Concerns raised about contractors sitting on Detroit wrecking board

Kat Stafford | Detroit Free Press

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The appointment of two contractors — one currently suspended from bidding in Detroit's demolition program— to a board that awards wrecking licenses in the city is raising questions about whether it's a conflict of interest for them to see the inner workings of potential competitors during the application process.

The city's Board of Examiners for Wrecking Contractors is comprised of seven members, two of whom are Richard Adamo, the owner of Adamo Group, and Michael Farrow, owner of Farrow Group. The remaining members include employees of the Buildings Safety Engineering Department, Detroit residents and an engineer.

Adamo is the largest contractor in Detroit's demolition program and has received more than $40 million since 2014 in federal Hardest Hit Fund money, the Free Press reported in June.

City spokesperson Tiffany Crawford said Richard Adamo was appointed to the board in May 2017, replacing his brother, John T. Adamo Jr., the former president of Adamo Group.

John T. Adamo Jr. died in a November 2015 Ohio construction accident.

Farrow, who has not bid on any work in nearly a year, has received about $2.6 million and has been on the board since 2010. Farrow could not immediately be reached for comment.

Wayne State University law professor Peter Henning said the city allowing board members to also be active bidders within the city's demolition program is an "odd way to set up a review system."

"Someone who's bidding and also has some say as to who the competing bidders are — that's a classic conflict of interest," Henning said. "Even if you try to do the best job you can, whoever gets the contract could be taking money out of your wallet. Typically, you would have people that don't have any interest in the underlying contract or agreement or whatever it is."

In addition to federally funded demolitions through the Detroit Land Bank Authority, Adamo and Farrow both have also performed city-funded demolition work in recent years.

Unlike other board appointments required to go before City Council for approval, wrecking board members are appointed by Mayor Mike Duggan to serve three-year terms, with no other approval needed.

"The City Council only approves those appointments where required by city ordinance or statute," Crawford said in a statement to the Free Press. "In this instance, pursuant to Section 12-11.20.0, City Council is not required to approve the seven members of the Wrecking Board."

In order to perform any kind of demolition work of residential or commercial structures in Detroit, companies are required to obtain a wrecking license.

Among its chief responsibilities, the board, in addition to recommending who gets wrecking licenses, also has the power to recommend license suspensions and revocations.

According to wrecking license requirements outlined in an application reviewed by the Free Press, applicants must be approved by the board. The application includes information about company officers, previous experience, equipment, insurance and more. The board has approved 38 licenses within the past five years.

Henning said it's understandable to want individuals with relevant experience but typically, "you're not allowed to bid when you're a member of the board."

"If nothing else, it creates just the appearance of a conflict of interest and that undermines public trust in the process," Henning said. "It doesn't mean anyone did anything wrong but people are going to look at it and have very serious questions about the process more than anything else. That's what's problematic."

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City officials are slated to go before the Detroit City Council on Monday to discuss, in part, a June Free Press report that revealed the city's demolition program lacks diversity.

Adamo's company was suspended from bidding on city and Land Bank contracts for 90 days after it tore down the wrong home in May but Richard Adamo is still an active board member, city officials confirmed.

"Each company's wrecking license is under the purview of the wrecking board," Detroit Building Authority Special Projects Director Brian Farkas said in an email to the Free Press. "We have no authority to revoke or rescind a license. Adamo is still ineligible for the award of any demolition contracts ... until August."

In an interview with the Free Press, City Council member Roy McCalister Jr. said, "It's unbelievable and a conflict of interest. If a person is suspended, that means they've done something unethical. My question is, if you're suspended, how can you do this type of business?"

Adamo's attorney Christian Hauser, in a statement to the Free Press, said the board's composition "has been established for decades" and his client has not had access to any information that would give him an edge.

"Richard Adamo is a volunteer member due to his expansive knowledge and familiarity with the demolition process, and in particular, the requirements mandated by the City of Detroit for both commercial and residential demolition," Hauser said. "During his tenure on the Board, there has never once been a situation where Mr. Adamo has been privy to information that would provide his company with a competitive advantage.”

David Bell, director of Detroit's Buildings Safety Engineering Department, said he takes the board's recommendations and makes a final decision on granting licenses or suspensions.

When asked whether he thought Adamo should step aside during the remainder of his suspension, Bell said: "I can't really speak to his suspension. ... I have to look at it further. It might be that it's not relevant. I've got to look into it."

As part of the application process, applicants submit supporting documentation that shows they meet the requirements laid out in Ordinance 290-H, which details wrecking rules. Buildings Safety employees then verify the documentation before scheduling a verbal oral examination with the board.

Applicants meet with the board, which questions them about their experience. The board then recommends applicants to take the exam for Class A or Class B licenses. Class A licenses require applicants to show experience elsewhere tearing down structures of unlimited height. Class B license holders are limited to wrecking buildings up to three stories or 35 feet.

Bell said the board has been in place since 1964 and until now, he has never heard any concerns about the board's makeup.

"I believe it's been working," Bell said. "I've been with this department for 20 years and this is the first time to my knowledge the question has been brought out. ... I think what the board has been doing throughout the years has been ethical. I have not seen anything that has not been ethical."

Bell said the ordinance pertaining to the board requires two members to be Building Safety employees, two Detroit residents, two licensed contractors and one engineer.

"The ordinance does not specify that the wreckers have to be retired so because it doesn't specify that, we don't see a reason why they have to be retired," Bell said. "The board makes the recommendation to me, and again, no one has come before the board who was qualified and not gotten their license."

Bell said quite a few board members have had their terms renewed but he couldn't comment on how the appointments are made.

The administration didn’t directly respond to a request for comment but instead authorized Bell to speak on behalf of the city.

"They are appointed by the mayor's office," Bell said. "I have to defer to the mayor's office on that whole process."

Bell said the city's position is the appointments don't present any ethical issues.

"You've got only two people that are on the board that may have or could possibly have a motive to deny but again if the people who come before us meet the requirements, we're going to approve them," Bell said.

But McCalister said he believes changes need to be made to the how the board operates.

"If you're involved in the advisory of who gets licenses and then you're part of the bidding to get contracts, you know everything you have to in order to get the contract," McCalister said. "And just because it's been in place since the '60s, doesn't mean that's right. There needs to be some changes to make it equal."

Bell said the ordinance that lays out who is on the board is part of a building code approved by council.

"Any changes council wants to make to this ordinance ... I am open to that discussion," Bell said. "Council makes all ordinances to my knowledge and we abide by them. So, if council changed the ordinance, then we're going to abide by it."

Contact Katrease Stafford: kstafford@freepress.com or 313-223-4759.