Investigator: New Flint probe looks at financial fraud

The lead investigator into Flint’s water crisis has launched a new probe amid allegations of “financial fraud” and “greed” behind the decision years ago to switch the city’s water source.

“Without getting too far into depth, we believe there was a significant financial fraud that drove this,” Andy Arena, the FBI Detroit office’s former director, said Thursday during a Senate Appropriations Subcommittee on General Government hearing.

The alleged scheme benefited “individuals,” said Arena, who added that “I believe greed drove this.”

Attorney General Bill Schuette started the original investigation in January 2016 after Michigan Gov. Rick Snyder declared a state of emergency involving Flint’s lead-contaminated water. The probe has resulted in criminal charges against 15 local and state officials, resulting in four plea deals and preliminary exams involving six defendants including state Health and Human Services Director Nick Lyon and Chief Medical Executive Eden Wells.

But this new “spin-off” investigation is looking into the motivation behind the decision to switch the city of Flint from the Detroit area water system to the new Karegnondi Water Authority. When Flint decided to join the regional authority, it ended its arrangement with the Detroit water system and started drawing water from the Flint River as an interim source, which eventually resulted in contaminated drinking water.

When Sen. Mike Nofs, R-Battle Creek, asked whether the probe involved local, state and federal entities, Arena responded: “It kind of cuts across all lines right now. ... I don’t know that they were working so much in concert, but the end game was people were trying to make money in different ways.”

Arena also reiterated that his team has been heading the Flint criminal investigation for more than two years but could not determine when it would end.

“We’re moving at lightning speed. ... I can assure everyone here that we are working as quickly as we possibly can,” he said. “Our bottom line is we want justice for the people of Flint, and we have to do that methodically.”

Arena added that state investigators were cooperating in a probe of the crisis led by federal authorities. He has talked with Matthew Schneider, the U.S. attorney for the Eastern District of Michigan who formerly was Schuette’s chief deputy, and had several meetings, Arena said.

“We’re sharing information, but it’s a little tricky,” he told the lawmakers.

In March 2013, Flint’s City Council members voted 7-1 to join a new regional provider rather than remain a customer with the Detroit system — as it had for decades. Three days earlier, Flint Emergency Manager Ed Kurtz had approved the deal as well, and it had the support of Genesee County Drain Commissioner Jeff Wright.

Then-state Treasurer Andy Dillon was initially skeptical about whether the new regional authority made financial sense. But Dillon said he was persuaded the deal was financially sound before a failed April 2013 last-ditch meeting between Detroit and Flint officials to try to save the existing arrangement.

Kurtz signed off on a subsequent order in June 2013 that allowed the “upgrading of the Flint Water Plant to ready it to treat water from the Flint River to serve as the primary drinking water source for approximately two years and then converting to KWA delivered lake water.”

Flint used river water from April 2014 until October 2015, when the city was moved back to the Detroit system following an outbreak of Legionnaires’ cases and evidence of elevated levels of lead in the city’s children.

The city of Flint has since decided to leave the Karegnondi authority because of the high cost of upgrading and fixing the Flint Water Plant and connecting it to the new regional system.

In October 2017, a federal judge dismissed objections by Flint’s council and paved the way for Flint officials to move forward with a long-term water contract with the Detroit area Great Lakes Water Authority supported by Mayor Karen Weaver to keep the city from bankruptcy.

Weaver, Snyder and the U.S. Environmental Protection Agency supported a proposed 30-year deal with the Great Lakes Water Authority, but the Flint City Council dragged its feet and balked.

The Michigan Department of Environmental Quality successfully sued the city to get the agreement approved after warning that the council was endangering public health in the wake of a crisis that has largely been blamed on the state.