Clarification: This July 18, 2018 Charlie LeDuff column, “Where Are the Indictments? Trapped in Politics, Feds Say,” regarding alleged political influence on the grand jury investigation into the Detroit home demolition project, described an unusual July, 2017 announcement that Detroit Mayor Mike Duggan was not a target of the grand jury. The column said the announcement was made by a spokesperson for then U.S. Attorney Barbara McQuade, described in the column as having a =close personal relationship with Mayor Duggan. McQuade was no longer the U.S. Attorney for the Eastern District of Michigan at the time of the 2017 announcement. She had resigned several months earlier in response to the change of Administrations. The announcement was made by McQuade’s former spokesperson on behalf of McQuade’s interim replacement, her former deputy. The Trump Administration delayed naming a new U.S. Attorney in Detroit until early this year, and he took office in June 2018.
By Charlie LeDuff
Mayor Duggan delivering his victory speech on Aug. 8, 2017. (Deadline Detroit photo)
Mayor Mike Duggan, the self-professed overlord of the troubled Detroit demolition program, likes to insist there is no trouble with the program at all. In fact, after he quietly brokered a multi-million-dollar settlement with the federal and state governments last year, he claimed the matter has been put to bed.
And yet the mere mention of inconsistencies, oddities, curiosities or grand juries associated with demolitions sends the mayor and his minions into apoplexy. Belittling tweets waft from city hall.
Threatening legal letters. All the while claiming it is the largest, most transparent demolition program in the country. Despite all this, the multi-jurisdictional corruption investigation into Hizzoner's demolition program remains white hot, according to more than two dozen interviews conducted with federal, state and local investigators with direct knowledge of the case, as well as with demolition contractors, lawyers, and city officials involved in it.
And in a neat bit of synchronicity, the lawyer once hired to protect Duggan from the Trump Department of Justice has taken a new job with Special Counsel Robert S. Mueller III inside the Trump Justice Department investigating possible collusion between candidate Trump and the Russians.
Meanwhile, here in Detroit, the government probe centers around handpicked Duggan officials allegedly steering contracts to preferred firms, characterized as possible collusion, bid-rigging and wire fraud.
Three federal investigators close to the case, who spoke on the condition of anonymity because it is ongoing, describe demolition officials asking Detroit fire officials to declare structures that had never burned as fire emergencies as a way to get around costly demolition requirements for asbestos. Those fire officials confirm those conversations with federal agents to Deadline Detroit.
Signed Proffer Agreements
A copy of a proffer agreement.
At least 20 people have signed proffer agreements -- a precursor to a plea deal -- and are cooperating with the FBI and U.S. Department of Justice. Here is a link to one of the redacted proffer agreements in this case. (Read pages 1, 2, 3, 4). Note the highlighted polygraph provisions.
Making false statements to federal investigators is a felony punishable by up to five years in prison. Nevertheless, two former city officials have failed polygraph tests, according to federal officials who say they have also captured the private emails, text messages and even voice mail of top city officials involved in the project.
We know who's sleeping with who, is how one investigator put it to me.
So with all this, why has the case creeped along for more than two years without a single public indictment?
Politics, is how frustrated investigators describe it to me. Details offered by them and others helps paint a portrait of intrigue and power and political connections stretching from Duggan City Hall to the the Obama White House to the Michigan Attorney General's Office to the Hillary Clinton Campaign.
An audit of Detroit's demolition program was quietly commissioned two years ago by the Michigan Housing Authority -- a nonprofit created by the state to act as a pass-through for the federal money to the city.
The findings were damning: The investigator used language like "collusion", "bid-rigging" and "greased from the beginning."
In one case, the highest bidder got the job, with the investigator writing: "Basically the entire bidding process was a sham."
The FBI, the DOJ, the Michigan Attorney General and the Governor's office were briefed on its contents, according to public documents.
Christy Goldsmith Romero
Finally, in August 2016, the federal agency that began the investigation in the first place: the Special Investigator General for the Troubled Asset Relief Program or SIGTARP, received its briefing from state officials by telephone.
Hours after hearing its disturbing contents, agents within the agency were told to "go dark" -- stop their investigation -- by SIGTARP chief Christy Goldsmith Romero, according to two people with direct knowledge of the conversation.
Goldsmith Romero told her staff that Duggan was a frequent guest of the White House, that he was in line for a possible cabinet position in the Clinton White House and had recently spoken on behalf of the presidential candidate at the Democratic National Convention.
Agents did not go dark, however, and were removed from the case. Acrimony enveloped the agency. In all, three lead investigators have been assigned to the Detroit case and dozens of agents and analysts have left SIGTARP.
Goldsmith Romero -- a Clinton campaign donor -- declined to comment.
A week after the SIGTARP briefing, the Detroit demolition program was secretly shutdown by the Department of Treasury, which has sent nearly $250 million of taxpayer money to Detroit to tear down blight. The shuttering of the program came just months before the national election and remained unknown to reporters, the city council and board members of the Detroit Land Bank.
In the end, there would be no cabinet position for Duggan as Trump defeated Clinton. But in January 2017, in waning days of Obama Administration, Duggan was allowed to travel to Chicago to negotiate a "settlement" with Treasury.
The city eventually repaid the state $5 million, which in turn gave it back to the city. The demolition contractors never repaid a dime and the American taxpayer is still out $5 million.
Honest Mistakes
Duggan insists the auditors' discoveries were simply honest mistakes by his handpicked bureaucracy. Nevertheless, the Washington D.C. law firm WilmerHale was hired to represent Duggan, the City of Detroit and the Detroit Land Bank, which owns the blighted properties. Billing records show Duggan had a three hour conversation in 2016 with power attorney Jeannie Rhee, who has deep ties in the Democratic Party.
Rhee was a former deputy assistant attorney general in the Obama Administration who directly counseled U.S. Attorney General Eric Holder. Rhee then went into private practice, representing Hillary Clinton in a lawsuit over her private emails. Rhee also donated the maximum amount allowed to the Clinton campaign.
Rhee no longer works in Duggan's defense, having taken a job in the public sector once again.
Now, Rhee is a member of the team of Special Counsel Robert S. Mueller III, investigating possible collusion between Trump's campaign and Russia. To date, 31 people have been indicted in that case. In the Detroit demolition case however, there have been none.
Rhee declined a request for comment.
The attorney general of Michigan, too was briefed on the audit's finding and is aware of the federal investigation. But Attorney General Bill Schuette, who is running for the Republican nomination for governor, has done nothing about it.
In fact, his office fought to keep the findings of the audit under raps, arguing the Michigan Housing Authority (MHA) was a non-profit, not a state entity. Thus, the audit was not the public's business.
This is a far cry from the tough-talking press release from Schuette in 2015, when he indicted a whistle blower in the demolition program for attempted fraud of $6,000.
"As Detroit continues to rebound, it is imperative that we not allow anyone to stand in the way of the progress we are seeing," said Schuette. "We cannot allow criminal behavior in the new Detroit."
Not exactly. One assistant attorney general with direct knowledge of the internal discussions about the case, called it a political favor to City Hall.
In the end however, the whistle blower was acquitted by a jury in less than three hours, which included a break for lunch.
Schuette Keeps Mum
Schuette had no comment then. Nor did his prosecutor, Paul Cusick, who would go on to be appointed to the Third Circuit Court just a few months later.
Michigan Atty. Gen. Bill Schuette
When reminded of his tough talk then, and asked why his office has not opened a corruption probe into City Hall now, Schuette, through a spokeswoman, declined comment.
As for the audit that Schuette fought to keep private? It was finally released this April -- 17 months later -- under pressure from local political hit man Robert Davis, who had sued for months to get the report.
"The motivation is quite clear," said Davis. "They were trying to keep its contents quite and out of public eye because the audit revealed criminal conduct that certain key figures in Duggan's administration where engaged in. It's obvious the powers that be, regardless of party affiliation, wanted to make sure the audit did not impact the mayor's reelection."
During the run-up to Duggan's re-election in 2017, I exposed that fact that a criminal grand jury had been impaneled in the demolition case. Among the subjects in the subpoenas is the office of the mayor of Detroit.
When the story broke, a representative for then U.S. Attorney for the Eastern District Barbara McQuade -- who has a close relationship with Duggan -- made the highly unusual move of calling reporters off the record to explain that Duggan was not a target, while confirming the existence of a secret grand jury.
Federal investigators fumed at the naked politics of it.
The office of the U.S. Attorney in Detroit declined to comment.
Duggan spokesman John Roach said in a statement, however, that their office has neither received nor asked for a letter stating that it is not a target of the criminal probe.
"We will continue to cooperate with the investigation as long as necessary," he wrote.
How long is that? The feds have gathered millions of pages of documents, hundreds of hours of interviews, copied hard drives, offered proffer agreements, and conducted polygraphs. They were in town last week yet again.
Who and when, if anyone, will be indicted in the Motor City?
"I feel bad for the people who took the grief for it because I pushed them," Duggan told Crain's Detroit Business last year.
One wonders, if he was including himself.
