Federal Agents Seize Detroit Land Bank Records Amid Widening Probe
By Joe Guillen and Tresa Baldas
Detroit Free Press
8:53 p.m. EST November 16, 2016
FBI agents entered Detroit Land Bank Authority offices and seized computers and documents Wednesday in a continuing federal investigation that has expanded to include the Detroit Land Bank Authority's home auction program, according to Free Press sources.
An earlier version of this story described the FBI seizure as a raid. But Land Bank spokesman Craig Fahle released this comment late Wednesday when asked about the reported action by federal agents on its offices at the Guardian Building downtown:
“This was a scheduled visit to provide records, not a raid. We have said from the very beginning that we are cooperating with federal authorities, and we will continue to do so."
The seizure signaled a more aggressive effort by federal authorities to get information about how the city and demolition contractors tore down thousands of dilapidated homes since 2014 with millions in federal dollars. The investigation began earlier this year after demolition prices spiked 60% under a new management structure Mayor Mike Duggan put into place after he took office.
The FBI would neither confirm nor deny its involvement in the raid.
According to one source, in addition to the demolition program, the FBI is investigating allegations that city employees rigged some of the Land Bank's home auctions. Detroit city workers, under a plan Mayor Mike Duggan initiated in 2015, get a 50% discount on winning auction bids. So if an employee wins an auction with a $10,000 bid, the actual cost is only $5,000.
According to that source, here's how the scam works: A city employee would place a bid on a piece of property and win it at auction. But instead of moving into the home, as required under the program that gives city employees preferential treatment, the employee would turn around and flip it to a real estate company, which then sells it for more and makes money.
The FBI and another federal law enforcement agency known as SIGTARP are conducting the federal probe into the city's demolition program, which is managed by the Land Bank and the Detroit Building Authority under a structure Duggan put in place after he was elected in 2014.
More than $250 million from the federal Hardest Hit Fund has been allocated to Detroit for its demolition program. The money helped the city tear down more than 10,000 blighted properties since Duggan took office. But the program came under scrutiny when it was revealed that costs had spiked more than 60%.
There were no signs of federal agents at the Guardian Building Wednesday afternoon.
Wayne County Executive Warren Evans, whose office also is in the Guardian, confirmed that the FBI was in the building today, but he did not know why.
"I think you guys probably got more information than I do," Evans told reporters Wednesday evening in the Guardian Building lobby. "I don't know."
Wednesday's seizure comes about a month after the U.S. Treasury Department lifted its suspension of the city's demolition program that was in effect from August to October. The program was allowed to resume once more controls were put in place, including embedding state workers into the program to keep watch.
The Michigan State Housing Development Authority, which oversees the flow of federal money to Detroit for demolitions, also is investigating the city's demolition program.
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| Housing advocates protest tax foreclosures which feed Detroit Land Bank Authority corruption. |
Detroit Free Press
8:53 p.m. EST November 16, 2016
FBI agents entered Detroit Land Bank Authority offices and seized computers and documents Wednesday in a continuing federal investigation that has expanded to include the Detroit Land Bank Authority's home auction program, according to Free Press sources.
An earlier version of this story described the FBI seizure as a raid. But Land Bank spokesman Craig Fahle released this comment late Wednesday when asked about the reported action by federal agents on its offices at the Guardian Building downtown:
“This was a scheduled visit to provide records, not a raid. We have said from the very beginning that we are cooperating with federal authorities, and we will continue to do so."
The seizure signaled a more aggressive effort by federal authorities to get information about how the city and demolition contractors tore down thousands of dilapidated homes since 2014 with millions in federal dollars. The investigation began earlier this year after demolition prices spiked 60% under a new management structure Mayor Mike Duggan put into place after he took office.
The FBI would neither confirm nor deny its involvement in the raid.
According to one source, in addition to the demolition program, the FBI is investigating allegations that city employees rigged some of the Land Bank's home auctions. Detroit city workers, under a plan Mayor Mike Duggan initiated in 2015, get a 50% discount on winning auction bids. So if an employee wins an auction with a $10,000 bid, the actual cost is only $5,000.
According to that source, here's how the scam works: A city employee would place a bid on a piece of property and win it at auction. But instead of moving into the home, as required under the program that gives city employees preferential treatment, the employee would turn around and flip it to a real estate company, which then sells it for more and makes money.
The FBI and another federal law enforcement agency known as SIGTARP are conducting the federal probe into the city's demolition program, which is managed by the Land Bank and the Detroit Building Authority under a structure Duggan put in place after he was elected in 2014.
More than $250 million from the federal Hardest Hit Fund has been allocated to Detroit for its demolition program. The money helped the city tear down more than 10,000 blighted properties since Duggan took office. But the program came under scrutiny when it was revealed that costs had spiked more than 60%.
There were no signs of federal agents at the Guardian Building Wednesday afternoon.
Wayne County Executive Warren Evans, whose office also is in the Guardian, confirmed that the FBI was in the building today, but he did not know why.
"I think you guys probably got more information than I do," Evans told reporters Wednesday evening in the Guardian Building lobby. "I don't know."
Wednesday's seizure comes about a month after the U.S. Treasury Department lifted its suspension of the city's demolition program that was in effect from August to October. The program was allowed to resume once more controls were put in place, including embedding state workers into the program to keep watch.
The Michigan State Housing Development Authority, which oversees the flow of federal money to Detroit for demolitions, also is investigating the city's demolition program.
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