Prosecutors focused on rigged bids and extortion demands Monday allegedly made by Kwame Kilpatrick, close friend Bobby Ferguson and former Detroit Water boss Victor Mercado as the City Hall corruption trial entered its fifth week.
In plodding, technical detail, prosecutors zeroed in on behind-the-scenes maneuvers that boosted Ferguson’s business fortunes and cost rival firms millions.
For the first time, jurors heard about steps allegedly taken by Mercado to rig bids. Until Monday, Mercado has been a nearly invisible figure during the trial’s early stages.
Prosecutors are trying to convince jurors a climate of fear made multimillionaire contractors quiver and give Ferguson a piece of city contracts.
Testimony continues at 9 a.m. Tuesday in federal court.
Live Updates EndedPlease read below for an archived view of this event.
Prosecutors are setting up testimony from a Detroit contractor who won a rigged contract that allegedly paid Bobby Ferguson more than $12.9 million.
A Detroit water department employee is setting up the testimony by describing how city officials yanked a certification for one firm that gave preferential treatment to companies based in Detroit.
Daniel Edwards testified that in May 2006, the city revoked the certification for a firm named DLZ. The move knocked DLZ, identified as Company D in the indictment, out of position to win a water-main project.
According to the indictment, Kilpatrick directed a city official to yank the certification.
Edwards wrote the letter revoking DLZ’s certification. He said he was ordered to write the letter by Darryl Latimer, the current Detroit Water and Sewerage Department deputy director.
Prosecutors allege Kwame Kilpatrick and former Detroit water boss Victor Mercado rigged the $15 million contract so DLZ would lose and another firm, Lakeshore Engineering Services would win. That’s because Lakeshore had agreed to partner with the mayor’s close friend and co-defendant, Bobby Ferguson, according to the indictment.
Change orders later boosted the value of the contract. Afterward, Ferguson and Kilpatrick allegedly extorted Lakeshore and a related firm A&H Contractors, according to the indictment.
In all, Ferguson and his companies received more than $12.9 million from the water main project.
A former Lakeshore executive, Thomas Hardiman, is expected to testify later today or Tuesday.
Kwame Kilpatrick padded his pal Bobby Ferguson’s contracts by approving change orders that added hundreds of thousands of dollars in costs paid by taxpayers, according to testimony.
Kilpatrick used powers awarded to mayors to bypass City Council approval for the change orders, a Detroit Water and Sewerage Department employee testified.
Daniel Edwards testified about a flurry of change orders authorized by Kilpatrick. In all, Ferguson and his companies got $60 million in city-related business because of the mayor — sometimes for doing no work at all.
In one case, Ferguson won an $821,475 contract.
Change orders later boosted the cost to more than $3.1 million.
Another $720,195 contract later grew to more than $1.7 million with change orders.
A 2008 investigation by The News showed Ferguson had received at least $170 million in city contracts — $109 million from the Detroit Water and Sewerage Department alone — since the mayor took office in 2002.
From The News investigation:
“Bobby Ferguson, who has been at the mayor’s side at black-tie social events and on the backs of motorcycles, has long claimed the relationship hurts his general contracting company’s ability to land contracts. But an analysis of records by The Detroit News shows his share of water department contracts has jumped more than 20-fold since Kilpatrick took office. Half of them have doubled, tripled or almost quadrupled in price because of additional work — a cost that is spread among customers in 126 communities across southeast Michigan.”
A Detroit Water manager testified Monday about an unusual 2003 contract allegedly corrupted by Kwame Kilpatrick.
Daniel Edwards, a construction contracts manager with the Detroit Water and Sewerage Department, testified about a $19.8 million contract to replace water mains downtown.
Kilpatrick, friend Bobby Ferguson, aide Derrick Miller and Detroit Water boss Victor Mercado allegedly schemed to boost Ferguson’s revenues on the contract, according to the City Hall corruption indictment.
According to the indictment:
“Following the intervention into the contracting process by KW AME KILPATRICK, MILLER and MERCADO, including giving FERGUSON downtown work originally assigned to the lowest bidder, FERGUSON received over $4.8 million in work on the downtown water main project through about 2007.
Prosecutors allege Ferguson and Kilpatrick played key behind-the-scenes roles.
“On or about February 18, 2004, FERGUSON advised KWAME KILPATRlCK and Miller that they needed to be part of the decision-making for the downtown water main contracts because Company D had stopped negotiations with FERGUSON and was trying to give the contract to one of FERGUSON’s competitors.”
In March 2004, DLZ recommended awarding contracts to the three lowest bidders. Ferguson wasn’t among the group — his bid was 45 percent higher than the lowest bid.
Then, Mercado allegedly intervened.
“On or about April 1, 2004, MERCADO assured KWAME KILPATRICK that he was trying to look for grounds to disqualify the lowest bidder and that he might look into delaying the project.”
Mercado later told DLZ to give the work to Ferguson, according to the indictment.
Just learned a contractor whose companies allegedly were extorted out of millions of dollars by Bobby Ferguson is expected to testify later today.
The firms, Detroit-based Lakeshore Engineering Services and A&H Contractors Inc., are related companies that shared executives who contributed tens of thousands of dollars to the political campaigns of Kilpatrick and his mother, ex-U.S. Rep. Carolyn Cheeks Kilpatrick.
The Detroit News first reported in December 2010 that both companies would factor into the upcoming indictment against Kilpatrick, Ferguson and other members of the so-called Kilpatrick Enterprise.
Hardiman is a former Lakeshore vice president and head of A&H, firms that are identified as “Company L” and “Company A” in the indictment.
Initially, Lakeshore refused to participate in the conspiracy, whose members included Kilpatrick; his father, Bernard Kilpatrick; Ferguson; former Detroit Water and Sewerage Department director Victor Mercado; and former aide Derrick Miller.
Lakeshore’s refusal to participate was costly, at least initially.
In spring 2003, Ferguson visited a Lakeshore executive at home and said he wanted 25 percent of the company’s $10 million sewer-repair contract. The Lakeshore executive refused, according to the indictment.
In July 2003, Mercado canceled Lakeshore’s deal and gave it to a firm tied to Anthony Soave, according to the indictment.
The next time Ferguson approached Lakeshore, he walked away with money.
Stung by Mercado yanking the $10 million contract, an unidentified Lakeshore executive understood it could not win a deal without paying Ferguson, the indictment said.
“He (sic) gotten smart,” Ferguson told Miller, according to the indictment.
An ill juror interrupted testimony in the Kwame Kilpatrick corruption case Monday.
The juror was one of two panelists complaining of sickness Monday. Testimony started with a Detroit Water and Sewerage Department employee but was stopped after a few minutes when the sick juror fled the courtroom.
U.S. District Judge Nancy Edmunds called for a short break to let the juror rest.
“You’re too young for hot flashes,” the judge joked.
So far, two jurors have been excused from the case, including one who repeatedly fell asleep early in the case. There are 12 jurors and four alternates.
A witness told jurors Monday that Kwame Kilpatrick possessed special powers as mayor to award contracts without seeking approval from City Council.
The power is a key element of the City Hall corruption case. Prosecutors allege Kilpatrick abused the power by steering work to his friend and co-defendant Bobby Ferguson.
Daniel Edwards, a construction contracts manager with the Detroit Water and Sewerage Department, testified Kilpatrick, and previous mayors, were granted the power from the late-U.S. District Judge John Feikens.
According to the indictment, Kilpatrick held up a $12 million contract amendment for work on a Sterling Heights sewer collapse. The ex-mayor allegedly held up the contract until a firm called Inland Waters agreed to give Ferguson $350,000.
Inland is a Detroit Water and Sewerage contractor linked to Grosse Pointe Farms businessman Anthony Soave. The firm is referred to in the City Hall corruption indictment as “Company I.”
Soave, who will testify, is accused in a court filing of bribing Kilpatrick with private flights and $10,000 worth of courtside Detroit Pistons tickets, and helping the former mayor’s mistress Christine Beatty lease a Land Rover.
Soave says he was extorted.
From the indictment:
“On or about May 3, 2005, FERGUSON told representatives of Company I that people “Downtown” would not understand it if FERGUSON did not get sufficient revenue from work on the sewer collapse, which might hurt Company rs chances of obtaining a contract amendment increasing the scope of its sewer lining contract. The representatives understood that FERGUSON’s reference to people “Downtown” meant the Mayor’s Office.”
Edwards also testified about bonus points awarded to minority and Detroit-based contractors during the bidding process.
Defense lawyers have signaled they will use this to explain how Ferguson — and African American businessman based in Detroit — received millions in city contracts.
Standing trial on charges that could send him to the slammer for 20 years carries one benefit for Kwame Kilpatrick. Well, one besides the free flights and comped hotel rooms.
Kwame Kilpatrick won’t have to sling hash in a Texas food bank, or anywhere else, this month.
The former mayor’s parole agent spared Kilpatrick from performing 16 hours of community service – a parole condition imposed earlier this year that triggered complaints from the former mayor.
The rule was relaxed because of the ongoing corruption trial and transfer of his parole from Texas back to Michigan, state Department of Corrections spokesman Russ Marlan said.
“His parole officer gave him permission to do 32 hours of community service next month,” Marlan said.
That decision could free up Kilpatrick to give more paid speeches, which have slowed to a near-stop.
Kilpatrick made $2,000 last month from a speaking engagement, Marlan said.
The ex-mayor anticipates earning $2,500 this month.
Kilpatrick says he hasn’t made a cent from sales of his autobiography.
“Parolee Kilpatrick repeatedly claims he has not been involved in the commercial selling or accounting of the book sales,” Marlan said. “Furthermore, he claims he hasn’t received any proceeds from the book.”
The Wayne County Prosecutor’s office is investigating, however.
“It hasn’t been established that he’s made money from the book,” Assistant Wayne County Prosecutor Marie Miller said. “There’s not really anything I’m going to say about that.”