Former City of Detroit Chief Administrative Officer Pleads Guilty to Corruption and Tax Offenses

Derrick Miller, 41, of McLean, Virginia, former chief administrative officer of the City of Detroit, pleaded guilty today before United States District Judge Nancy G. Edmunds to corruption and tax offenses, United States Attorney Barbara L. McQuade announced today. McQuade was joined in the announcement by Andrew G. Arena, Special Agent In Charge of the Detroit Field Office of the Federal Bureau of Investigation and Erick Martinez, Special Agent in Charge of the Internal Revenue Service, Criminal Investigations.

According to the charges in the second superseding information and facts stated in Miller’s plea agreement, during the period from 2005 to 2007, Miller served as chief administrative officer and chief information officer for the City of Detroit. In these capacities, Miller had authority and influence over the lease and sale of certain properties owned by the City of Detroit. During that time, Miller accepted a total of $115,000 from a real estate broker who received commissions in connection with the lease and/or sale of City of Detroit properties. Miller accepted the $115,000 intending to be corruptly rewarded in connection with the transactions.

Also, in October 2008, Miller filed an individual income tax return for the 2007 tax year in which he willfully made statements which he knew were not true regarding the amount of income he received from two of his companies, Atrium Financial LLC and Citivest LLC, with the intent of concealing that income from the IRS. Miller intentionally failed to report on his return $46,725 he received that year from a real estate broker (representing a portion of the $115,000 described above). Miller also intentionally failed to report on his tax return a total of $568,000 he received in 2007 for his assistance to a real estate company that entered into a purchase and leaseback of a portfolio of properties. The total amount of additional tax due and owing for tax year 2007 was $240,858.

The plea agreement also indicates that in about 2003 and 2004, while serving as chief administrative officer for the City, Miller twice received $10,000 from Karl Kado, owner of Metro Services Organization (“MSO”), for Miller’s assistance to MSO in obtaining and keeping contracts for electrical and cleaning services at Cobo Civic Center. Miller also delivered $10,000 from Kado to Kwame Kilpatrick in about late 2001, when Kilpatrick was running for Mayor of Detroit.

The plea agreement further indicates that during the period 2006 to 2007, while serving as chief information officer for the City, Miller authorized that at least $4.4 million in funds from the U.S. Department of Homeland Security (“DHS”) be paid to Security Communications Alert Network (“SCAN”) to install security cameras and television screens in the City to detect and alert the public about potential threats to the public. Miller received more than $10,000 from Andrew Park, one of the owners of SCAN, in part because of Miller’s assistance in obtaining the DHS funding.

Finally, Miller admitted in the plea agreement that at the direction of then-Mayor Kwame Kilpatrick, Miller and other members of the City administration assisted Kilpatrick and Bobby Ferguson by steering millions of dollars of City business to Ferguson. Kilpatrick, as well as his top assistants, including Miller and Victor Mercado, pressured contractors to put Ferguson on City contracts they had received, or risk having the contracts held up or canceled. Mercado and other City officials influenced the award of contracts to teams that included Ferguson on them, including reevaluating bids if Ferguson was not part of the winning team. Miller and other City officials also gave Ferguson inside information about contracts or bid evaluations to give Ferguson’s team an edge over competing bidders.

United States Attorney McQuade said: “This guilty plea marks an important step in the investigation and prosecution of those involved in municipal corruption during the Kilpatrick administration of the City of Detroit. It also serves as a warning to those who hold public office throughout this region that there are serious consequences to abusing the trust of the citizens they are supposed to serve.”

FBI Special Agent in Charge Arena said: “This plea is part of a multi-year, multi-agency investigation in to the corruption plaguing the City of Detroit. Public officials involved in acts of corruption and blatant greed will be held accountable for their actions. The FBI’s public corruption program is determined to investigate and expose abuse of public trust.”

“Public officials hold positions of trust in the eyes of the public. That trust is broken when these officials commit crimes. No public official gets a free pass to ignore the law and IRS-CI works to ensure that everyone is held accountable,” said IRS-Criminal Investigation Special Agent in Charge Erick Martinez.

Derrick Miller is released on bond pending his sentencing. He was referred to the United States Probation Department for a presentence investigation. Miller faces a statutory maximum sentence of up to ten years in prison or a fine of $250,000, or both.

Under the terms of the plea agreement, the parties agreed that the sentence would not exceed ten years in prison. The agreement also provided that Mr. Miller would cooperate in the government’s continuing investigation of others, and that he could be eligible to receive a sentence reduction if his cooperation is deemed to be substantial assistance under the Federal Sentencing Guidelines. The plea agreement provides that the amount of sentence reduction, if any, would be decided by the United States District Judge.

The investigation of this case is being conducted by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigations, and prosecuted by Assistant U.S. Attorneys Mark Chutkow and R. Michael Bullotta.