A mogul's Detroit passion gets messy
Quicken Loans chairman Dan Gilbert has big plans for the city, but stirs controversy with his bid for casinos in Ohio and his loan to fallen mayor Kwame Kilpatrick.
DETROIT (Fortune) -- While Detroit booster Dan Gilbert has a passion for the city, where he wants to move 1,700 jobs, it's a romance that's getting complicated.
That's because of his new flirtation across the border and controversy at home. The Quicken Loans founder and chairman is a rising force in Ohio, where he backed a winning referendum Nov. 3 to approve casino gambling. (See editor note at bottom.) That gives Gilbert an exclusive option to build casinos in Cincinnati and Cleveland, and allows another firm, Penn National Gaming, to open casinos in Columbus and Toledo.
To score with voters, Gilbert and other casino backers promised Ohioans at least 16,000 new jobs. But his newfound popularity in Cleveland, where he owns the Cavaliers, isn't resonating in Detroit, where the city's three casinos bring in $1 billion a year or so, and Gilbert's two-city straddle is viewed with concern.
"Bullishness, it seems, has limits when opportunity knocks," wrote Detroit News columnist Daniel Howes.
Gilbert's reputation also took a hit during an Oct. 29 court hearing when exiled Detroit Mayor Kwame Kilpatrick testified that he'd been the beneficiary of a secret loan from a powerful Detroit foursome that included Gilbert. The Quicken Loans founder has become a high-profile figure in Detroit, thanks lately to his plan to move his company's headquarters from the suburbs to downtown Detroit.
Compuware CEO Peter Karmanos, racing mogul Roger Penske, PVS Chemicals chief Jim Nicholson, and Gilbert were the generous patrons who promised -- and later delivered -- a $240,000 personal loan to the former mayor, most of it paid as he left jail last February, but promised in August 2008, a month before Kilpatrick left office.
Kilpatrick, who served jail time for lying under oath, was on the witness stand this time over the issue of $900,000 in restitution he owes the city. The resulting controversy was, for the Detroit Four, a public thrashing for their act of civic intervention: The men had moved behind the scenes to end Kilpatrick's endless, operatic maneuvers to stay in office, despite spiraling scandals throughout 2007 and 2008.
In separate statements, Penske, Gilbert, and Karmanos made their case: The payout was no payoff but a tool to help propel the embattled, stubborn mayor out of office and out of Detroit.
"In our view, it was important for the city, and the entire region, that the mayor leave office as soon as it was practical," Gilbert said, referring to "the situation and circumstances that had surrounded former Mayor Kilpatrick and his administration."
Some publicly agreed. Oakland County Executive L. Brooks Patterson, a sometime adversary of Kilpatrick's, termed the money "good intentions by some very solid citizens." He told the Detroit News: "It was an incentive for Kilpatrick to end this useless defense of the Alamo."
Since getting out of jail, Kilpatrick has depended heavily on the kindness of friends. As a sales representative for Covisint, a Compuware (CPWR) subsidiary, he is making a $100,000 salary and living in executive splendor in affluent Southlake, Texas. He and his wife lease a 5,866-square-foot home, complete with pool and landscaped grounds, that was on the market for $1.1 million last year -- quite a pad for an unproven computer-systems salesman.
Although Kilpatrick's administration was dogged by scandal, allegations of corruption, and the eventual publication of steamy text messages between the mayor and his chief of staff, he was an inspiring public speaker who galvanized a period of downtown development. It was Kilpatrick who helped persuade Karmanos, and later Gilbert, that Detroit's future was worth betting on as a corporate hometown.
While the four lenders have not been charged with any wrongdoing, the loan was made privately, which rankles a community tired of behind-the-scenes deals. In another confidential deal, two fired police officers who sued the city ultimately settled for $8.4 million in exchange for their silence. Once the deal leaked out, so did evidence that Mayor Kilpatrick had lied in court. Text messages, including hundreds between Kilpatrick and his chief of staff, longtime friend and lover, Christine Beatty, were published in the Detroit Free Press, destroying his testimony, credibility, and career.
In the week before Kilpatrick's surprise testimony about the loans, Gilbert described his appreciation for the former mayor, describing his passion for the city, his ability to convey that effectively.
"What happened [to him] was just unbelievable and sad, because he had a lot of tools in his toolbox," Gilbert said during an interview in his Quicken office. "The whole thing was disappointing, but I'm more disappointed for the city, because it would have been way better for him to be there and follow through."
Laura Berman is a columnist for the Detroit News.
-- An earlier version of this story incorrectly referred to Dan Gilbert as CEO of Quicken Loans. He is founder and chairman. A corrected version is above.