Land bank hires lawyers for demolition criminal probe

Detroit — Two law firms specializing in white-collar criminal defense are representing the Detroit Land Bank Authority in connection with a “criminal investigation” into the city’s demolition program being conducted by federal inspectors, according to contracts reviewed by The Detroit News.

The land bank’s board approved last week the hiring of Washington D.C. law firm WilmerHale as well as attorneys from Miller Canfield's Troy office. Under the agreement, the city and Detroit Building Authority are also clients.

The firms were retained weeks after the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, sent the city’s Auditor General Mark Lockridge a federal subpoena for records related to the demolition program.

In contract correspondence titled “City of Detroit/SIGTARP Investigation,” Miller Canfield attorney Gerald Gleeson II noted the firm will be assisting WilmerHale attorneys who are representing the land bank, building authority and city “with respect to a criminal investigation being conducted by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).”

The federal subpoena request came after Lockridge’s office released preliminary findings from a lengthy audit into the city’s demolition activities. The April report, flagged potential conflicts of interest between the city and executive leadership of the Detroit Building Authority.

Detroit’s top attorney, Melvin Butch Hollowell, countered that the assertion was “misplaced and inaccurate.” The city’s building authority has since appointed a new director.

WilmerHale partner Jeannie Rhee is being paid $760 per hour. The fee is a 20 percent discount for her regular $950 hourly rate. Separately, the associate assisting Rhee will be paid $504 per hour, down from $630 per hour.

In a May 10 engagement letter, Rhee said WilmerHale will advise the joint clients “in connection with the SIGTARP investigation of demolition activities that received certain federal funds (the “Matter”).

Miller Canfield assigned Gleeson as well as partners Thomas Cranmer and Jeffrey Crapko, with an hourly billing rate of $300.

The land bank, which administers the city’s Hardest Hit Fund demolitions, said it would not comment on any investigations.

The legal fees are being paid from the land bank’s general operating account, which includes Hardest Hit Fund allocations, proceeds from real estate sales and foundation grants. The Hardest Hit Fund dollars are earmarked for demolition and would not be used for attorney fees.

“In my 30 years of the practice of law in Washington, I always made sure my clients had the best possible counsel who specialized in dealing with each federal agency,” Detroit Land Bank Chair Erica Ward Gerson said in a statement Thursday. “It’s essential to make sure that we comply fully and seamlessly with whatever that agency is seeking.”

Mayor Mike Duggan administration’s key initiative came under scrutiny last fall amid concern over soaring costs and bidding practices.

This month, the FBI’s Detroit office also acknowledged it’s investigating the program. The probe is among several other ongoing audits and reviews.

Lockridge told The News the SIGTARP subpoena was seeking documents supporting the preliminary audit that was published.

SIGTARP has said the office doesn’t confirm or comment on open investigations.

City Council President Brenda Jones sought answers from the law department over the newly retained legal representation that she fears could pose a conflict of interest and was approved without council’s knowledge.

In response, Hollowell stressed the city is not paying for the legal services. The contracts are land bank contracts, approved by the land bank board.

“And in this matter, the city is only tangentially involved, if at all,” he wrote.

.

CFerretti@detroitnews.com