Kwawme water drain fiasco
All the recent chaos surrounding past water and sewage drain deals
involving Kwawme Kilpatrick cast a bad light on the current
Oakland/Macomb Interceptor work done by those same contractors.
Warren borders Detroit and is hooked into many of DWSD drain systems.
Crain’s Detroit Business
March 17, 2013 8:00 AM
Biz takes the stand:
Key testimony against ex-mayor Kilpatrick
• CEO, United Road Services Inc., Romulus
• Testified Dec. 7 and 10, 2012, regarding count 1, racketeering,
Kwame Kilpatrick and Bobby Ferguson; counts 2 and 3, extortion,
Ferguson; count 11, extortion, Kilpatrick and Ferguson.
Count 11 was dismissed.
Kathleen McCann, a former senior vice president of Soave Enterprises Inc.,
recounted meeting with Bobby Ferguson in early 2002 after CEO
Anthony Soave visited Kwame Kilpatrick and was informed that Soave’s
proposed subcontractor on a sewer lining contract
“was out and Ferguson was in.”
McCann joined Soave Enterprises in 1990, around the time Soave acquired
what is now Inland Waters Pollution Control Inc. and appointed her to
the Inland board. Soave has since sold all but 10 percent in that
company. Kilpatrick administrative aide Derrick Miller later checked up
with McCann on the status of negotiating Ferguson’s share of that
contract during the 2002 Mackinac Policy Conference, a conversation
that she said made her uncomfortable.
“We were essentially in a forced marriage, and we knew that this was a
relationship that we were going to have to endure, and so we did our
very best to ultimately get to these contractual arrangements …
to satisfy the promise we made … to do this work,” she testified.
She testified that Ferguson ultimately negotiated for a 20 percent, or
$10 million, share of contract revenue on the lining contract and for
a share of the profits. He allegedly sought to expand on that same
arrangement when Inland Waters became prime contractor on emergency
repairs to a sinkhole in Sterling Heights.
She also compiled a company “diary” starting around 2003 to document
illegal or questionable requests that Miller, Ferguson and others
made of Soave or Inland.
Why her testimony is important: McCann told jurors that Soave and
Inland Waters received veiled threats and that the “risk of losing
the work kind of was hanging over our heads.”
Since then: McCann left Soave in 2011 and became president of
Romulus-based United Road Services.
THE ‘RIGHT’ CONTRACTOR
• President-CEO, Soave Enterprises Inc., Detroit; part owner,
former full owner, Inland Waters Pollution Control Inc.,
Detroit; owner, City Aviation Services Inc.
• Testified Dec. 5-7, 2012, regarding count 1, racketeering,
Kwame Kilpatrick and Bobby Ferguson; counts 2 and 3, extortion,
Kilpatrick; counts 18-30, mail and wire fraud, Kilpatrick.
Counts 27 and 29 were dismissed.
After Kwame Kilpatrick became mayor, Anthony Soave testified,
that a $50 million sewer lining contract his company Inland Waters
Pollution Control had at the close of the Dennis Archer administration
was still languishing on the mayor’s desk. He paid a visit in
April 2002 to ask why.
At that time, Inland had hired a company owned by former
Detroit Water and Sewerage Department Director
Charlie Williams as a subcontractor.
“I just asked (Kilpatrick) what was wrong, and he said I had the
wrong subcontractor. I think I asked him, ‘What’s the right one?’
So he told me, Ferguson was the right one.”
Ferguson then displaced Williams’ company on the contract, but
Soave said he “felt bad” for Williams and paid him $200,000.
Soave is now a 48 percent owner of Williams’ contracting
company, MPS Industrial Services.
He also told jurors he allowed Kilpatrick and his family the use
of private planes through his company City Aviation Services Inc.
for at least 20 round trips, including from the Bahamas to Detroit
and back again during and after the summer 2003 power blackout
in Michigan, and shopping trips to New York.
Between 2004 and 2008, he also donated $175,000 to the nonprofit
Kilpatrick Civic Fund, which other witnesses established the
mayor used for personal and political expenses.
While Soave said he was reluctant to get on bad terms with the
mayor, he was more firm with Ferguson and resisted efforts to
grow Ferguson’s share of the profits or to be paid for
work he didn’t perform.
“(Vice President Kathleen McCann told me that) Bobby said next time
we bid on the next contract, he wants to be our partner, (that)
he wants to bid … (as) either as a partner or 50-50,” he said.
“I told her, ‘You can tell him to go F himself.’
I’d rather not have the work than be partners with him.”
Why his testimony is important: Although McCann handled many of the
particulars of dealing with Ferguson, Soave’s testimony explained
the mayor’s role in the leverage that Ferguson was able to gain.
Since then: Soave sold an 80 percent stake in Inland Waters,
which he acquired around 1990, to Strength Capital in 2005.
He retains a 10 percent share after selling another 10 percent.
SINKHOLE REPAIR PROJECT
• Senior project manager and sales manager,
Inland Waters Pollution Control Inc., Detroit
• Testified Jan. 16, regarding count 1,
racketeering, and count 3, extortion, Bobby Ferguson.
An 11-foot-diameter sewer interceptor — then owned by the
Detroit Water and Sewerage Department near 15 Mile and Hayes
in Sterling Heights — collapsed in August 2004,
causing part of the roadway to sink as well.
Repairs took about a year to complete, and project manager
Walter Rozycki was site representative for Detroit-based
Inland Waters Pollution Control, the general contractor on the project.
Rozycki testified that Bobby Ferguson first reported to the site
on Sept. 14 and a work crew showed up the following day.
Ferguson’s Enterprises Inc., as a subcontractor, handled excavation
work for a bypass to be installed at the sinkhole site, as well as
fueling generators, site restoration and landscaping.
Rozycki reviewed invoices and work records submitted on site but
said a federal agent later showed him other invoices on behalf
of Ferguson’s company billing for work before he was hired at
the project site. In one case, the record appears to be a bill
before the sinkhole had even happened.
Why his testimony is important: Prosecutors alleged Kilpatrick
steered a portion of the sinkhole repair project to Ferguson’s
company and held up approval of a contract amendment for
Inland Waters until it agreed to pay Ferguson at least $350,000
for work his company did not perform.
LAKESHORE LEARNS HOW TO PLAY BALL
• Chairman, Lakeshore TolTest Corp.
and The Lakeshore Group, Detroit
• Testified Nov. 15-27, 2012, regarding count 1, racketeering,
Bobby Ferguson, Kwame Kilpatrick and Bernard Kilpatrick;
counts 7-9, extortion, Ferguson and Kwame Kilpatrick.
There was no verdict on count 1 for Bernard Kilpatrick,
and no verdict on counts 7 and 8 for Kwame Kilpatrick.
Avinash Rachmale testified that his then-midsize business,
Lakeshore Engineering Services Inc., was in dire straits
after losing two city contracts, until he made Bobby Ferguson
a subcontractor on sewer repairs in 2004 and got the work.
His subsequent move to give in and play ball enriched Ferguson’s
companies more than $1.7 million for work not performed,
Rachmale testified that Lakeshore lost two contracts totaling
$15 million to a competitor in 2003, including one it had
previously won, after Ferguson, as a subcontractor to the
competitor, asked to be dealt in for 25 percent of the work
— and was rebuffed.
At the time, Lakeshore’s entire annual revenue
was only about $15 million.
“It was devastating that both contracts (were) canceled, and I
had stomach aches and I couldn’t come to the office for a while,”
Rachmale said. “I just felt that we worked all along
… writing these humongous proposals, and ultimately
our jobs are canceled.”
Rachmale later agreed to deal Ferguson in for a 36 percent cut of
a contract for inspection and rehabilitation of 10 outfalls
(stormwater discharge points).
Doing so meant having to exclude Hayes Excavating Co., an excavating
subcontractor Lakeshore had used in the previous failed bids.
Rachmale did it, but felt the Ferguson cut was oversized for its
relatively small share of work. Lakeshore landed that contract
in late 2004, and Hayes Excavating went out of business sometime
later, Rachmale testified.
Why his testimony is important: Rachmale’s tale of reversing his
fortunes after paying Bernard Kilpatrick consultant fees and
meeting with Ferguson helped prosecutors establish he was initially
extorted out of the first two contracts. Prosecutors also established
Ferguson got 5 percent of a subsequent asbestos contract for which
he did no work — the basis of a single charge on which Ferguson
was convicted, but jurors could reach no verdict for Kilpatrick.
Since then: Rachmale is now chairman of Lakeshore TolTest Corp.,
formed after Lakeshore merged with Toledo-based TolTest Corp. in 2010.
DLZ: IN AND OUT OF FAVOR
• Former COO, DLZ Corp., Columbus, Ohio
• Testified Oct. 24, 2012, regarding count 1, racketeering,
Bobby Ferguson; count 6, bribery, concerning programs that
receive federal funds, Ferguson and Kwame Kilpatrick.
Count 6 was dismissed.
In early 2004, Ohio-based DLZ Corp., through its Detroit-based
DLZ Michigan Inc. subsidiary, was asked to replace a downtown
water main by the Detroit Water and Sewerage Department in
time for Super Bowl XL in 2006.
DLZ, a project manager, had just used Bobby Ferguson’s
Ferguson’s Enterprises Inc. on a pilot program for the city.
But after soliciting competitive bids on the new project,
DLZ selected three other companies.
COO Pratap Rajadhyaksha testified that then-water department
Director Victor Mercado had advised him that Ferguson should
be awarded some of the work, even though Ferguson’s bid
was substantially higher. DLZ complied.
Rajadhyaksha said Ferguson became the most difficult project
contractor to work with, seeking to be paid for several
change orders that Rajadhyaksha thought were unjustified.
Ferguson’s company ultimately received more than $4 million
on the downtown water main project.
In 2006, DLZ was competing on a follow-up contract to service
the city’s east side water mains but, Rajadhyaksha testified,
it lost that job after its certification as a Detroit-based business
was revoked by the Detroit Human Rights Department.
Why his testimony is important: Prosecutors contended DLZ actually had
a more competitive bid on the east side mains project than
Lakeshore Engineering Services, which had teamed with Ferguson.
But Kilpatrick had directed Human Rights to revoke DLZ’s certification.
The government also contends Kilpatrick benefited financially
from his efforts to steer the project toward Ferguson.