Bad for Business

At an otherwise ordinary annual meeting last week, Anthony Earley, CEO of Detroit's DTE Energy electric company, fielded mundane questions from shareholders. What's going on with employee pensions? Can DTE get in on the coming electric car craze? Then a middle-aged shareholder from the Detroit suburbs stepped to the microphone. "I've been reading in the paper that you contributed to the mayor's campaign in 2005," Conrad Trendowski said, referring to Detroit Mayor Kwame Kilpatrick, who is facing eight felony charges in a sex scandal known as "Textgate." "What this mayor did was totally unacceptable." Trendowski, his voice rising, implored Earley to end Detroit's embarrassment by persuading Kilpatrick to resign. "There's a crisis in this city," he said. "Whatever influence you have, urge him that it's not acceptable for him to stay." Earley responded with stony silence.

That is the response that most of Detroit's business elite has given the controversy consuming this city for the last four months. From the car chiefs at the Big Three to the CEOs of the many manufacturers that still dot this tarnished rustbelt town, the MO has been to remain mostly mum about the first sitting mayor in Detroit history to be charged with a crime. That strategy of silence is in stark contrast to the growing chorus calling for Kilpatrick to resign. Last week the Detroit City Council voted 5-4 to begin forfeiture of office proceedings against the mayor. The council also voted to ask Michigan's Democratic Gov. Jennifer Granholm to remove Kilpatrick from office—which she says she will not do while the legal proceedings are playing out. But that could take a year, legal experts say. Meanwhile, the state with the nation's highest unemployment rate and the city Forbes magazine recently named the most miserable in America continues to suffer. "This scandal has paralyzed economic development in Detroit," says Sam Riddle, a veteran political operative who worked on Kilpatrick's 2005 re-election campaign—which was heavily funded by the business community. "The longer this mayor stays in office, the longer it will hurt the economy."

Why won't the power brokers use their clout to get the mayor out? For one thing, the mostly white male CEOs fear being tarred as racists in this deeply divided city, where Kilpatrick, who is African-American, has decried his accusers for having a "lynch-mob mentality." Though many business leaders privately despair at how the text-sex scandal is hurting their beleaguered city, they see no upside in criticizing the mayor. "If you are a businessman here, there is nothing to gain by speaking out," says one executive, asking for anonymity for exactly the reason he described. "Somebody could point a finger at you."

Instead, they use mildly critical terms to describe the controversy, which has already cost the city two conventions and brought city government to a standstill. "This is a distraction," says Doug Rothwell, CEO of Detroit Renaissance, a civic booster group of about 50 corporate chiefs who are divided on how to respond. "You will never know the businesses that will decide not to come here."

Ironically, DTE's Earley was one of the few who publicly criticized Kilpatrick. He said he was "extremely disappointed" in Kilpatrick after the Detroit Free Press on Jan. 23 published the mayor's salacious text messages, which appeared to contradict his sworn testimony denying an affair with his chief of staff, Christine Beatty (who has since resigned and is also facing felony charges). Earley told the paper that the scandal is "a tragedy for the city," but he stops short of calling on Kilpatrick to resign. "I've made my opinion known to the mayor," he told reporters after the annual meeting. "Business leaders hope the mayor's lawyers and the prosecutor can come to a quick resolution."

But Kilpatrick's case is not on a fast track. The 37-year-old Democrat, whom comedian Chris Rock once called America's first hip-hop mayor, has surrounded himself with a high-powered legal team to fight the charges, which could land him in jail for up to 80 years. The husband and father of three is accused of perjury, obstructing justice and misconduct in office for allegedly lying about his dalliance with a deputy. Last summer, while testifying in a whistleblower lawsuit brought by two former Detroit police officers, Kilpatrick and Beatty denied they were lovers and that they fired the officers for investigating the mayor's security detail, which could have exposed their affair. The city lost the trial, but Kilpatrick vowed to appeal. Then one of the cop's lawyers revealed that he had obtained transcripts of the incriminating text messages. The mayor quickly settled the suit in exchange for destroying the texts, according to legal filings. Cost to Detroit taxpayers: $9 million.