The Office of Inspector General (OIG) suspended Warren-based Den-Man Contractors, Inc. in April from applying for any contracts with the City of Detroit through July 26 as the OIG conducts a deeper investigation into whether the contractor should be debarred from working with Detroit altogether. Christian Hauser, an attorney representing Den-Man Owner David Holman, argued during a Monday appeal hearing that the OIG is unfairly punishing the company. But the City Council was unmoved; voting 7-0 to support the OIG’s findings.
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“I think this is a slap on the wrist,” said Council President Pro Tem James Tate. “The 90-day suspension hasn’t been done permanently because it’s allowing the investigation to work.”
Hauser asked the council Monday to reverse the suspension, which he characterized as “a rush to judgment,” “knee-jerk reaction” and “reprehensible.” Inspector General Ellen Ha said during the Monday hearing that there is ample evidence to justify the temporary suspension, and her decision is supported by the law. Ha said investigations into Den-Man have been in progress since 2018.
“We don’t do a knee-jerk reaction here. I understand the gravity of the situation,” Ha said. “It’s not just the taxpayers money, it’s the health, wealth and safety of Detroit residents.
“You should know that over the last five years, we’ve quietly assisted in the various investigations conducted by federal and state agencies,” Ha added. “We currently have four investigations that we can’t close. It still remains important that we disclose as little as possible, so as not to interfere with the investigation.”
In April, Michigan Attorney General Dana Nessel filed criminal enterprise and false pretense charges against David MacDonald, an employee of Den-Man until 2018. MacDonald allegedly secured $1.1 million worth of contaminated backfill dirt that was paid for by the city through a contract with Den-Man. The contractor was paid $12 million by the city from 2017-18, the last year it performed demolition work for Detroit.
Den-Man’s owner hasn’t been criminally charged, but the OIG said Holman’s “lack of oversight” allowed MacDonald to engage in alleged criminal behavior that benefitted Holman’s company. Holman did not address the council during the hearing.
Ha said 200 properties demolished by Den-Man in 2017 and 2018 contained the potentially contaminated dirt, some of which was found to have arsenic and cancer-causing chemicals. Ha said Den-Man didn’t sufficiently test for contamination and failed to produce documents showing the source of the backfill.
That left Detroit taxpayers with the bill. As of June 8, Detroit paid $490,836 for sampling and analytical work and to fence off the properties. Ha said it will cost even more to remove the contaminated dirt and replace it at 184 sites.
The OIG temporarily barred Den-Man from bidding on city contracts two days after Nessel filed charges against the company’s former employee. Ha said investigators learned that Den-Man had been hauling backfill dirt in Detroit since 2018 under subcontracts with other demolition companies. Den-Man was also seeking to become a prequalified demolition contractor again through the city’s $250 million Prop N bond fund, she said.
Suspension was “the only course of action” given the new information, Ha said.
“We’re talking about contaminated dirt in residential areas where children play, pets run around, where neighbors and families get together where people may plant trees, flowers, grass or vegetables,” Ha said, referring to the 2018 incident. “So I ask this honorable body: Are we willing to risk the health, safety and welfare of Detroit residents, including children, so that Den-Man can make more money from Detroit? The answer, I say, should be a resounding no.”
Detroit Corporation Counsel Conrad Mallett said all options are on the table to seek reimbursement for the “rather sizable bill” after the OIG investigation is finished. Mallett said the city has the right to be selective with who it chooses to work with.
“No one has a right to do work with the City of Detroit. It is not a constitutional right that you gather from the stars or anything like that,” Mallett said.
Under the city’s demolition program, fill material must be provided from an approved source to be used as backfill at any demolition site to ensure that the city’s standards are met.
In recent years, concerns have been raised over the lack of early controls when it came to backfill records and charges in the federally funded demolition effort that began in spring 2014.
The six-year initiative ultimately took down more than 15,000 residential properties with more than $265 million. But the program had its challenges after first coming under scrutiny in the fall of 2015 over bidding practices and rising costs.
Current and former council members, community advocates and state and federal lawmakers have voiced concerns in the past over the sources of dirt used at demolition sites.
Hauser, the attorney representing Den-Man, agreed that the OIG has the legal authority to temporarily suspend a contractor but argued that the company has had a clean track record since the 2018 incident and spent roughly $451,710 on engineering and cleanup.
“Since that employee left Den-Man, do you know what’s happened? Nothing,” Hauser said. “There’s not been another violation. There’s not been another stop work order. There’s not been another complaint by (the Michigan Department of Environment, Great Lakes and Energy). There’s not been another complaint by any resident. Nothing.”
Hauser said Den-Man shouldn’t be prevented from working in Detroit while other investigations are ongoing. The company, he said, is losing $5,000 a day in missed work for other demolition contractors.
“I’m arguing here, that the OIG continue to investigate and continue to see if you can find something, but while you’re doing that, afford this man and his company’s presumption of innocence the ability to earn a living in the city, because he’s done nothing wrong,” Hauser said. “If there’s a finding that he or his company deliberately was involved in this, we’ll take our lumps, we’re big boys, but while that’s pending, that’s our objection.”
Council members were less than sympathetic, especially after learning Den-Man had previously been fined by EGLE for demolishing the wrong house. Den-Man mistakenly tore down a land bank house at 1444 Flanders St. in 2019. Hauser said it was slated for demolition anyway.
Council Member Fred Durhal III said that the accidental demolition alone is enough to suspend the contractor. Hauser however said it’s a common occurrence. Detroit would not have any demolition contractors if it stopped working with those that knocked down the wrong house, he said.
“If that’s going to be the benchmark, if you knock the wrong house down in the City of Detroit, candidly, you’re not going to have any demolition contractors in the city,” Hauser said. “It happens. It’s life, it’s an accident. It’s not like I knocked Joe Louis Arena down. There’s 10,000 houses that have been part of this (Proposal N) program.”
Council Member Angela Whitfield-Calloway took issue with Hauser’s tone.
“You’re kind of cavalier with that, (saying) you inadvertently tore down a house like it’s
no big deal,” she said. “It’s a big deal in this city.”
Whitfield-Calloway said Detroit should go after Den-Man for “every dollar we’ve had to spend” to clean up the contaminated dirt. She also suggested residents living near the sites should sue Den-Man.