Contaminated dirt was potentially used to fill demolition sites across Detroit and is the focus of a widening federal criminal probe of the city's demolition program, multiple sources familiar with the investigation told the Free Press.

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— including the I-96 freeway construction project — and then passed it off as an approved residential dirt source before billing the federally-funded Detroit Land Bank Authority demolition program for materials they never actually paid for, sources said.

And in its first public acknowledgement of the probe, the Michigan Department of Environmental Quality confirmed late Thursday that it is aware of the nature of the investigation and the "potential use of I-96 soils as backfill in residential areas" in Detroit.

"From review of the data, it appears that these soils were contaminated with chlorides (salt) from road deicing," the MDEQ said in a statement to the Free Press. "The chloride concentrations in the soil did exceed the residential soil criteria."

The MDEQ also confirmed it has had conversations with SIGTARP, and possibly other federal agencies, about the dirt usage.

Separately, one contractor, city officials confirmed late Wednesday to the Free Press, was recently ordered to dig up dozens of sites across the city that were filled with "unverified backfill" dirt. The city said Thursday a review of the company is "ongoing and may result in additional sites" being identified.

However, the exact number of potential sites where unverified dirt has been used overall is not yet fully known, sources said, raising questions of whether there's a potential environmental impact.

The MDEQ said in its statement that: "This would be of concern in areas where people drink well water but because the area is served by city water, there is not a public health risk from this soil. High chlorides in the soil can be toxic to plants and plants growing in chloride contaminated soils may be affected."

But Nick Schroeck, director of the University of Detroit Mercy's environmental law clinic, pushed back against MDEQ's stance.

"I would still be concerned about chloride washing off of sites during rain events and snow melt and getting into storm drains and making its way into surface waters, or that it would be captured by the combined sewer system and have to be treated at the wastewater treatment plant," Schroeck said. "In the event of a water main break or other loss of pressure to the municipal water supply, ground water can seep into the drinking water distribution system. If the groundwater surrounding the drinking water pipes is contaminated, it can lead to potential contamination of drinking water."

When asked for comment, the U.S. Environmental Protection Agency said the "EPA does not comment on ongoing investigations."

However, the EPA said that in 2014 it worked with the city and the MDEQ to "enhance demolition practices," including the program's backfill sourcing and testing.

"The new protocol requires each contractor to identify source material location and testing evaluation of commercial soil sources in advance of backfilling so as to avoid bad fill material negatively impacting neighborhoods," the EPA said in a statement, adding however, that Detroit is ultimately "responsible for identifying dirt sources under its protocol."

City officials said due to testing performed by environmental consultants, dirt from the I-96 road construction project and the Little Caesars Arena site has been deemed "not suitable for residential use" and has been prohibited from being used.

It's not immediately clear when that testing occurred.

The Michigan Department of Transportation did not respond to specific questions about the investigation and MDEQ's assertion that the dirt wasbut spokesperson Diane Cross said in a statement that the I-96 project included the excavation of about 812,000 cubic yards of "earth" and of that, 7,000 cubic yards, was considered "non-hazardous contaminated material."

"Those 7,000 cubic yards had slightly higher than normal readings for naturally occurring arsenic and, while not hazardous, (it) was given special consideration to where it was moved," Cross said, adding that the soil was used in two areas within the scope of the I-96 project.

For some Detroit residents and environmental experts, concern remains.

If companies obtain backfill materials from a commercial or industrial site, laboratory testing must be conducted and results must be approved prior to use, according to the Michigan Homeowner Assistance Nonprofit Housing Corp.'s Blight Operations Manual.

MHA administers the federal Hardest Hit Fund program that funds Land Bank demolitions.

The use of untested or potentially contaminated soil puts nearby residents at risk of coming into contact with a number of contaminants, such as lead or other toxins, said Schroeck.

"If you are potentially using contaminated dirt, that raises a number of concerns," Schroeck said. "If you have contaminated soil ... children can ingest it just by playing in the soil. A lot of kids in Detroit already have high lead levels so you want to limit their exposure as much as possible. That's what would concern me most. That's why we want them to use clean dirt-- dirt that comes from a verified source."

Contractors have said that increased scrutiny and the investigation of the program's dirt usage has made it harder to obtain large amounts of backfill to use at sites.

Detroit officials adamantly disputed these claims but admitted there are currently 330 open holes across the city.

Officials said most of the holes are within the allowable 30-day window but 94 are overdue to be filled. While visiting some of the open holes across the city, the Free Press found what appeared to be a dead dog in one unfilled hole and trash strewn about other sites, including old tires.

"During the past 90 days, our contractors have knocked down 826 dangerous buildings and have filled 833 demolitions holes," Detroit Building Authority Special Projects Director Brian Farkas said in an email. "Clearly, this is a contractor-specific problem and not an issue with availability of materials."

Detroit Charter Commission member and local activist Joanna Underwood, who has been a longtime critic of the Detroit Land Bank, said she's concerned about the potential impact on the community.

"It's so dangerous because when you think of those community gardens, people buying side lots and fixing them up and kids playing, no telling what's in that dirt," Underwood said. "If the soil is contaminated, what about whatever you build on top? It's an environmental issue that needs to be addressed."

A fresh round of subpoenas issued Jan.10 by SIGTARP to about 10 contractors, provides a new glimpse into the direction of the lengthy federal investigation.

When asked by the Free Press if the city was aware of the subpoenas and nature of the investigation, officials responded with a statement that they are "cooperating fully and do not comment about investigations."

"Any time we become aware of such violations we take immediate action and we welcome specific information about any instances we may not be aware of," Farkas said.

Meanwhile, the MHA told the Free Press late last year that its office has been aware of SIGTARP's review of the program for a few years.

"It’s our understanding that dirt, like any other facet of the program, may be among the items under review," MHA spokesperson Katie Bach said via email.

More than $250 million from the Hardest Hit Fund has been allocated to Detroit for its demolition program since Mayor Mike Duggan began his aggressive effort to tackle blight across the city. MHA said its disbursed more than $176 million in federal funds to demolish 10,755 properties. Detroit has the largest demolition program of its kind in the nation.

The federal probe has long been shrouded in mystery since it was reported in the fall of 2015 that demolition prices had risen as much as 60 percent under Duggan's administration. The city's demolition program is managed by the Land Bank and the Detroit Building Authority under a structure Duggan put in place after he was elected in 2014.

The Free Press previously reported that suspicions of bid rigging arose in the summer of 2016 during a forensic audit of the demolition program performed by two firms hired by the state — Holland & Knight and Ernst & Young. A state official later said in 2017 that it "didn't see any bid rigging." The suspicions coincided with a three-month suspension of the city's demolition program imposed by the U.S. Treasury.

The investigation into dirt usage and billing is the latest layer of the ongoing SIGTARP and previously reported FBI investigation.

Federal agents visited Detroit just months ago to interview multiple companies who have performed work in the program, sources confirmed.

The Free Press interviewed multiple sources for this story who have been close to the investigation but requested anonymity because they haven’t been authorized to speak publicly. One source said federal authorities appear to be "filling in the blanks" as the investigation heats up.

SIGTARP spokesman Rob Sholars declined comment on this story, saying the agency does "not comment on ongoing investigations, including confirming or denying their existence."

Where did the dirt come from?

The subpoenas, which were sent to contractors amid the federal government shutdown, commanded companies to produce all original documents related to dirt they obtained for numerous contracts awarded between 2016 and 2018. The issuance of subpoenas was first reported by Deadline Detroit in late January.

Subpoenas reviewed by the Free Press show that contractors have until late February to produce a number of documents and invoices including:

Addresses where backfill dirt was delivered

Quantity of backfill dirt

Provider and hauler of backfill dirt

Receipts and records for purchased backfill dirt

All invoices related to source location of backfill dirt (i.e. residential/commercial excavation)

Contractors who spoke with the Free Press said the cost of dirt has risen substantially. Depending on the source of materials, contractors previously paid on average about $2 a yard. Now, costs are between $4 and $6 a yard. Some said they have invoiced the Land Bank between $1,200 and $2,500 or more just to fill a single hole, not including trucking fees.

MHA said Detroit put a new dirt tracking system in place late last year to "help better document the dirt being used at demolition sites." Emails reviewed by the Free Press indicate contractors started using the new platform system mid-November.

Prior to the change, demolition contractors were only required to identify the source of all backfill materials and maintain records available for inspection upon request.

Now, contractors are required to certify in writing and provide documentation concerning dirt sources and destination.

"MHA supported the guideline changes because they made sense for the continued success of the program," Bach said in an email.

However, the city downplayed the changes, saying they weren't in response to the ongoing investigation and that the overall policy has not changed since 2016.

Officials said between 2016 and 2018, there have been several instances in which contractors were sanctioned for violating the backfill policy.

In response to a question of whether it was concerned about any potential public exposure, the city said public health and safety is a "top priority."

"As is our policy, each contractor had to pay for the cost of removal, replacement and proper disposal of the unauthorized fill," the city said in a statement.

DMC Consultants, a company that has performed at least 1,324 HHF-funded demolitions totaling millions, was placed on a stop work order in early February until its caught up on its backlog of open holes. The company, the city said, was also barred from bidding through April in light of other violations.

Officials confirmed that it had identified at least 34 individual demolition sites where "unverified backfill" was used.

"We first became aware of this issue on Jan 31st, when our data platform flagged a use of unapproved dirt," Farkas said. "DMC has been directed to submit a corrective action plan by Monday."

Contractors are allowed to have dirt stockpiled at their yards tested and approved for use, the city said. The quantity of approved dirt is then recorded in its dirt tracking platform and when that quantity is exhausted, the platform alerts the city to the attempted use of an exhausted source.

DMC had 80,000 yards of dirt at its yard tested and approved in 2015, according to city records.

Once that dirt was used, the company began using unapproved dirt in 2016, the city said.

"They were sent a “cease and desist” letter and immediately got 28,000 yards of additional dirt tested approved," Farkas said. "That material also has been exhausted and replaced with fill from an unverified source. As stated above, we are not going to allow unapproved dirt at demo sites."

Farkas said the city has directed the company "to remove and properly dispose of the old unverified fill and replace it with approved material at their own expense."

"We are giving DMC an option to develop a plan for having the soil tested at each of these demo locations to determine whether it is safe to remain there," Farkas said. "If they submit a plan, we will consider that approach. ... For community safety reasons, we are not going to allow unapproved dirt at demo sites."

DMC didn't immediately respond to a request for comment.

Bach said MHA has not been notified of any discrepancies where dirt was obtained free or sites that required dirt to be dug up because of unauthorized usage.

"We regularly work with all blight partners, and have processes and procedures in place to recapture funds from a blight partner or contractor, if necessary," Bach said. "In fact, we had a contractor conduct his own audit and self-reported an overbilling of dirt costs to MHA. That was the only instance we are aware involving a contractor having to refund MHA because of overbilling dirt costs."

Open holes across the city

As of Wednesday, there were 330 open holes, 236 of which were within the 30-day compliance period.

Of the total 94 open holes beyond 30 days, DMC has the most with 41.

"If we look at the holes that have been open for more than 90 days, DMC is responsible for 21 of 35," the city said in an emailed statement. "Out of the total 330 open holes, including those that have not reached the 30 day deadline, DMC is responsible for 68."

Along Auburn Road on the city's west side between Joy Road and Tireman, the Free Press visited at least four open holes.

A review of city demolition records show that at least three of the HHF-funded demolitions were performed by Rickman Enterprises between Dec. 18 and Dec. 19. By city standards, the holes should have been filled long ago.

After receiving a tip from a concerned resident, while examining holes, the Free Press found a dead dog, wrapped in a purple sheet and partially submerged in murky water and ice within an open hole. Trash was strewn around the hole, including two knocked over, dirt-covered signs alerting residents to use caution and keep out of the demolition site.

The city said it informed Detroit Animal Control about the dead dog but it remained in the hole as of Thursday afternoon.

"They need to fix this and clean it up," said Michael Davis, who lives on the east side but was visiting a friend's home across the street from where the dead dog was found. "Anything can happen near those holes."

Derrick Pratt, who said he moved from Saginaw to Detroit about five years ago, said he fell into an open hole at 8629 Auburn next to his home last week. Pratt said he has young children in his home and he's always careful to make sure they don't slip into the muddy hole.

"I fell in trying to get my dog after it fell in the hole," Pratt said, pointing to his boot prints left in the mud where he slipped in. "They need to come fill this in. It's terrible. It's blight when the house is up and blight with these holes, too."

When asked to respond to concerns raised by residents about the lingering holes, the city said: "...The vast majority of our holes are getting filled within the 30-day time period during winter and we are working with contractors to get the rest filled as quickly as possible."

But for Underwood, who lives in the area, that assurance isn't enough. Underwood recently started posting a series of Facebook Live videos to document the holes she finds across the city.

"I started investigating the demolition holes because I saw one up the street from me and I noticed it wasn't being filled," Underwood said. "They are eyesores and I'm nervous that maybe a child will fall in it. This demolition program has become a public hazard. They're risking our lives to make a profit. These people (companies) are coming to capitalize off the fact we're one of the poorest black cities in America."

Kat Stafford is the Detroit government watchdog reporter for the Free Press, covering city issues and the community. Contact her: kstafford@freepress.com or 313-223-4759.