Joe Guillen

Detroit Free Press

An Oakland County judge is expected to rule as early as next week on whether to proceed with a case that accuses a vendor involved in Detroit's demolition program with fraud.

Defense lawyers for Barry Ellentuck, a demolition contractor facing felony charges in the alleged defrauding of the Detroit Land Bank Authority, played a secret recording in court last week that raised questions about the state's response to accusations of fraud Ellentuck made in 2014 against another company hired to help with Detroit’s blight demolition program.

The audio was one of two secretly recorded conversations involving Ellentuck and government witnesses that the defense revealed and played during Ellentuck’s preliminary examination at 48th District Court in Oakland County on Feb. 4.

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The recordings were played to discredit two witnesses, including Michele Wildman, who was acting executive director with the Michigan Land Bank, the state agency that oversaw and helped manage the Detroit Land Bank's ambitious program to demolish thousands of blighted homes. Wildman is now chief housing investment officer for the Michigan State Housing Development Authority.

Ellentuck's defense attorney, Joe Lavigne, contrasted the lack of follow-up on information provided by Ellentuck with the swift action to investigate claims in January 2015 that Ellentuck's company attempted to defraud the Detroit Land Bank.

"The difference in the approach to the information reported showed that at best they were selective about what they wanted to investigate or follow up on," Lavigne said in an interview. "I certainly think his information would've been worthy of follow-up given their willingness to investigate him (Ellentuck)."

Michigan Attorney General Bill Schuette announced felony charges against Ellentuck on Dec. 15 for submitting billing statements to the Detroit Land Bank with more than 100 hours of work that Schuette's office said was not performed. Ellentuck's company, ADR Consultants, charged $55 an hour for the work, though the Land Bank never paid the allegedly fraudulent bills. Ellentuck, 53, of West Bloomfield has denied the charges.

Oakland County 48th District Court Judge Marc Barron said at the conclusion of last week's hearing that he would need three weeks to review testimony and the secret recordings before deciding whether to send Ellentuck's case to trial court, reduce the severity of the charges or dismiss the case.

Ellentuck’s company was hired by the state in late 2012 to help carry out federally funded demolition programs in Detroit and other cities. The company scored bids, helped the Detroit Land Bank pick demolition contractors and reviewed invoices from some Land Bank contractors.

Detroit's auditor general launched an investigation in October of the city's demolition activities under Mayor Mike Duggan. Since then, statements and e-mails from Ellentuck's company, ADR Consultants, have been central to media reports about the early stages of Duggan's demolition program. E-mails described in a Dec. 14 Free Press story showed uncommon accommodations afforded to three companies that received the majority of demolition work early on — Adamo, Homrich and MCM Management.

On one secret recording played last week in court, Ellentuck can be heard warning Wildman about questionable invoices from Lakeshore Global, a Detroit company the Land Bank hired to assess asbestos in blighted Detroit homes to be demolished. Ellentuck said in the recording that Lakeshore did not perform some work for which it billed.

But before the recording was played, Wildman was asked — on the stand — whether Ellentuck ever reported fraud involving Lakeshore. She testified that Ellentuck did not, and, if he had, she would have followed up on the accusation.

On the recording, Ellentuck can be heard describing his concerns about Lakeshore to Wildman. The conversation was said to have occurred in April 2014.

"I’ve already caught them fraudulently billing. Let me correct myself, billing for work not performed. We’ve rejected their invoices three times," Ellentuck said on the recording.

“Just they’re buffoons or is there some legitimate?" Wildman responded on the recording.

“What is a buffoon?" Ellentuck responded. "I believe everybody is used to doing business as usual and that means you bill for work, or you bill for everything under the notice to proceed, regardless of whether or not you did the work. Because no one will check. And I think it’s the old city mentality."

An attorney for Lakeshore, Gerard Mantese, vehemently denied the company did anything improper. Lakeshore Global showed the Free Press the company's invoices for work done under its contract with the Detroit Land Bank. The invoices and corresponding revisions show there was a billing discrepancy in March 2014 regarding inspections at three out of 429 houses at which Lakeshore performed asbestos surveys. Lakeshore initially billed $2,334 for the three inspections. After Ellentuck notified the company that there was no work done at the three properties, Lakeshore realized there was a data entry error and that the work had actually been done at three properties not included in the invoice. In the end, the amount billed the Land Bank remained the same. Only the addresses where the work was done changed.

“The reams of documents that Lakeshore Global provided to the Free Press show that all of the amounts billed were proper and accurate," Mantese said in a statement. ​

Altogether, the Detroit Land Bank paid Lakeshore $270,101 under its contract between 2014-15, said Land Bank spokesman Craig Fahle.

Fahle said that the Land Bank is not concerned about money paid to Lakeshore under the contract because Ellentuck's company, ADR Consultants, certified and submitted Lakeshore's invoices to the Land Bank.

Should the case against Ellentuck proceed, it could give a behind-the-scenes look at Detroit’s demolition program. Wildman also was asked on the stand about price fixing — she denied discussing the topic with Ellentuck — contract change orders and the “Big Three,” a label demolition officials used to describe demo companies Adamo, Homrich and MCM Management.

The mayor’s office maintains the demolition program was aboveboard and is eliminating blight in Detroit’s neighborhoods at a record pace. The city has been allocated more than $120 million from the federal government's Hardest Hit Fund to help tear down blighted houses.

After the recording was played, Wildman said the accusations against Lakeshore would have been of interest if state dollars were involved. As it was, the Detroit Land Bank paid Lakeshore and applied to the state for federal reimbursement.

“Sounds like we were having a conversation about a city demolition process,” Wildman testified. “It’s not state business.”

Wildman said the Michigan Land Bank’s role is to provide technical support to help the Detroit Land Bank manage its demolition program.

Before Wildman testified, Ellentuck’s lawyer, Lavigne, also asked Carrie Lewand-Monroe, executive director of the Detroit Land Bank, if Ellentuck reported his concerns about Lakeshore to her. “I don’t remember any incidents with Lakeshore,” Lewand-Monroe said.

Had Ellentuck reported fraud, Lewand-Monroe said, she would have alerted others — just as she did when an employee of Ellentuck’s told the Land Bank that he was pressured to falsify bills to the Land Bank.

Tim McCarthy, who worked for Ellentuck at ADR in 2014, said in court that the Attorney General’s Office contacted him in February 2015, about a month after he wrote an e-mail to a Detroit Land Bank official describing pressure from Ellentuck to falsify about 115 hours of work on time sheets to the Land Bank.

McCarthy testified Thursday that records he kept of his work were about 115 hours short of more than 1,147 hours ADR billed the Land Bank. When Ellentuck insisted that he come up with the hours, he refused, McCarthy testified.

“I stood my ground and said this is all the hours I could come up with,” McCarthy said. “He just told me I had to come up with those hours.”

It turned out that Ellentuck recorded a meeting he had with McCarthy in December 2014 about the discrepancy. A snippet of the recording was played in court, and Ellentuck could be heard saying “why would we fudge the numbers.”

Assistant Attorney General Paul Cusick said Ellentuck ultimately turned in invoices for work ADR didn’t perform. “He sought payment. He did not receive it,” Cusick argued in court. “He asked an employee to lie.”

Contact Joe Guillen: 313-222-6678, jguillen@freepress.com or on Twitter @joeguillen.