Macomb sewer suit alleges price-fixing scheme
Public Works commissioner says county was overcharged by $25.5 million
Posted July 19, 2011
Once again, the alleged misdeeds of Kwame Kilpatrick and company are triggering a ripple effect locally.
On July 18, Macomb County Public Works Commissioner Anthony V. Marrocco filed a federal lawsuit accusing the former Detroit mayor, businessman Bobby Ferguson, former Detroit Water and Sewerage Department head Victor Mercado and a slew of other defendants, including contractors and subcontractors, of myriad illegal activities associated with repairs on a collapsed interceptor.
Among the claims are breach of contract, fraud and intentional interference with contractual relations in violation of several laws, including the Racketeer Influenced and Corrupt Organizations Act, the Sherman Act and the Clayton Antitrust Act.
The suit — filed on behalf of the 11-municipality Macomb Interceptor Drain Drainage District — alleges “a widespread scheme to overcharge the Detroit Water and Sewerage Department for time, labor and materials to stabilize and repair” the collapsed sewer on 15 Mile in Sterling Heights in 2004-2005.
Speaking during a July 19 press conference, Marrocco, surrounded by attorneys Lawrence Scott, Raechel Badalamenti and Robert Kirk, said the “overcharges amounted to some $25.5 million.”
“According to an independent evaluation commissioned to examine the contract work, Macomb County was charged approximately $54.5 million for the project, when the true cost should have been in the range of $29 million, according to our estimates,” he said.
One of the named defendants, Detroit-based Inland Waters Pollution Control Inc., allegedly estimated early on that the project would not exceed $35 million.
Chief Deputy Public Works Commissioner William Misterovich identified indictments against Kilpatrick and his associates, handed down by a federal grand jury last December, as the “genesis” of the county’s investigation into possible criminal activity.
The indictments, which included more than three dozen counts, alleged Kilpatrick, Ferguson, Mercado and others tampered with various DWSD projects, including the Sterling Heights job, “coercing” contractors to include Ferguson’s companies in public contracts and rigging bids to ensure Ferguson received a portion of proceeds.
Marrocco said the DWSD kept Macomb County in the dark about details associated with the Sterling Heights project, insisting that the timeframe and cost — which Marrocco now says seemed too high — were reasonable. The DWSD owned the sewer at the time; it has since been acquired by Macomb and Oakland counties.
“We trusted they would be fair with Macomb County,” said Marrocco. “Detroit kept us off the project. They didn’t want us there at all. Mercado said it was going to be strictly Detroit, and he was going to handle it.”
After the indictments were handed down, “I was angry; I thought the water and sewer department people who were running the operation were making fun of Macomb County, I felt like, and taking advantage of us,” he added. “I decided we were going to go after them.”
Marrocco’s lawsuit claims Inland Waters “presented and received payment from DWSD upon grossly inflated and inaccurate invoices, assessed unreasonable and bad faith profit markups and approved excessive subcontractor overcharges pursuant to unlawful agreements to participate in and further the scheme.”
In exchange for at least one amendment to Inland’s contract, the company allegedly paid Ferguson $350,000 for work he never performed.
The suit claims other contractors and subcontractors also became complicit in the scheme by implementing “exorbitant markups” and charging for personnel and equipment that were unnecessary or never even present.
If damages are recovered, the reimbursement would likely be passed along to consumers via lowered water and sewer rates, said Marrocco.
“I think we’re going to win it,” he said. “It’s not going to happen overnight.”
This is only the latest in a string of action since the federal indictments.
Late last year, Marrocco sent correspondence to Detroit Mayor Dave Bing seeking confirmation on whether Ferguson had received payment for work never performed, as the indictments alleged. If so, Marrocco asserted, the sewer district should get its money back.
And in January, Oakland County filed a motion seeking an interim regional management panel to provide suburban customers expanded influence over the Detroit Water Board’s oversight. A few weeks later, an agreement was struck in which the suburbs were given more say over the board’s composition.
Scott said Detroit officials recently approved expending money to launch their own investigation into the DWSD projects, and Badalamenti said they’re working cooperatively with Macomb County.
Martin Crandall, Mercado’s attorney; James C. Thomas, Kilpatrick’s attorney; and Gerald Evelyn, Ferguson’s attorney, could not be reached immediately for comment. A staffer answering the phone at Inland Waters July 19 said no one was available to comment.
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