Detroit police and state environmental regulators are separately probing two companies believed to have together filled hundreds of Detroit demolition sites with toxic dirt, threatening to cost the city millions in cleanup, Mayor Mike Duggan announced at a Dec. 22 news conference with just over a week left in office.

An “intensive” and ongoing criminal investigation into potential fraud by Detroit-based Gayanga Co. has identified 49 demolition sites where the contractor may have used toxic dirt, in addition to 58 the city says it already found contaminated, Detroit Police Deputy Chief Kari Sloan said. Duggan said he requested the police investigation in September after the Detroit Office of the Inspector General found the contractor may have intentionally used backfill from unapproved sources.

Separately, the Michigan Department of Environment, Great Lakes and Energy says it is coordinating with Detroit officials to evaluate the activities of Oakland County-based Iron Horse of Michigan Inc. after Duggan said the city found it sourced potentially toxic dirt to Gayanga and three other contractors responsible for 424 demolitions.

The city is in the process of testing the Gayanga and Iron Horse sites of concern and plans to replace the dirt at all sites found to be contaminated. Dirt has been removed from at least 50 sites thus far and the city will eventually sue the contractors in an attempt to recoup costs, Duggan said, adding that he has spoken with Mayor-elect Mary Sheffield about the issue. A representative for Sheffield’s transition did not return a request for comment Monday.

Removing and replacing dirt at the site of a single home demolition costs an average of $18,000, Duggan said — nearly the cost of the demolition itself. Replacing the dirt at 400 sites could cost $8 million, but testing conducted at dozens of sites thus far shows only about 30% are contaminated above acceptable levels for the region, Duggan said.

More than 400 sites connected to the two companies still require testing, a process expected to be completed by March, Duggan said.

“Long-term human contact is a health risk,” Duggan said of the imperative to replace the soil, adding that future building costs on the cleared sites would “be far more expensive … if contaminated backfill is left behind.”

“I am trying to set the stage so that we can see houses re-emerge in these neighborhoods in as cost-effective a way as possible, which is why we go and investigate every single case where there’s a problem,” Duggan said.

Gayanga was initially suspended from Detroit’s demolition program in September after the Detroit Office of the Inspector General alleged it had sourced contaminated dirt from redevelopment of the former Northland Mall site in Southfield. The City Council upheld the suspension by a unanimous vote Nov. 19.

While the company used contaminated dirt from Iron Horse at some sites, toxic backfill from elsewhere was found at 24 Gayanga demolition locations, Duggan said.

The demolition company owned by Brian McKinney has received tens of millions of dollars in city demolition contracts since a 2018 push by Duggan, Sheffield and other city leaders to ensure greater minority and Detroit-based business representation in the program. Sheffield and McKinney were romantically involved in 2019, when she was a City Council member voting to approve millions in contracts for him.

In a Dec. 22 statement, Gayanga spokesman Shaun Wilson said: “We have been fully transparent and compliant with all aspects of the investigation and it’s worth noting that Gayanga used only publicly approved sources for all the sites in question. If in fact it is found an employee deviated from our outlined processes and procedures for personal gain, we expect them to be held accountable like any other contractor. Furthermore, the only reason Iron Horse has been suspended and under investigation NOW is because of our clear records indicating the majority of the dirt in question came from them … and we vigorously defended that position.”

Iron Horse is owned by Rodney Burrell, a former Northville hauling company owner who pleaded guilty in 2010 to submitting an inflated bid to help former Mayor Kwame Kilpatrick’s friend Bobby Ferguson win a contract. Burrell’s Iron Horse was approved by the city as a dirt supplier for the demolition program in 2023 and suspended Nov. 3, after initial testing revealed contamination at numerous sites.

The Iron Horse sand and gravel pit sourcing the dirt is in Milford Township and known as a “native” pit with undisturbed soil, typically an ideal source for backfill, Duggan said.

After receiving reports of potential contamination this summer, the city hired environmental consulting firm Mannik and Smith Group to begin testing the site. The firm visited the site Dec. 2 and found not only the native pit but dirt being trucked in. Duggan said Iron Horse prevented the firm from conducting soil testing and that the city — which lacks jurisdiction in Oakland County — subsequently filed a complaint with EGLE.

“This is a disturbing outcome. We have never seen evidence of soil from a native pit testing at these kinds of elevated contaminated levels,” Duggan said. “We are extremely suspicious that they are not actually selling native soil and gravel.”

Reached by phone and asked about Duggan’s statements Monday, Iron Horse owner Burrell said, “Don’t know nothing about it. I haven’t dealt with any dirty dirt.” 

Burrell has previously denied claims that the dirt he sells to demolition contractors is contaminated, telling Crain’s Detroit in September: “That’s a bunch of bulls—. They come out every year and look at my stuff and take pictures and send letters. … They can come out and test mine at any time.”

In a statement, an EGLE spokesman said the city has shared its findings into Iron Horse with the agency.

“We continue to gather more details about the specific Detroit parcels where this fill was used to assess any risks,” said spokesman Josef Stephens. “EGLE’s next step is to evaluate potential public health risks, based on the nature and placement of the fill material. EGLE will continue working with the city to determine appropriate actions, including possible remediation or enforcement if contamination is confirmed.”

Duggan said the soil becomes a health risk when it is unearthed — “if you were to dig through the foot of topsoil and spend a lot of time digging in the dirt.”

The Detroit police probe of Gayanga has meanwhile involved the execution of 13 search warrants, the seizure and examination of a laptop and several cell phones, the seizure of more than 100 boxes of detailed work records, and interviews with dozens of workers affiliated with the company, Sloan said. Duggan said the company allegedly misrepresented the source of its backfill soil in paperwork filed with the city. The investigation will eventually be turned over to the Wayne County Prosecutor’s Office for potential charges.

Toxic dirt has been a recurrent problem in the demolition program that has taken down approximately 27,000 abandoned and blighted Detroit homes since Duggan took office in 2014, prompting the implementation of additional safeguards.

All of the public money spent replacing toxic dirt at 154 sites demolished before 2020 — when the program was largely federally funded — was recouped through city lawsuits and federal government action, Duggan said. Since 2021, Detroit taxpayers have been responsible for the cost of demolitions through a $250 million voter-approved bond known as Proposal N.

Duggan said the city has never before faced a situation in which a purported supplier of native dirt distributed contaminants to numerous contractors, and said a $15 million reserve fund is in place in the event the city is unable to recover cleanup costs. Those reserves, however, must also pay for other demolition program issues, such as broken sidewalks and property damage.

“I want to make sure I am leaving the city with no significant long-term financial risk,” Duggan said.

Also Monday, Duggan touted the city’s demolition program as a “remarkable” achievement, saying that when he took office 12 years ago, Detroit had 47,000 abandoned houses. Today, he said, the Detroit Land Bank Authority owns 942 houses, and fewer than 250 remain to be demolished under Proposal N.

“Now, there are still privately owned abandoned houses out there, and the city is going to have to be vigilant in enforcement,” Duggan said. But “the days of saying ‘that abandoned land bank house is bringing down my block’ are over. … The 47,000 abandoned houses that were a scourge on this city have been resolved.”