News Story

Little Or No Consequences for Detroit Land Bank Billing Scam

Only one employee transferred with a pay cut

Improprieties at the Detroit Land Bank Authority cost taxpayers over $824,000. Though they have been the subject of an audit and continue to be the focus of a federal criminal investigation, only one employee has experienced any consequences. That individual, a manager at a program overseeing the demolition of buildings in Detroit, was transferred to another job and took a pay cut of $15,000.

The authority was created to package and sell abandoned and tax-foreclosed properties owned by the city. It receives federal funds meant for blight removal and is the subject of a federal investigation due to rising demolition costs and questions regarding contracts with private vendors.

A grant compliance officer for the demolition program was transferred to another project in mid-October, just weeks before the organization released an internal audit, according to documents obtained in a Freedom of Information Act request.

Martha Delgado, the compliance manager for the land bank's demolition work, oversaw the federal grant that supplied the city with over $250 million.

Delgado’s pay was reduced from $85,000 to $70,000 as she was transferred to a new role as an administrator for a program dubbed “Rehabbed and Ready,” intended to refurbish and market properties. She is also a retired city administrator.

Her employer released an audit in October that discovered improper billing had cost the state $824,491 that the city has to repay, according to the Detroit Free Press. The federal program had a cap of $25,000 per demolition. To get around the cap, some contractors shifted costs from more difficult and costly jobs to simpler and cheaper ones. In the case of two contracts, $78,239 was shifted between several properties to stay under the capped amount.

Documents obtained from the FOIA request also show Delgado was notified she could no longer discuss the demolition program with her colleagues. The notice also says her reassignment came at the request of the Michigan State Housing Development Authority, a state agency that is investigating the demolition program.

Officials from the Detroit Land Bank Authority said they cannot comment on personnel matters but will assist with the investigation.

“We’ve been cooperating since the very beginning and will continue to do so,” said Craig Fahle, director of public of affairs for the land bank.

Whistleblower Timothy Drakeford of Direct Construction Services signed an affidavit on Sept. 28 alleging a manager with the Detroit Building Authority asked him to “re-balance the bid sheets,” according to The Detroit News. The manager, Aradondo Haskins, was fired months earlier for unrelated actions.

The newspaper also reported that the land bank's chair, Erica Ward Gerson, said a rogue employee authorized the shifting costs.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.