A Detroit Land Bank Authority contractor is under investigation and could lose more than $15 million in scheduled demolition work because of allegations it tore down several homes and buried the debris under layers of backfill dirt instead of properly disposing of the materials, the Free Press has learned.

The demolitions, which were performed by Chicago-based McDonagh Demolition Inc., have sparked an internal review of every demolition — 90 in total — that the company has performed in Detroit. The company could also face suspension or expulsion from the program, city officials confirmed.

Concerns regarding proper abatement and backfill practices also have raised questions about unusually high bidding awards for some demolition projects. A Free Press review of McDonagh demolition projects found a half dozen that were well above the $25,000 ceiling for federal dollars. At least two were more than $40,000, according to city records.

Read more: Was contaminated dirt used to fill Detroit demolition holes? Feds ask

Read more: Detroit Land Bank contractor demolished home with asbestos inside

And while the city credited internal quality controls for catching the demo violations, one top city official and a state agency that oversees the city's blight removal program are questioning why the company wasn't caught sooner.

Multiple sources, who requested anonymity because they haven't been authorized to speak publicly, told the Free Press that the city was alerted to the situation by a former company employee who shared photos with the Land Bank of discarded debrisburied at demo sites.

When asked by the city whether that was true, Detroit Building Authority Special Projects Director Brian Farkas said: "I cannot comment on an active investigation."

Instead, Farkas said its on-site DBA field liaison discovered that McDonagh "filled several demolition holes before fully removing all of the demolition debris."

The city did not state how the DBA employee discovered the violations.

"Any sites found in this condition will have all fill removed and replaced with another approved source," Farkas said. At least four sites already have been identified for excavation.

In an emailed statement to the Free Press, the company stated: “During the course of demolishing dozens of abandoned homes, McDonagh has been made aware of four properties that contained small pieces of concrete in the backfill. We have been working with the DBA to remove that material. We are confident that this is an isolated issue.”

Farkas said the city alerted the Michigan Department of Environmental Quality of the situation but an MDEQ spokesperson said in a statement late Monday that it had not been notified. Instead, the MDEQ said it was informed of another issue with McDonagh by the city.

"I checked with our Detroit staff and no one was notified by the city of this issue or received any complaints about illegal disposal by this contractor," spokesperson Scott Dean said. "Our asbestos program did issue a violation notice to this contractor based on violations that the city identified and had the contractor self report, but that was not related to buried asbestos waste."

Dean said it is the city's responsibility, not the DEQ's, to provide oversight of the contractors' waste disposal practices.

"If they find a contractor has illegally disposed of waste on-site, it is the city's responsibility to rectify that problem," Dean said, adding, however, that the city is not required to report the issue. "It is a violation of state law (Part 115, Solid Waste Management) to dispose of the demolition waste on-site."

Contractors are required by local and state regulations to fully remove demolition debris and transport the materials to approved landfill locations after a structure is torn down — in part to prevent any environmental issues. Companies must then use clean and approved backfill materials to fill the open holes.

"These are serious findings concerning a new contractor who started work late last year," Michigan Homeowner Assistance Nonprofit Housing Corp. spokesperson Katie Bach said. "The health and safety of Detroit residents during the demolition process is paramount. We are demanding full disclosure about how this happened and why these violations were not caught during the routine inspection process."

MHA administers the federal Hardest Hit Fund program that funds Land Bank demolitions and has disbursed more than $176 million in federal funds to Detroit, which has the largest demolition program of its kind in the nation.

MHA characterized the situation as a "clear violation" of its blight manual that dictates the rules of the state's blight program.

Meanwhile, City Council President Pro Tem Mary Sheffield told the Free Press she is calling for direct oversight of the demolition program to be returned to the city and removed from the two external authorities currently overseeing it — The Detroit Land Bank and Detroit Building Authority.

"To hear that an unknown, out-of-state company came into our city and thought so little of our residents and communities that they buried multiple houses within demo sites is not only alarming, it's indefensible," Sheffield said in an interview with the Free Press. "I feel the Detroit Land Bank’s decision to award over $15 million of demo contracts in less than a year to a company who had never worked in our city and had no stake in our community is yet another example of policies created to negatively impact Detroiters."

The company has performed at least five demolitions in Sheffield's district. Other council members who also had demolitions performed in their districts by McDonagh did not respond to a request for comment.

Sheffield is also calling for:

All of the company's contracts to be immediately pulled.

Excavation of all of their demolition sites to determine whether debris has been buried.

Revocation of the company's wrecking license.

For McDonagh's wrecking license to be revoked and the disbarment of the company and anyone else who may have participated in burying the debris.

"Had it not been for a former McDonagh employee coming forward, our supposedly rigorous dirt processes in place wouldn’t have caught entire homes being buried in the dirt," Sheffield said.

McDonagh, which began performing demolitions in the city in early December, is under contract to tear down 682 properties in neighborhoods across Detroit. The company has been placed on a stop work order while the review is ongoing.

The city, which would respond to questions from the Free Press only via email, said upon making the discovery last week, it "immediately began an internal review."

"McDonagh has been issued a stop work order until we have a chance to review each of its sites and ensure that all work has been completed properly or redone if it has not been," Farkas said via email. "This is a serious violation of our protocols and will be dealt with severely in our contractor discipline process and likely will result in suspension or expulsion from the program."

The company has already been ordered to excavate a handful of properties, including a site at 13047 Maiden St. on the city's east side that was demolished on Dec. 27.

Prior to the demolition, that home was only partially abated, the Free Press confirmed, raising concerns of whether some asbestos-laden materials may have still been on the site when the company buried the debris.

Farkas said members of his staff said they only observed "hard fill," such as bricks, cement and foundation walls left at the site.

"This means the materials with possible asbestos would have been removed with the debris portion of the structure," Farkas said.

When asked whether further testing would occur, Farkas said testing outside of the asbestos survey prior to the demolition "is not required."

A Free Press reporter and photographer visited the site Friday and watched as the company removed the backfill from the ground, as DBA employees observed the process. The Free Press also identified another site, 13089 Maiden St., just a few houses down on the same block that appeared to have chunks of bricks, concrete and other materials on top of the surface and protruding from the ground.

That property was torn down by the same company on Dec. 27 and is among the properties under review.

Bach said the issue was brought to MHA’s attention last week.

"The Detroit Land Bank Authority and Detroit Building Authority have been instructed to conduct a thorough review of all 90 sites and report the findings to us," Bach said.

High costs

McDonagh was set to be paid about $1.5 million in federal funds for the 90 structures it has demolished. However, the company has not been paid yet and all payments have been frozen pending the outcome of the investigation, city officials said. The Free Press was only able to identify and analyze 82 of the company's public demolition records, through the city's open data portal.

Here are the top amounts McDonagh was set to be paid to demolish single-family residential homes prior to the launch of the internal investigation:

$47,703.41 for demolishing 14253 Wilshire on Dec. 13.

$40,127.41 for demolishing 9156 Lakepointe on Dec. 10.

$36,617.46 for demolishing 6427 Iroquois on Feb. 14.

$29,237.41 for demolishing 9913 Balfour on Dec. 11.

$26,785.41 for demolishing 12614 Corbett on Dec. 5.

$26,470.41 for demolishing 12622 Corbett on Dec. 5.

Each of these demolitions were set to be paid through HHF funds which have a $25,000 cap. Land Bank spokesperson Alyssa Strickland said city dollars would have been used to cover anything over $25,000 and is standard practice for the program. Anything over $25,000 goes through an executive director review process to determine whether the cost "is worth it to eliminate that blight on the neighborhood."

When asked what the justification was for the exorbitant pricing, Strickland said, "There are a significant number of houses that must come down but require significant abatement and/or they are larger houses, so it costs more to demolish them."

Strickland said the overall abatement and demo costs from McDonagh and other contractors were "high and that is reflected in bids from all of the contractors." Strickland said McDonagh's were significantly lower than other companies.

The cost of demolition has risen since Detroit Mayor Mike Duggan first began his blight remediation effort in 2014 when the average was about $14,000 per home.

Criticism of the costs began in 2015 when the average soared to more than $16,000. In 2015, Duggan defended the rising costs to City Council, which had risen to $16,400 at one point, compared with about $10,000 in 2013.

Duggan attributed the higher costs to a number of reasons for the price increase, including requiring contractors to use clean soil to fill in demolition sites and using "wet" demolition techniques to control dust — hosing down houses before and after demolition.

The Free Press found that McDonagh's average cost of demolition on its properties was $16,533.12.

Bach said any demolitions that are found to be in violation of MHA guidelines will not be funded with Hardest Hit Funds.

With the company at risk of losing 628 properties in contracted HHF-funded work, a Land Bank official denied it was a setback for the program to have to potentially rebid all of the work.

"It is not a setback because we are already months ahead of schedule," Strickland said. "Even with a rebidding process to address these properties, our HHF spend-down will still be complete well before the deadline."

New environmental concerns?

The improper demolitions have raised new environmental questions that come just two weeks after a Free Press investigation reported that contaminated and unverified dirt was potentially used to fill demolition sites across Detroit.

Dirt usage is the focus of a widening federal criminal probe of the city's federally funded demolition program.

The Special Inspector General for the Troubled Asset Relief Program is also probing whether some companies used free dirt obtained from a variety of unverified sources and then passed it off as an approved residential dirt source before billing the demolition program for materials they never actually paid for.

The investigation led Michigan state Rep. LaTanya Garrett to call for state-level hearings to discuss the "alarming" findings and spurred Sheffield to request a congressional hearing be held. Sheffield's request was sent to U.S. Reps. Rashida Tlaib and Brenda Lawrence.

Separately, Sheffield announced during Tuesday's formal session that she will be voting no on all city demolition contracts moving forward. Sheffield, who cited recent news reports and dissatisfaction about the program's procedures and oversight, joins Council President Brenda Jones in voting no on the contracts.

Jones has been voting no on city demolition contracts since the SIGTARP investigation was first announced. The move is significant because now the body's two top leaders are voting no on the lucrative contracts.

Wayne State University professor Shirley Papuga, who specializes in hydrology and urban ecosystems, said the recent environmental concerns raised could be a good opportunity for the city to partner with local researchers, including those at WSU, to tackle "a socio-environmental issue that is impacting so many people and residents of the community."

"Obviously, public health is going to be a main concern," Papuga said, adding that research might need to be done to determine the level of any potential risk. "So thinking about whether or not there are contaminants present, what those contaminants are and potentially, what would their human exposure pathways be?"

The MDEQ said there are potential environmental and public health risks to burying the waste on-site, which is why it's prohibited by state law.

"Soil, air, and water contamination are possible, as well as the physical hazard if waste is close to the surface," Dean said, adding that there are concerns of the lots becoming unusable if they are filled with waste. "Neighbors do not want the lots for gardens if they find waste when they try to dig into the soil. Future redevelopment in these areas may be hampered if the developers find that they have to excavate waste from these lots before they rebuild. This is why it is critical that Detroit provide rigorous contractor oversight."

Kat Stafford writes enterprise and investigative stories about Detroit. Contact her: kstafford@freepress.com or 313-223-4759.