping things separate.  True.

Shea asks if you didn't ask you wouldn't know.  That's correct.

11:28

Blackwell asks if his firm would e-rile returns without authorization.  NO.

She up now. Asks if he started doing Bernard's returns when he was married to Betty.  Yes.

Asks if he helped Bernard set up Maestro for tax purposes.  Yes.

Shea asks if Bernard and Betty divorced. Correct.

Shea asks about the routine the firm follows with clients, asks if reminder is sent out each tax year.  Young says yes.

Asks if Bernard filled it out and returned it.  Young says no.

Asks if BErnard was pretty hands off.  Young says I agree.

Shea says you'd see him when he dropped off  his information.  Correct.  And when he picked up his return.  Correct.

11:23

Blackwell asks if the return is filed under perjury to the tax payer.  Shea objects, any tax payer of this tax payer.  Blackwell rephrases, to this tax payer.  Shea objects again.  Blackwell says this return for this year under penalty of perjury to Bernard Kilpatrick.  Now Shea objects on basis of foundation.  Judge Edmunds over rules.

Blackwell asks if Bernard signed the tax return.  Young explains the IRS only requires the e-filing authorizations to be kept for three years so they don't have all of them.

Young says in a effort to avoid failure to file penalties for 2007 they filed an estimated return expecting to file an amended return.  Young says Cassandra did.  Shea object.  Judge Edmunds says he can answer.

Young says Cassandra told her about the conversation with Bernard and asks him if it was okay to file the estimated return.

Young says it was filed under penalty of perjury to Bernard.

11:17

Young says he told Bernard to do everything from his business accounts so they could keep track of it.  Says he also told him to give them his personal income information so they could track those as well.  Says if he'd seen unusually large deposits in a personal account he would have asked about them.

Blackwell asks if Bernard authorized him to e-file his tax returns.  Young says yes.

BAck to the tax return for Maestro. 2004, is he aware of the 120,000 deposit in his personal account.  Young says if they had found some connection to the business that wasn't a problem but if it was income it should have been reported.

Blackwell asks if the return is filed under penalty of perjury.  Young says yes.

11:12

Judge Edmunds swears in Alan Young now.  He's the managing director of Alan Young and Associates.  MSU grad and Tax degree from Walsh College, and he's a CPA.

Young says he's known Bernard since the early 90's and started preparing his returns in the mid 90's.  Says Cassandra Jones was Bernard's primary tax prepare and he reviewed the returns.

Young says Bernard's company was set up as an "S" corporation, which was a pass through company and he told  Bernard the income related to the business should be deposited in the business accounts and all transactions should done from the business accounts.

Blackwell asks if he asks clients to report all income.  Young says yes, they have to report it.

Blackwell asks if it's important to look at personal accounts.  Young's says not necessarily but he doesn expect income going to a personal account to be reported.

11:06

Cassandra Jones is back in the witness box.  Jennifer Blackwell on redirect.  Asks how income for an ""S" corporation is transferred to an individual and if she expects a client to tell her about all sources of income.  Jones says yes.

Blackwell asks if she has to rely on the taxpayer for accurate information.  Jones says yes.

Shea's turn.  ASks is she specifically recalls asking Bernard every year for every scrap of information.  Jones says no.

ASks if she can recall every conversation she had with Bernard for all the tax years.  Right.

Shea asks if at some point with a long time client things become assumed.  Right.

Shea asks if when Bernard worked for the county his tax return was simpler.  Correct.

Shea says with as busy as things get she can't spend hours with each client and she has to rely on clients to present information.  Correct.

Asks if she can't expect perfect accuracy from each client.  Yes.

And Jones is excused, her boss is up next.

10:58

We're back.  The members of the jury are taking their seats.

10:57

And we're taking a break.

10:33

Shea asks if a client has to sign a document giving permission to file on line.  Shea asks if she was asked to produce any documents giving permission to electronically file.  No.

Shea asks if she has a signature on a document for 2007.  Jones says not in her possession.

Shea asks if the IRS requires the prepare to keep a copy of this form.  Yes.

Shea asks if things get crazy at tax time.  Yes.

Shea asks about the penalty.  Jones says she's not sure off the top of her head she'd have to look it up.

Shea asks if sometimes not every "I" gets dotted and not every "T" gets crossed.  Jones says sometimes.

Shea asks  if an E filing authorization may not get signed.  Jones says that may be true.

Shea is done. Judge Edmunds calls for a 10 minute break.

10:27

Shea asks about the 2007 returns now, asks if she asked for extensions.  Yes.  asks if there was anything unusual going on at the time.  Jones says there was controversy because of Kwame.

Shea asks if prior to 2008 Bernard got all his tax stuff in.  Jones says right.

Shea says so up until 2008 Bernard was slow but got her the information.  Right.

Shea asks if at some point someone told  Bernard he had to file something or he'd get hit with a stiff penalty.  Jones says yes, she doesn't recall who, but that conversation was had.

Jones says she can't remember who figured out what they were going to do but they talked to Bernard, formed a plan and figured they could fled an amended return.

Shea says the ultimate failure to file  an amended return wasn't anticipated at the time.  Jones says that's correct.

10:22

Shea asks if cash deposited into another account, would she have asked questions.  Jones says she would have enquired.  Shea says it may not have been income.  Jones says that's right.  Shea says that doesn't mean info was being withheld.  Right.

Shea asks if she knows if Bernard got an inheritance in 2005.  No.

Asks if in 2002 Bernard rolled over a retirement account.  Yes.  asks if she knew he was old enough to take retirement distributions and did he take any.  Not that's she's aware.

10:17

Shaking heads in the jury.  Judge Edmunds asks Shea to have Jones explain how Bernard's business was set up.

Shea brings up that it's different than a company like Coca Cola because Coke pays a separate tax but Bernard's company was set up as an "S" corporation because the money would pass through the company without being taxed, to Bernard, who would then pay tax on it as income.

Shea asks what happens  when the boss signs off on the return.  Jones says it would be E-filed, says they would have a meeting with the client to review it.

Shea asks if Bernard ever challenged the information on the returns.  Sometimes.

Shea asks what happens if money was owned.  Jones says she or her boss would notify him.

10:12

Shea asks if Jones wanted him to bring in all his business bank statements and the business check book to see what was paid out for expense purposes.  Yes.

Shea says you didn't ask him for his personal records.  No.  Says you wouldn't know because this was the policy of the firm.  Jones says that's right, the personal had nothing to do with the business.

Shea asks if she has clients that are messy when keeping track of personal and business accounts.  Right.

Shea asks if she has to deal with messy clients.  Yes.  But if you don't have the records it's not available for you to consider.  Jones says that's right.  Note to self:  Be messy and disorganized and pay less tax.  Hmm, may want to see how this trial turns out before I put that one into practice, eh?

10:06

Shea is up on cross, says help, says he's fighting a cold, says he can't even complain about it because it seems everyone is fighting a cold.  Blackwell and Shea both sound like they're ailing. 

Shea asks about a questionnaire Jones asks clients to fill out.  Jones says some clients do and some don't.  Bernard didn't.

Shea says MR. Kilpatrick was one of those guys who wasn't exactly engaged in the process and asked if she had to drag him along.  Jones says correct. 

Shea asks if at some point Bernard would walk in with a shoe box of records or something like that and they'd sit down and start.  Correct.

Jones explains that she filled out two different returns, one personal and one for the business.

Shea asks if  it would ultimately go to  her boss Mr. Young for final review. Jones says yes.

9:59

Jones is now explaining that in 2007 she requested extensions because Bernard hadn't coughed up his documentation.  Says they were estimating based on 2006 numbers.  Says she never got the 2007 numbers.  Says eventually they submitted a return based on the estimates and that the return was never amended.

9:56

Jones says she calculated Bernard's tax liability based on what he reported and it would have changed with the new numbers.  Jones says Bernard didn't make any changes to the return, and she filed it with his authorization.

looking at 2005 now.   Income $220,000.  Jones says she looked at bank statements for Maestro but not the personal accounts.

Bernard is paying close attention to Blackwell no, occasionally glancing at his son or at the screen showing his tax returns, whispering to his attorney.  Shea is objecting now.  Judge Edmunds says Jones can testify to what she did but not others in her office.

Bernard is now sitting hunched over with his hands between his knees, usually he's more laid back, and leaning back in his chair.  The usual placid look on his face is now gone.

9:49

Jones says it's important to find out about all taxable income in a given year.  This should be good.  Jones says she got all Bernard's documentation and went through a check list to make  sure she got everything she needed to fill out his returns.

Looking at his 2004 personal return now.  Income was more than $300,00.  Blackwell asks about gambling income, abut 1600.  Total is 336,625.  Jones says she believed that was his total income.  Says the calculation would have changed if other income was reported.

Here comes that tax evasion charge.

Blackwell asks if Jones was aware of a 120,000 deposited into his personal  account.  Jones says now, had she known, she would have asked if it was income and reported it on his tax form.

9:41

Prosecution brings Cassandra Jones to the stand, now self employed but used to work for CPA firm Allen Young and associates, tax prepares, she has a bachelors degree in accounting.

Jones prepared Bernard's tax returns.  And for his company Maestro and Associates.

Blackwell runs her through her bona fides.

9:38

Shea is up now on cross.  Asks if Sauer remembers that Cunningham plead guilty to a crime.  Asks if Cunningham withdrew additional amounts of cash for other purposes.  Sauer agrees.

Shea asks if deposits were made and no cash was withdrawn.  Sauer says that's correct.

Bullotta on redirect asks about the total of $250,000.  Sauer says there were additional deposits made later.  Yes.

Shea asks if Bernard shared in those payments.  No.  Shea asks if Syncom honored it's contract.  Yes.

And Sauer is excused.

9:33

Special AGent Sauer is the financial expert for the government, the guy who dredges through  bank records and ties all the deposits and withdrawals to what could be illegal activity going at the time.  It's pretty dry testimony, lots of deposits slips and canceled checks, but the amounts are in the 10-20,000 range and when connected to the dates and times of deposits in the defendants accounts it makes a pretty compelling story.

Sauer prepared a spread sheet showing the deposits and withdrawals.  One example, $25,000 goes into the account, and the same date $12,000 is taken out in cash.

9:27

The jury is seated and Judge Edmunds welcomes them back.  Mike Bullotta brings special agent Ron Sauer to the stand.  Asks him about the last witness we heard from before the break, Cunningham, who got quarterly payments from a company named Syncom.

Sauer says most of the payments were $25,000, says he saw cash withdrawals in 2006 and 2007.  The prosecution is claiming that these withdrawals were used to pay Bernard Kilpatrick.  Cunningham says he learned how things worked in Detroit... take care of Dad.

SAuer says he got the documents from the banks where Cunningham and his wife had accounts.

9:22

Judge Edmunds says she's sorry for the delays, she has lobbied to get the defendants and attorneys in the court house.  Says yesterday someone tried to bring in a magazine for a firearm, not the gun but a clip, and she recognizes there are security issues but she is trying to make it easier for the trial participants to get in the building in a timely fashion.

9:19

Judge Edmunds says she will look at the redacted documents in chambers and let them know if she has any problems.

9:18

Thomas says the accuracy of the way the test was set up is misleading.  Says the TSA also looks for people who are concealing things.  Thomas says there are scientific studies about how the magnetometers can be set and adjusted.

Blackwell argued that it was the defense who brought this up in the first place, that's why they sent an agent to the airport with large amounts of cash to see if it could be brought into the airport.  I'd sure like to see what $90,000 looks like... and see if someone could get it through security.

Thomas also says that there are aspects of the test that will not be available to the defense because of national security reasons.  Thomas say he has security clearance and he should be able to see all the documentation.

Thomas argues that the prosecution can't guarantee that the settings on the machine the agent and Clift went through would have been the same.

Blackwell up now, says the prosecution is testing the defense assertion that cash could not have been snuck through security.  Says they'll give the judge the redacted documents in chambers.

Judge Edmunds says she'll permit the testimony.

9:11

Prosecutor Jennifer Blackwell is arguing the motion.  Sounds like she has laryngitis.  She's explaining that the prosecution has witnesses to present evidence about getting large sums of cash through airport security and says the Defense made a baseless argument that the money would have set off the security systems.

Jim Thomas, who brought up this argument in cross examination, is arguing against.  Thomas says the demonstration is not similar to conditions brought up during testimony, and that the magnetometers may not have been the same, or the settings may have been different, of the one the witness went through may not have been working.

This is about testimony from Clift who said he  brought $90,000 from Chicago for Kwame.

9:05

Kwame Kilpatrick and his attorney Jim Thomas have arrived.  We'll be seeing a brand new witness this morning.  Judge Nancy Edmunds is entering the court room and we get the "all rise."  Court is in session.  Judge Edmunds says they'll start with a motion hearing since the first witness of the day is delayed in the line for security.

9:01

The picture is up in the over flow room, Bernard Kilpatrick and Bobby Ferguson are in the  court room along with their attorneys.

8:57

Good Morning and Happy New Year from the Theodore J. Levin Federal Court House in down town Detroit.  It's  a news year and a fresh start to the Kilpatrick Inc. Public Corruption trial after the Holiday break.
 
Ken Martinek is Senior Producer-Investigations for Fox 2 News.  You can contact him at ken.martinek@foxtv.com

 
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