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Detroit — A minority-owned firm that’s participated in the city’s federally funded demolition program is suing the mayor, land bank and building authority on claims of racial discrimination and retaliation.

A federal lawsuit filed Sunday by Detroit-based Direct Construction Services and the firm’s managing member, Timothy Drakeford, who is black, alleges he was treated unfairly based on his race and that officials in the program conspired to have him suspended for refusing to falsify documents and for cooperating with federal authorities.

Drakeford, who is barred from bidding on federally funded demolition work, also is claiming breach of contract and accuses program administrators of failing to pay black contractors on time.

Reached Monday, Drakeford declined to comment on the lawsuit and directed inquiries to his attorney, who could not immediately be reached. 

The suit, which names Detroit Mayor Mike Duggan, the city’s land bank and building authority as well as high-ranking officials from each division, contends some contractors — including Drakeford — were previously asked to change bidding and cost numbers “to reflect compliance” under the federal Hardest Hit Fund guidelines.

The company, it contends, was later suspended not based on its quality of work but “because of the refusal to change numbers in bid packages.” 

“This case arises because of defendants’ breach of contract, concert of action, due process violations, discrimination on the grounds of race in its implementation of Hardest Hit Homeowner demolition program, including failure to timely pay black contractors in comparison to their white counterparts, improper and disparate discipline and retaliation,” the lawsuit reads.

The city’s demolition program has been under scrutiny since fall 2015 when questions were raised over bidding practices and rising costs. The program is the focus of a federal criminal investigation and has been the subject of state and local reviews and one by the FBI’s Detroit office, which has acknowledged it’s investigating the program.

The Detroit News last summer reported a federal grand jury was focused on the program and whether federal money was misappropriated while the city worked to demolish homes after its bankruptcy.

The city’s land bank and building authority jointly oversee the program; its federal dollars are dispersed through the Michigan State Housing Development Authority.

The lawsuit notes Direct Construction was awarded three contracts for demolition work by the land bank. The company, the suit claims, noticed payments were delayed and more difficult to obtain from the land bank than for “larger white companies,” such as Adamo and Homrich, two firms awarded the largest percentage of the work to date.

Drakeford’s firm claims Direct Construction was under contract for several demolition packages and still hasn’t been paid despite assurances that he would be, the suit says.

It’s unclear from the filing how much remains outstanding according to the company, but emails attached as exhibits document exchanges over invoice submissions and documentation concerns. The emails reference more than $143,000 in unpaid work and the land bank’s intention to make partial payments for properties within the bid packs that had cleared review. 

“This repetitive process has gone on for over a year now, with no success,” the suit says.

Direct Construction contends it had been performing work on two contracts that it had been awarded for a total of 48 homes. On Dec. 19, 2016, the company got an “immediate stop work order” from the land bank, without explanation, the suit contends. 

In February 2017, the company received a letter regarding an Office of Inspector General report that suggested photographs submitted for repayment of sidewalk work were falsified and that the company would not be compensated. A suspension letter then followed on May 19, 2017.

“Plaintiff at that point was concerned and had been question(ed) by FBI investigators regarding issues at the DLBA,” the lawsuit says. “Plaintiff was advised he and his company could not bid or continue work.”

The suit asks the court to award damages and declare the actions of the city, its land bank and building authority as “discriminatory and illegal.”

The firm was among a few suspended last year on claims of manipulating sidewalk repair photographs to obtain payment. 

In response to the federal suit, Detroit Corporation Counsel Lawrence Garcia on Monday defended the investigative findings and suspension.

“The OIG found that not only did Mr. Drakeford personally manipulate a photo of a demolition site to conceal tires that had not been removed from the lot but also gave information that was not truthful to the OIG’s investigators. For the penalties issued with respect to these matters, the DLBA, the DBA and the city followed the recommendations of the independently appointed inspector general,” Garcia said in a written statement.

“These facts more than justify the city’s actions, and Mr. Drakeford's claims are just sour grapes.”

Detroit’s Office of Inspector General — at the request of the land bank — launched investigations in December 2016 into allegations that sidewalk repair photographs were being doctored. The land bank requires its contractors to take “before and after” photographs of sidewalks, drive approaches, neighboring residences and surrounding areas to document conditions.

Direct Construction was flagged over five of its submitted photographs. In a Feb. 1, 2017, report, the inspector general’s office concluded the photos were modified to disguise incomplete work and recommended the company be barred from doing work in the city’s demolition program until at least 2020. Direct Construction filed an appeal, which was not successful. The suspension went into effect June 13, 2017.

The Michigan State Housing Development Authority began placing greater emphasis on sidewalk replacement photographs in October 2016, when a new set of practices went into place. At that point, federally funded demolition had been suspended for two months after a review by the Michigan Homeowner Assistance Nonprofit Housing Corp., in conjunction with MSHDA, turned up “mistakes” and “errors.”

The investigation into Drakeford’s company concluded land bank employees “presented strong evidence” that several photographs had been “falsified,” according to the inspector’s report. 

The report detailed an interview conducted by an investigator with Drakeford on Dec. 8, 2016, as well as subsequent email conversations regarding photographs that were submitted to obtain payment. Drakeford denied wrongdoing and said he hired a subcontractor to replace the sidewalks. He was unable to provide any documentation to support the claim.

Drakeford did admit to adding green spots to one of the questioned photographs to “conceal tires that were on the property,” according to the report. He said he was directed to do so by “someone at the land bank.”

Sunday’s lawsuit separately references a cost-shifting practice in the program that was previously flagged in an independent audit conducted by the land bank.

Drakeford, in a past interview with The Detroit News, said he was asked to sign an affidavit saying he was asked to “rebalance the bid sheets” for a contract involving 38 houses by a former employee of the building authority. 

The affidavit surfaced soon after the land bank released its audit findings, which concluded excessive demolition costs were hidden by spreading them over hundreds of properties to appear they didn’t exceed a required $25,000 cap set by the state.

Duggan 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. The land bank last summer 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.

The city’s administration has said that Detroit has been transparent with its demolition program and cooperated fully with all inquiries.

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