AG Schuette’s office draws new criticism on Flint probe

Jim Lynch and Jonathan Oosting
The Detroit News

The office of Michigan Attorney General Bill Schuette continues to draw criticism for his team’s ongoing criminal probe into the Flint water crisis, including recent criminal charges against former emergency managers accused of conspiring to advance a “sham” environmental order on which his office signed off.

Investigators with Schuette’s office last week tied two former state-appointed emergency managers and two former Flint city officials to an administrative consent order issued by Michigan’s Department of Environmental Quality in 2014. The officials allegedly conspired to secure the order by using a manufactured environmental “calamity” that would allow cash-strapped Flint to borrow money.

That money, according to charging documents, was used not to address the clean-up of a lime sludge facility, but helped Flint pay to participate in the newly formed Karegnondi Water Authority.

The city in April 2014 switched from the Detroit water system to the Flint River for its drinking water as part of its effort to join the new authority. The decision, along with the improper treatment of the water, is believed to have led to lead contamination and a deadly outbreak of Legionnaires’ disease that killed 12 in the region.

But Schuette’s office signed off on that agreement “as to form” in 2014. The documentation bears the signatures of former Flint chief legal officer Peter Bade, DEQ official Bryce Feighner and Schuette’s assistant attorney general Robert Reichel.

“Ultimately, (Flint’s) lime sludge disposal facility was used as a premise for obtaining the funds needed to finance the City of Flint’s contribution to the KWA pipeline,” wrote Special Prosecutor Todd Flood said in his warrant request. “Factually, this was a sham transaction designed under false pretenses to obtain money for the KWA.”

Karegnondi Water Authority CEO Jeff Wright, a key figure at the heart of the city’s municipal water switch, said Wednesday the warrant request filed last week by Flood contains a series of “factual errors” and “foundational discrepancies.”

And the approval of Schuette’s office on a questionable document spurred at least one call for a new look at the Flint case.

“Progress Michigan has said from the beginning that we need an independent investigation into the Flint water crisis,” Lonnie Scott, executive director of the liberal group, said in a Wednesday statement. “This is at its best horrible optics and at its worst another piece of the puzzle in a massive cover-up.

“Why wasn’t this wrinkle in the investigation brought to the public light by the AG? He’s quick to trot himself out in front of TV cameras for a self-congratulatory press conference, but can’t be bothered to mention how his office was directly involved in the lead-up to this man made crisis?”

But a Schuette representative called the furor over the administrative consent order signature “a tempest in a teapot.”

“The role of the Attorney General’s Office is to approve legal documents as to form, but we are never involved directly in the policy creation, and the point of the charges last week was that those charged hid their true motivation,” spokeswoman Andrea Bitely said. “We are continuing with our investigation and will continue to charge where the evidence leads.”

Schuette has created a “firewall” within his office, separating his investigatory team from other attorneys to avoid any potential conflicts of interest.

The use of a false pretense charge against former emergency managers Gerald Ambrose and Darnell Earley, as well as former Flint public works officials Howard Croft and Daugherty Johnson, has been criticized by legal experts. One called it an “unusual” application of the law.

In a Wednesday letter to authority stakeholders, Wright accused Schuette’s office of misleading the public about how Flint became a member of the water authority. He addressed three points:

■That Flint emergency managers continued to pursue the KWA deal, despite a report from the engineering firm Tucker, Young, Jackson, Tull Inc. that raised concerns about the deal being too costly for the city. State and KWA officials raised questions at the time about the firm’s potential bias, since it performed work for the Detroit Water and Sewerage Department.

A second engineering report countered the findings, clearing the way for Flint to join KWA.

“The Tucker, Young report was rejected by all parties in 2013 as erroneous, and potentially biased towards (Flint remaining with) ... Detroit and (DWSD),” Wright wrote. “During the past three years, the figures in the Tucker, Young report have been proven wrong.”

■That Flint’s participation would make or break the authority. “...The KWA pipeline was going to be built regardless of Flint’s participation,” Wright wrote, noting the authority issued $35 million in bonds for building a new pipeline intake before Flint officially joined KWA.

■That KWA would take ownership of Flint’s water treatment plant if the city failed to meet its bond obligations -- a statement the document attributed to former Flint Mayor Dayne Walling.

“It is difficult to discern what source the former mayor is referencing,” Wright wrote. “No document or agreement ... contains any sort of provision to that effect.”

The administrative consent order proved a critical moment in the Flint crisis because it “bound” Flint to use the Flint River as an interim water source until the KWA pipeline was completed, according to Flood’s warrant request. The harsh water ended up the toxin of lead from aging pipes into the city’s drinking water.

Miller Canfield attorney Dan Massaron, the authority’s bond counsel, made the case for the consent order in a March 2014 email to Ambrose, Earley and others. The order “is a condition precedent to proceeding with the transaction,” he wrote. “Put another way, we will cannot (sic) continue with the transaction without the ACO.”

Ambrose forwarded the message to former state Treasury official Wayne Workman, who then asked colleagues if the department could “get a call in” with then-DEQ Director Dan Wyant to “push this through.”

Wright said in his Wednesday letter he did not want to “delve into the debate” over whether the consent order was needed for Flint to join KWA,” but he challenged that assertion in a Nov. 22 report. The city could not legally operate its water treatment plant without it, he said, because of a “shortsighted” decision to improperly store sludge at a nearby site.

“The ACO did help Flint’s future bonding activities by reducing the amount included in calculating the city’s bonded indebtedness,” Wright wrote, “but was not necessary to sell KWA bonds.”

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