FBI investigating Detroit’s demolition program

Christine Ferretti
The Detroit News

Detroit — The FBI confirmed it’s investigating the city’s demolitions, adding to further scrutiny of the blight removal program.

The FBI’s Detroit Office on Wednesday confirmed its probe of the program amid several other ongoing audits and investigations. Late last month, the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, sent the city a federal subpoena for records.

“We’re investigating the city’s demolition program,” said Jill Washburn, a spokeswoman for the FBI’s Detroit Field Office, declining further comment.

Detroit’s federally funded demolition program has been under review since last fall when questions were raised about its costs and bidding practices.

Earlier this month, Detroit Auditor General Mark Lockridge said SIGTARP subpoenaed his office for documents involving federal funds used to knock down thousands of homes in the city dating back to Jan. 1, 2014.

An official with SIGTARP said the office doesn’t comment on its investigations. It also does not confirm whether they are open, nor does it discuss its actions, including subpoenas.

The subpoena request came after Lockridge’s office released preliminary findings from a months-long audit into the city’s demolition activities. The report, issued in mid-April, flagged potential conflicts of interest between the city and executive leadership of the Detroit Building Authority.

But Detroit’s top attorney, Melvin Butch Hollowell, has countered the assertion of conflict is “misplaced and inaccurate.”

Detroit’s City Council in October requested the audit of the Detroit Building Authority and Detroit Land Bank Authority’s demolition activities in response to concerns over bidding practices and spiraling costs within the city’s program.

Meanwhile, the city’s Inspector General’s Office is conducting its own investigation into an aspect of the demolition program, and officials say it should wrap up in the coming weeks.

The land bank authority, which administers the city’s Hardest Hit Fund demolitions, said Wednesday it has not been contacted by federal inspectors or the FBI.

“But, we will cooperate if at some point they do contact us,” said Craig Fahle, a land bank spokesman.

Erica Ward Gerson, who chairs the land bank, has said it has cooperated with other audits and reviews of the demolition program conducted by the city’s auditor and inspector general as well as the Michigan State Housing Development Authority — all of which have turned up nothing specific to the land bank.

Since January 2014, more than 8,600 houses have come down in Detroit under the Duggan administration’s demolition program. The vast majority of the city’s demolitions — more than 6,000 — have been paid for with federal Hardest Hit Fund dollars.

On Monday, the city announced that its blight removal efforts will be expanding into even more city neighborhoods with the help of $42 million in additional funding approved by the U.S. Treasury and MSHDA. To date, the city has received $170 million in federal blight removal funds.

MSHDA formerly reviewed the land bank’s bid selection process related to Hardest Hit funds amid news reports questioning bidding practices and spiraling demolition costs. The state agency noted it did not find “any glaring or significant problems.”

Last fall, the mayor’s office defended the bidding process for its large-scale demolition program after after a WJBK-TV report (Channel 2) claimed city building officials improperly met with contractors in 2014 to set prices for bulk demolitions before requests for bids were official.

Three of the four local contractors participating in the negotiations were the sole bidders after the project was publicly offered and awarded the work.

The administration later countered there was nothing unusual or improper about the set-price contract initiative for bulk demolitions, which was a pilot program and discontinued shortly after when it failed to attract national players.

The project accounted for nearly 1,400 of the homes knocked down in Detroit in 2014.

Under the Hardest Hit program, Detroit’s demolition costs went from an average of about $13,600 per house in 2014 to about $16,400 in 2015. The city said the rising prices were tied to new environmental safeguards. They have since made changes, and costs now average about $13,600 per house.