Thursday, June 2, 2011

Legal Services Agreement Signals New Chapter in DWSD Corruption Probe

Despite more than 8 years of investigation by the FBI and U.S. Attorney's Office, which culminated last December in a 38-count indictment involve bid rigging, kick-backs and general corruption in the DWSD contracting process, a new investigation is about to kick off. This one will focus on the contractors identified in the federal indictment. 

At the May 25, 2011 Detroit Water Board Meeting, Commissioners were asked to approve a new legal services contract with Miller Canfield for the purpose of investigating both contracts and contractors identified in the federal indictment against disgraced former Mayor Kwame Kilpatrick and former DWSD Director Victor Mercado. The Board recessed to discuss the matter in (private) executive session.  The resolution to begin the new investigation reads as follows:
Upon recommendation of Robert C. Walter, Assistant Corporation Counsel, the Board of Water Commissioners  authorizes the Deputy Director  to execute a legal services contract with Miller Canfield Paddock & Stone in an amount not to exceed  $250,000.00 for an investigation regarding DWSD Contracts and Contractors identified in the federal indictment in Case No. CR-10-2040, and also authorizes the Deputy Director to take such other action as may be necessary to accomplish the intent of this vote. [Note: The federal case is actually Case No. 10-cr-20403.]
Comment: While its unclear which contracts or contractors this new investigation will focus on, Article 7.10 of DWSD's standard general conditions grants the Department broad audit rights and access to project documents for up to 3 years after final payment. Given the potential number of contracts at issue, it seems likely that the investigators will exhaust the initial amount authorized for this probe before completing it. In fact, I expect the final contract amount will be 4 or 5 times higher.   

Update (7/7): City Council approved the legal services agreement with Miller Canfield on July 6, 2011. In doing so, new details have emerged concerning the direction of Miller Canfield's probe.  While its likely that DWSD will pursue claims against Ferguson Enterprises and Xcel Construction Services, the key will be locating assets or tracing funds that may already moved several times. 

For more information about DWSD Update, click here.  

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