Joe Guillen, and Tresa Baldas

Detroit Free Press

The FBI has joined a federal investigation into Detroit’s demolition program, according to a source familiar with the investigation.

The FBI is the second federal investigative agency looking into the demolition program — an ambitious effort designed by Mayor Mike Duggan to tackle Detroit’s massive blight problem.

“We are assisting,” the source told the Free Press. “We’re more of a background player at this point.”

Late last month, a federal inspector general subpoenaed records from the Detroit Auditor General’s office, which is also investigating the demolition program.

Feds subpoena Detroit for blight removal records

The subpoena from the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, was the first sign that the federally funded demolition program was under federal investigation.

Duggan spokesman John Roach referred questions about the FBI to the Detroit Land Bank Authority. "We have not been contacted on this," Roach said in a text message.

Land Bank spokesman Craig Fahle said in a statement: "The Detroit Land Bank has not been contacted by the FBI. But we will cooperate if at some point they do contact us."

Detroit’s blight demolition program under Duggan largely has been paid for with federal dollars from the Hardest Hit Fund, a TARP program. Detroit so far has been allocated $172 million from the federal Hardest Hit Fund and has torn down more than 8,000 blighted homes since 2014.

Duggan’s blight elimination program has been under fire for rising demolition costs since last fall. The average cost to tear down a blighted home went from $8,500 to $10,000 under former Mayor Dave Bing to an average at one point of $16,400 under Duggan.

Detroit Auditor General Mark Lockridge recently told the Free Press that he was on a conference call with SIGTARP officials a couple months ago and believes the agency is interested in the rising costs under Duggan’s efforts and bidding practices in the early stages of the program.

“They are looking at why costs went up,” Lockridge said.

Duggan has attributed the rising cost to extra efforts being undertaken by the demolition program to properly and safely demolish homes and dispose of debris that was not performed under the Bing administration. Bing later took exception to that claim.

Detroit’s demolition program is carried out by the Detroit Land Bank Authority and the Detroit Building Authority — both public agencies over which Duggan has influence. Federal money for the program is funneled to the city by the Michigan Housing Development Agency.

As a law enforcement agency, SIGTARP has the power to seize, search and arrest. SIGTARP was established in 2008 to audit and investigate spending of the economic stimulus money.

In addition to rising costs, there also have been questions raised about the way demolition contracts were handed out under Duggan’s program.

Specifically, the Free Press reported in December that a state consultant who worked closely with Detroit demolition officials said that he refused to attend meetings where city officials and companies agreed to a contract price for a massive project before others could submit bids.

That consultant is embroiled in a legal battle with the state and is facing charges of submitting false billing statements to the Detroit Land Bank.

The report also included e-mails related to contract awards between March 2014 and January showing Duggan appointees David Manardo and James Wright making decisions on the contracts.

The messages show some uncommon accommodations afforded to three companies that received the majority of demolition work early on — Adamo, Homrich and MCM Management — a group that attended the pre-bid meetings in June 2014 and was referred to in messages as the "big three.”

Together, Adamo, Homrich and MCM received $38.2 million, or about 74%, of the $51.5 million in demolition contracts awarded between March 2014 and January and paid for with the city's first allocation of federal money for blight elimination.

According to the e-mails, Detroit demolition officials gave Adamo, Homrich and MCM a break on bonding requirements offered to no other firms. The e-mails also show that the "big three" convinced city officials in the middle of a job to pay extra for asbestos removal, despite an earlier understanding that such work would be included in the up-front price. The change orders that followed ended up costing taxpayers at least $3.7 million.