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Detroit — The Detroit Land Bank Authority agreed Friday to allow a third company to continue demolition work after being given a stop-work order by the city, The Detroit News has learned.

Detroit's Building Authority issued the order last week to Chicago-based McDonagh Demolition for all of its demolition and backfill work after it was discovered the company had not fully excavated demolition debris such as basements, walls and footing at multiple sites before adding dirt on top.

The Detroit Land Bank Authority notified the company Sunday it was terminating its contract with McDonagh after it was not working quickly enough on remediation plans. But McDonagh wanted to continue negotiations, said Alyssa Strickland, public information officer for the land bank, in a statement.

"The resulting settlement allows the sites in question to be remediated faster than terminating their contract," she said on Friday.

The settlement allows McDonagh to complete the demolition work it has begun. It requires the company to remediate sites where it already has conducted demolition work at its own expense.

The settlement also requires a Buildings, Safety Engineering and Environmental Department inspector to be onsite at all times. McDonagh will be paid for the demolition work already conducted only after remediation is complete and the work is approved by the land bank, building authority and the Michigan State Housing and Development Authority.

But McDonagh will not be allowed to proceed with demolition projects that it has not yet started. The company has about $17 million in contracts, according to the city. McDonagh also is prohibited from obtaining any additional demolition projects paid for by the federal Hardest Hit Fund.

In a statement, McDonagh said an internal investigation "uncovered evidence that individuals acted on their own, without the knowledge, authorization or consent of McDonagh ownership or management."

Joshua Robbins, McDonagh spokesman, said he could not comment on what evidence or what actions employees had taken at the demolition site "because there is an investigation going on." He also declined to comment if those workers still are working at McDonagh.

"From the very onset McDonagh Demolition has been committed to providing Detroit with safe and responsible services," the company said. "We thank officials for working with us to reach an amicable solution based on facts, not the deliberate actions of individuals acting on their own to deceive."

Robbins said the company will start making preparations to return to its work next week.

The Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, launched a criminal investigation into Detroit's demolition program several years ago after concerns were raised over bidding practices and spiraling costs. 

The federal watchdog agency has not commented on the investigation, including whether it exists, but its probe has been referenced in court documents, legal contracts and subpoenas. 

McDonagh has been cooperating with the SIGTARP investigation, a source told The News.

The agreement with McDonagh comes amid a number of high-profile contractor violations in recent months and growing concern among city, state and congressional lawmakers over record-keeping methods for potentially contaminated dirt used in the program.

A former McDonagh employee had notified the city about the debris left behind, which is considered a breach of contract and violation of demolition program guidelines.

The city said Sunday it was deploying a new tool — ground-penetrating radar equipment — to investigate the work of McDonagh and two other demolition contractors, Warren's Blue Star and Detroit-based Gayanga Co.

Blue Star and Gayanga were issued stop-work orders earlier this month on claims they failed to clear out basements and other debris at multiple sites. Their suspensions were lifted this week, though the auditing process will continue, the Detroit Building Authority confirmed.

bnoble@detroitnews.com

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