Ronald Zajac, General Counsel of Detroit’s Pension Funds, and Paul Stewart, Former Pension Fund Trustee, Indicted in Bribery Conspiracy
|U.S. Attorney’s Office March 20, 2013|
Ronald Zajac, of Northville, Michigan, the general counsel of Detroit’s two pension funds, and Paul Stewart, of Detroit, Michigan, a former trustee of Detroit’s Police and Fire Retirement System, were both charged today in a superseding indictment with participating in a bribery and kickback conspiracy involving over $200 million in investments before the two city of Detroit pension funds United States Attorney Barbara L. McQuade announced today.
McQuade was joined in the announcement by FBI Special Agent in Charge Robert D. Foley, III.
Zajac and Stewart were added as defendants in a superseding indictment that had already charged former city Treasurer Jeffrey Beasley and investment sponsor Roy Dixon with the bribery and kickback conspiracy. The charges were set forth in a fifth superseding indictment issued by a Detroit federal grand jury today.
United States Attorney McQuade said, “Public officials entrusted with billions of dollars in employees’ pension money cannot take bribes and kickbacks to influence their investment decisions.”
Robert Foley, Special Agent in Charge, Federal Bureau of Investigation said, “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.”
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 terminated 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. Stewart also served as the vice president of the Detroit Police Officers Association, the union that represents most of Detroit’s police force.
According to the 13-count superseding indictment, between January 2006 and April 2009, defendants Zajac and Stewart conspired with Beasley, Dixon, and other individuals to defraud current and retired employees of the city of Detroit of their right to the honest services of former Mayor Kwame Kilpatrick, Beasley, Stewart, and other trustees free from bribery and corruption. During the the conspiracy, Stewart accepted thousands of dollars in cash, trips, entertainment, and other things of value from people seeking investments from the Police and Fire Retirement System. Stewart accepted a $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 Stewart and his mistress, and a trip to Naples, Florida, for Stewart and his mistress. In addition, Stewart accepted a “birthday present” of $5,000 in cash at a party at the Atheneum Hotel. Zajac organized the party, and Zajac solicited and collected the cash from people having business before the Boards of Trustees of the pension funds. Zajac also collected and delivered an additional $5,000 in cash for a second pension fund trustee at the same party. At a party in January 2007, Zajac collected and delivered thousands of dollars in cash for former Treasurer and Trustee Beasley.
Also during the conspiracy, Zajac sought to curry favor with Beasley and former Mayor Kilpatrick by raising more than $70,000 for the Kilpatrick Civic Fund. Zajac directed and forced people having business before the pension funds to spend thousands of dollars to entertain trustees of both pension funds. Zajac forced one trustee to pay more than $10,000 for limousines for trustees during a trip to New York City.
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. As a result of the raise, Zajac was receiving over $400,000 in compensation per year from the pension funds.
Upon conviction, both Zajac and Stewart face a maximum of 20 years in prison and a fine of up to $250,000 on the charge of conspiracy to commit honest services mail and wire fraud. The superseding indictment seeks forfeiture of the proceeds of the conspiracy received by Zajac, Stewart, and their co-conspirators.
The case was investigated by agents of the FBI, the Department of Labor, and the Internal Revenue Service. It is being prosecuted by Assistant United States Attorneys Robert Cares and David A. Gardey.