Detroit land bank hands over documents to authorities

Christine Ferretti
The Detroit News

Detroit — The Detroit Land Bank Authority, which is under federal criminal investigation over the city’s demolition program, had FBI agents present at their offices Wednesday to acquire documents.

"Federal agents visited the offices of the Detroit Land Bank (Wednesday) to obtain materials that were produced voluntarily as part of the City's ongoing cooperation in the investigation," said Gina Balaya, public information officer for the United States Attorney's Office, in an email to The News.

Land Bank spokesman Craig Fahle said authorities were inside the Guardian Building on Wednesday for a “scheduled visit” to obtain records that he would not discuss.

“This was a scheduled visit to provide records, not a raid,” Fahle said in a statement. “We have said from the very beginning that we are cooperating with federal authorities, and we will continue to do so."

Fahle confirmed to The News the land bank handed over the sought records.

But Jim Martinez, spokesman for Wayne County Executive Warren Evans, confirmed the county — which owns the building — was given a courtesy call from building security that the FBI was present inside the building.

Earlier Wednesday, Fahle would not confirm the agency’s arrival, releasing a statement that read: “The Detroit Land Bank can’t comment on ongoing investigations, other than to say we are fully cooperating.”

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

In May, the FBI’s Detroit office acknowledged it was investigating the program.

Last month, it was revealed by Mayor Mike Duggan that U.S. Treasury had prohibited the use of federal Hardest Hit Funds for demolitions for two months beginning in August after a probe conducted by the Michigan Homeowner Assistance Nonprofit Housing Corp., in conjunction with Michigan State Housing Development Authority, turned up questions over “certain prior transactions” and indicated specific controls needed to be strengthened.

A separate independent audit commissioned this summer by the land bank also revealed excessive demolition costs were hidden by spreading them over hundreds of properties so it appeared no demolition exceeded cost limits set by the state.

The audit turned up mistakes over a nine month period between June 2015 and February, including inadequate record keeping, bid mistakes and about $1 million improperly billed to the state.

Duggan has admitted the program has had “mistakes” and “errors.”

Mayoral spokesman John Roach declined to comment Wednesday.

In April, the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, sent the city a federal subpoena for records.

Auditor General Mark Lockridge acknowledged his office received the federal subpoena after it 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 city’s building authority. Lockridge has told The Detroit News the SIGTARP subpoena was seeking documents supporting the preliminary audit.

A Wayne County Circuit judge next month is expected to revisit a battle over the release of the subpoena the land bank received from SIGTARP.

In August, Judge David Allen ruled the subpoena could stay secret for the time, but he believed it ultimately was “the public’s business.”

The judge is expected to get an update on the stage of the investigation during a hearing slated for Dec. 7.

The city’s Office of Inspector General is also conducting a review of an aspect of the program.

Detroit officials, meanwhile, have defended the demolition program and said they are cooperating fully with all investigations.

The city has taken down more than 10,600 blighted homes since 2014.