Kilpatrick, Ferguson, and Cheeks Kilpatrick )
Detroit — Documents subpoenaed from Detroit Water and Sewerage contractors with close ties to ex-Mayor Kwame Kilpatrick, his parents and his friend Bobby Ferguson are expected to play a role in the next round of City Hall corruption indictments, The Detroit News has learned.
The federal grand jury investigating corruption has issued subpoenas to Detroit-based Lakeshore Engineering Services and A&H Contractors Inc., related companies that until recently shared executives who contributed tens of thousands of dollars to the political campaigns of Kilpatrick and his mother, outgoing U.S. Rep. Carolyn Cheeks Kilpatrick.
The revelations are further indications that the investigation is focusing on business dealings involving the Water and Sewerage Department, a cash-rich utility in which Kilpatrick once had broad powers to award multimillion-dollar contracts without Detroit City Council approval.
Kilpatrick and his father, political consultant Bernard Kilpatrick, have been publicly linked to the federal investigation but have not been charged with any crimes, though there are signs the government is zeroing in on Bernard Kilpatrick.
Ann Arbor lawyer John A. Shea was recently appointed to represent Bernard Kilpatrick. The FBI has been investigating whether contractors seeking city work while Kwame Kilpatrick was mayor were pressured to hire his father as a consultant.
Shea and Kwame Kilpatrick's attorney James C. Thomas could not be reached for comment Monday.
Criminal defense attorneys representing the companies said the firms and their executives are not targets of the probe, which sources told The News is expected to yield indictments as early as this week.
The corruption investigation, which dates to 2005, has netted more than 10 felony convictions, including that of former City Council President Monica Conyers.
"That they have gotten 10 convictions seems to suggest they're looking in the right places," said Alan Gershel, former head of criminal prosecutions in the U.S. Attorney's Office in Detroit and now a professor at Thomas Cooley Law School's Auburn Hills campus. "You want to subpoena books and records to see if there are parallels to companies you know are engaged in wrongdoing. There may be nothing there, but you won't know unless you look."
Lakeshore is headed by Bloomfield Hills businessman Avinash Rachmale, 45, who oversaw the company's rise from a small minority-owned firm — before Kwame Kilpatrick was elected mayor — into a global player with defense industry deals in the Iraq and Afghanistan war zones.
"Lakeshore has received a grand jury subpoena and has produced all the documents and cooperated fully with the federal investigation," said the company's lawyer Walter Piszczatowski, an ex-assistant U.S. attorney who specializes in criminal defense work. "Neither Lakeshore nor any of its principals are targets."
Piszczatowski would not specify which contracts are under scrutiny, but the company has received more than $145 million in city work from several departments, most notably the Water and Sewerage Department.
The vast majority of Lakeshore's contracts were awarded after Kwame Kilpatrick took office in 2002, according to city records.
A&H Contractors, a Detroit-based construction firm headed by businessman Thomas Hardiman Sr., also is cooperating, his lawyer Christopher Andreoff said.
"They are not a target," said Andreoff, who also is a former assistant U.S. attorney specializing in criminal defense. "All I can share with you at this point is there have been subpoenas issued for various records and documents."
Hardiman, 58, is a former Lakeshore vice president. Rachmale shed his business interests in A&H in approximately 2003, Piszczatowski said. Rachmale was listed as a company director as recently as 2009, according to state business records.
A&H has received work from several city departments, including Water and Sewerage, parks and recreation, and the housing commission.
The cooperation of Water and Sewerage contractors is surfacing after earlier signs investigators are scrutinizing the utility's business dealings.
The Water and Sewerage Department's former director, Victor Mercado, said in September he had testified before the grand jury, adding that he is not the focus of the investigation.
The Detroit News has learned Mercado's retired deputy, Gary Fujita, testified several months ago about contracts awarded during Kilpatrick's tenure, including for the Garden View housing project. The Garden View deal led to Ferguson's indictment in September on charges related to a $12 million bid-rigging scheme.
"I am comfortable saying (Fujita's) not a subject or target of the investigation," his attorney, Mark Kriger, said. "He answered all their questions. He's not a major player in this. He's very minor."
In July 2008, Fujita urged the council to approve two contracts with Ferguson worth more than $4.3 million, saying loans were at risk if the city delayed approval.
A Detroit News investigation showed Ferguson companies have received at least $170 million in city contracts since 2002, including $109 million from Water and Sewerage.
Lakeshore rivals Ferguson in multimillion-dollar deals secured from the city and has drawn grand jury scrutiny.
Lakeshore's name was among 64 groups of individuals and corporations listed on a 2005 grand jury subpoena. The grand jury was seeking records from the Detroit Economic Growth Corp., according to a copy obtained by The News.
In 2006, the year after the subpoena was issued, Lakeshore was identified in the program for Kilpatrick's inaugural celebration as a supporter for donating at least $25,000.
In November 2001, the month Kwame Kilpatrick was elected mayor, Rachmale contributed $1,000 to Cheeks Kilpatrick, according to the Center for Responsive Politics.
Over the next nine years, as the firm's business dealings with Detroit multiplied, Rachmale, Hardiman and other Lakeshore executives contributed $29,150 to the congresswoman's campaigns.
The company's close ties to the city and the Kilpatricks are illustrated at Lakeshore's headquarters, at the northeastern corner of Woodward and East Grand Boulevard. The city moved its police Central District into the building a few years ago as part of a $34 million no-bid lease. The building also housed Cheeks Kilpatrick's local office and the headquarters of a neighborhood initiative launched by Kwame Kilpatrick in 2007.
Gov. Jennifer Granholm also rented campaign space in the building.
Lakeshore has provided a soft landing spot for former members of Kilpatrick's administration.
In September 2008, the month Kwame Kilpatrick resigned, former Deputy Mayor Anthony Adams was named president of Lakeshore Healthcare Investment Group, a Detroit-based health care provider affiliated with Lakeshore Engineering.
Adams, who briefly led the Water and Sewerage Department, is cooperating with investigators probing the alleged misuse of federal housing funds. Adams is not a target of the investigation, his attorney, William Mitchell, said.
Lakeshore was awarded millions in contracts from the water department and hired a company headed by Ferguson as a subcontractor.
In June 2005, Kilpatrick authorized a $19.9 million sewer contract to Lakeshore, according to city records.
Kilpatrick authorized the deal as special administrator overseeing the Water and Sewerage Department, powers that let him bypass the Detroit Board of Water Commissioners and the City Council on some decisions, including contracts.
Piszczatowski said: "I know that all our contracts were approved by City Council, and I am very confident that this one also went through City Council."
Four months later, Kilpatrick increased the contract by $8 million, according to city records.
Lakeshore hired one of Ferguson's companies, Ferguson Enterprises, as a subcontractor, city records show.
Lakeshore and another Ferguson company, Xcel Construction, reaped millions in other contracts, too.
In March 2007, the Water and Sewerage Department split the Detroit service area when it undertook an inspection and rehabilitation of the city's sewer system.
Lakeshore got the east side. Xcel and a partner got the west side. All told, the contracts were worth more than $70 million.
Lakeshore hired A&H Contractors as a subcontractor, according to city records.
In 2005, A&H's board of directors included Bernard Kilpatrick's second wife, Bettye Kilpatrick, according to state records.
It was a short stint, however.
In 2006, her name was removed from A&H's state filing.