State letter notes firing, reassignment in Detroit demo probe
Detroit — A former high-ranking member of the Detroit Building Authority was terminated and a land bank staffer who oversaw Detroit's blight elimination was reassigned over problematic bid awards for the city's federally funded demolition program, according to a document released amid a 2016 state audit that found evidence of possible "bid rigging" and "collusion."
The previously redacted Sept. 30, 2016, letter, sent by the homeownership director of the Michigan Homeowner Assistance Nonprofit Housing Corp. to the U.S. Treasury, identifies former Detroit Building Authority deputy director Jim Wright as a "key staff person" terminated from the program over the issues, and a second Detroit Land Bank staffer, Marti Delgado, reassigned to another area "that does not have any roles and responsibilities with blight elimination or handling of any Hardest Hit blight funding."
The full letter — which also referenced an ongoing federal criminal investigation into the program — was made public Monday as part of a lawsuit filed last fall by activist Robert Davis over the release of audit and financial documents related to the state's investigation of the program.
The revelation comes after the audit, first made public this spring through the Freedom of Information Act, detailed admissions from Wright and Delgado regarding the manipulation of bid awards. The 2016 audit, at the time, also suspected "bid rigging" and "collusion" between the city's building authority, the Detroit Land Bank and program contractors.
Wright, according to the 2016 state audit released to The Detroit News, admitted to contract price manipulation that included hiding some demolition overages by spreading them over other properties so it appeared none of the work exceeded cost limits set by the state.
The practice — which kept each property under a $25,000 required cap — shifted costs "arbitrarily" to other properties, Delgado and Wright both admitted in a July 2016 interview with Tom Golden, who led the investigation for the state.
This was done to abide by a per property funding cap set by the MHA. The Michigan State Housing Development Authority, which distributes federal dollars for the program, was not aware of it, according to the audit. But Detroit's Building Authority Director David Manardo was, according to interviews conducted during the audit.
“He knew of this practice. That it was done. There was no malice intent," Wright told Golden of Manardo. "He wanted to remove the blighted homes at the same contract value. And I agreed to adjust the other properties upwards to make up for the reductions. If the contractors would agree to reduce the price on those properties over the cap then we’d agree to shift those amounts to other properties in the same package. Make up the difference. ... It should not have been done that way."
Wright, who oversaw the blight removal program, abruptly resigned in August 2016, according to city officials at the time. Delgado, a compliance manager for the land bank, left the blight elimination program in January 2017.
Wright hung up when reached by phone Monday. A relative for Delgado said she was not available.
The city's demolition program has been the subject of federal, state and local reviews since it came under scrutiny in the fall of 2015 in the wake of bidding concerns and soaring costs.
John Roach, a spokesman for Detroit Mayor Mike Duggan, said the city does not comment on personnel matters. But he added that Detroit "has been completely transparent with its demolition program and has fully cooperated with every state and federal inquiry into the program."
"All of the issues raised in the MHA audit were addressed and resolved a year ago and detailed in two press conferences conducted by Mayor Duggan," Roach wrote in an email.
"The land bank and the state agreed on a financial settlement over disputed billings to the state, and there was no finding of wrongdoing on the part of the city or the land bank. Since these issues were settled, the U.S. Treasury Department has released another $132 million to Detroit’s demolition program to allow it to continue its work."
Roach said initial concerns raised by the auditor involving Manardo were not substantiated after a full investigation of land bank and building authority computers and documents.
"In the preliminary stages of the investigation, the auditors raised the possibility that Dave Manardo may have had some responsibility for the ineligible billing practices," Roach said. "We cannot speak to the statements made by Jim Wright during his interview with the auditors."
State officials on Monday deferred comment on the audit and Davis' claims to the state Attorney General's Office, which is handling the litigation Davis filed against MHA and the state treasury. A spokesperson reached late Monday declined comment, citing the pending litigation.
MHA Homeownership Director Mary Townley, during a February deposition in Davis' lawsuit, said there had been concerns of "possible bid-rigging" but the investigation, at the time, was "still ongoing with no final determinations being made."
Katie Bach, a spokeswoman for MSHDA, noted Monday that "it wasn't MHA's role to conclude if there was bid-rigging, as that is a law enforcement determination."
MHA, while pursuing its investigation and seeking payback of any funds inappropriately spent by the land bank, also prepared a presentation to update law enforcement on irregularities in the land bank's use of the federal dollars for demolition, she said.
"MHA is not aware of the status of any law enforcement investigations that may have resulted from that disclosure," she said.
MHA hired Golden in spring 2016 as well as the firm Ernst & Young to conduct a forensic audit of Detroit's Hardest Hit Fund program expenditures. In August, the state informed the city of the early issues uncovered.
The federally funded program shut down for two months in August 2016 after the MHA review, in conjunction with MSHDA, turned up "mistakes" and "errors."
Since then, several controls have been strengthened. Among them, state housing authority employees are now embedded at the land bank and building authority to provide compliance support. Treasury accepted the new procedures Oct. 14, 2016, and work resumed.
Duggan first revealed in February 2017 that the state's review of the program's billing practices had turned up a total of $7.3 million in what MSHDA argued were "inappropriate" or "inaccurate" costs.
Early last year, the land bank repaid $1.37 million to address improper expenses identified by auditors for the state.
Last June, the city's land bank also reached a settlement with state housing officials to pay $5 million to resolve a dispute over invoices the state said were improperly submitted for repayment in the demolition program. At the same time, the state agreed to make another $5 million available to the city for tearing down houses.