Mayor Duggan’s beleaguered Land Bank, which is the target of a federal grand jury investigation, will return $5 million to a state housing agency for improper invoices submitted for demolition and asbestos work.
In an agreement with Michigan housing officials, the city of Detroit pledged to return the money and reimburse the state an undisclosed amount of money to cover the costs of a state investigation that found improper, if not illegal, expenses. The payment comes on top of $1.4 million that the Land Bank already returned to the Michigan Homeowner Assistance Nonprofit Housing Corp., which administers federal demolition funds on behalf of the Michigan State Housing Development Authority (MSHDA).
Under the pact, the city admitted to no wrongdoing.
The demolition program has come under local, state and federal investigation following allegations that the Detroit Land Bank and Building Authority colluded with preferred contractors to set the prices of demolition work.
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“I am pleased both parties were able to reach a resolution without incurring the added costs of an arbitrator,” MSHDA Executive Director Earl Poleski said in a released statement. “The new protocols and procedures put in place over the past several months have improved programmatic operations, allowing us to move forward in a business-like fashion to support the new direction of the land bank and the important work being done to reduce foreclosure and revitalize neighborhoods in the city.”
The agreement was announced just a week after Motor City Muckraker revealed that federal prosecutors issued grand jury subpoenas to contractors for all correspondence with the Land Bank, Building Authority, mayor’s office and state agencies that oversee the demolition program.
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Some of the improper billings involve set-price bids for preferred contractors.
In addition to investigating bid-rigging, federal authorities are also probing allegations of wire fraud after some contractors received money for work they didn’t perform.
The grand jury is expected to soon announce more subpoenas.
A vast majority of cases that go before a federal grand jury result in criminal charges.
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The Land Bank, which set a goal of 150 demolitions a week, is down to 22 so far this year. In the past three years, the Land Bank has more than doubled its payroll costs.
Steve Neavling lives and works in Detroit as an investigative journalist. His stories have uncovered corruption, led to arrests and reforms and prompted FBI investigations.