Rizzo founder resigns amid federal corruption probe
A widespread federal probe into municipal garbage contracts in Macomb County that so far has collared two elected officials snared a third casualty Tuesday when the founder of Rizzo Environmental Services resigned from the company.
Just hours after a Macomb Township trustee appeared in shackles in a federal courtroom in Detroit to answer criminal bribery charges, Chuck Rizzo Jr. stepped down from his namesake company, which is at the center of a long-running investigation into systemic corruption in southeast Michigan and primarily in Macomb County.
The resignation was announced not by Rizzo himself but by his company’s new owner, GFL Environmental Inc., after its president and CEO, Patrick Dovigi, learned Tuesday of the second arrest of an official charged with federal bribery for his alleged role in getting a Rizzo contract approved.
“In the best interest of the company and our customers” that Rizzo resigned, Dovigi said.
“While our review is ongoing, the allegations that have been presented in two federal criminal complaints are completely counter to the way we that GFL does business,” Dovigi said. “We are outraged by the allegations that have been reported and have zero tolerance for employee misconduct or unprofessional behavior.”
Toronto-based GFL acquired Rizzo Oct. 1.
Earlier Tuesday, trustee Clifford Freitas, 43, was arrested by FBI agents on a criminal complaint charging him with demanding and taking bribes in exchange for official help on the municipal contract.
Freitas, shackled at his wrists and legs, answered “yes” when asked if he understood the charges against him Tuesday afternoon in federal court in Detroit. U.S. Judge Magistrate Mona Majzoub ordered Freitas released on a $10,000 bond and to return to court Nov. 15 for his next appearance on the charges.
Freitas, who faces up to 10 years in prison and a fine of up to $250,000, declined to comment after his court appearance. Members of his family attended the hearing and also declined to comment, as did his attorney, Daniel Garon.
Earlier this month, Clinton Township trustee Dean Reynolds also was charged in federal court with demanding and taking bribes in exchange for his vote on municipal contracts since 2012. Reynolds, 49, is accused of accepting $50,000-$70,000 from a company that secured a “significant” contract with Clinton Township. He also accepted $17,000 from an undercover FBI agent, which was recorded on video, officials said in a statement.
Macomb County Executive Mark Hackel called the charges “embarrassing” but not surprising.
He said many contractors in Macomb are being forced to pay officials for municipal and county contracts but are afraid to come forward.
“They either have to pay to play or stay out of the way,” Hackel said. “I’m hearing it directly from developers and contractors about the problems they have had to deal with.”
Prosecutors allege Freitas engaged in a pattern of corrupt activity, including demanding and accepting money in exchange for official acts as a trustee.
The vendor was not identified in court records, but township documents on the hiring of Rizzo last year match up with details in the criminal complaint.
According to board of trustees minutes, on Sept. 23, 2015, the township approved, 5-0, the only municipal contract before it — a five-year waste contract with Rizzo, which took effect Oct. 1, 2015.
According to the complaint, that same day the FBI recorded a conversation between Freitas and a vendor representative — who was working with federal authorities at the time — in which the vendor told Freitas to make sure the board approves the contract.
Freitas, whose term on the township board ends Nov. 20, abstained from the vote because he was a project manager for Rizzo. According to Freitas’ LinkedIn profile, he left the company this month.
In the conversation recorded by the FBI, Freitas said he was advised by the township attorney the lawyer wouldn’t talk to him about the Rizzo contract “in case he is called to testify.”
“I’ll tell him that the contract, uh, needs to be signed tonight. No ifs, ands or buts,” Freitas told the vendor representative.
On May 6, the FBI used the same vendor employee to make a $2,000 bribe payment to Freitas, prosecutors allege in the complaint. The payment was audio- and video-recorded.
Macomb Township supervisor Janet Dunn issued a statement Tuesday that said her office condemns actions by public officials that betray the public trust. “Regarding Mr. Freitas, I am personally shocked and deeply saddened to hear of these allegations,” she said.
GFL’s Dovigi said in the statement Tuesday that Rizzo did not learn of its potential role in the FBI investigation until after Reynolds was charged.
“We had no prior knowledge of the FBI’s investigation or the allegations associated with elected officials in Macomb County,” Dovigi said. “While our review is ongoing, the allegations that have been presented in two federal criminal complaints are completely counter to the way that GFL does business.”
Rizzo Jr. did not disclose during the sale that the company was under investigation by the FBI, Dovigi said. “If we would have known this preclosing, there is a very good chance we never would have completed the transaction.”
Rizzo Jr. was executive vice president of GFL at the time of his resignation, Dovigi said. He was previously president of Rizzo.
Rizzo has confirmed it’s cooperating with investigators.
GFL plans to soon change all branding from the Rizzo name because the company will now be called GFL Environmental USA, Dovigi said. It will also repaint the company’s red trucks green.
GFL’s policy is to rebrand its acquisitions within six months of the sale, but that process will likely be expedited given the allegations against Rizzo, Dovigi said.
According to Tuesday’s complaint, Macomb Township put out a request for proposal for the municipal contract in July 2015. Soon after, Freitas approached a representative of a prospective vendor and demanded money in return for his support as a trustee.
Freitas agreed to accept $7,500 from the vendor in return for his help in getting the contract, prosecutors allege.
Through his position as a trustee, Freitas obtained sensitive bid information on the municipal contract to help the vendor, telling the vendor what bid was needed to beat out competing contractors, prosecutors allege.
After the vendor was awarded the contract by the township, Freitas demanded an additional $35,000 from the company representative for his additional help as a public official relating to the contract, according to the complaint.
Dovigi said Rizzo services and contracts will not be affected by the corruption probe.
A few Metro Detroit communities expressed concern with the investigation last week with one municipality — Huron Township — rescinding its vote to award Rizzo a contract.
“Once the municipalities and townships understand who they are dealing with, we don’t think it’s going to be a concern,” he said.