Day 29: Detroit official implicates Kilpatrick in water deals

Darryl Latimer

A key Detroit Water official official who allegedly helped hamstring a water department contractor testified about behind-the-scenes dealings during ex-Detroit Mayor Kwame Kilpatrick”s scandal-plagued tenure that pumped millions into Bobby Ferguson’s pockets.

Darryl Latimer, deputy director of the Detroit Water and Sewerage Department, followed businessman Avinash Rachmale to the witness stand.

Latimer addressed a key point in the government’s case alleging Kilpatrick rigged bids that ultimately benefited Ferguson.

Latimer will return to the witness stand when testimony resumes Wednesday in federal court.

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Bobby Ferguson and Kwame Kilpatrick outside federal court.

City officials yanked a company’s certification giving preferential treatment to firms based in Detroit after Kwame Kilpatrick allegedly questioned a deal in which the business scored higher than his pal Bobby Ferguson’s company.

Water department official Darryl Latimer testified about the behind-the-scenes dealings that helped Ferguson win a contract replacing water mains in 2006.

The dealings revolved around a bidding process in 2006. A company called Superior ranked highest and partnered with a firm called DLZ, which received credit for having its headquarters in Detroit.

Latimer, however, said the firm’s headquarters were in Ohio.

On May 4, 2006, Latimer was ordered to meet with Kilpatrick.

During the meeting, Kilpatrick brought up DLZ, Latimer testified.

Latimer told Kilpatrick DLZ’s headquarters was in Ohio.

The next day, Latimer was ordered to launch an investigation that ended with DLZ losing points awarded to Detroit-headquartered companies.

The move boosted Ferguson’s firm into first place, letting Kilpatrick’s close friend win the contract, Latimer testified.

At the same time, prosecutors allege Kilpatrick and former Detroit water boss Victor Mercado rigged a $15 million contract so DLZ would lose and another firm, Lakeshore Engineering Services would win. That’s because Lakeshore had agreed to partner with 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 year after the water contract dealings, the city inexplicably restored DLZ’s certification given to companies with Detroit-based headquarters, Latimer said.

Victor Mercado outside federal court.

Convicted former Detroit Water boss Victor Mercado forced an underling to strip a $10 million contract from a firm in 2003 and give it to a company partnered with Bobby Ferguson, according to testimony Tuesday.

Water department official Darryl Latimer said he was forced to cancel the $10 million sewer-repair deal with Lakeshore Engineering Services and give the work to Inland Waters. Inland was headed by Grosse Pointe Farms businessman Tony Soave, a powerful businessman who allegedly provided free private flights and other perks to Mayor Kwame Kilpatrick.

Lattimer is corroborating a portion of key testimony from earlier in the case. Prosecutors and witnesses allege Ferguson used his friendship with ex-Mayor Kwame Kilpatrick to have the city cancel Lakeshore deals totaling $15 million because the firm refused his demands for a cut of the deals.

“There wasn’t any need to cancel it,” Latimer testified Tuesday.

Mercado told Latimer what to write in an email canceling the Lakeshore deal, the city official said Tuesday.

“Did you feel comfortable writing these words?” Assistant U.S. Attorney Mark Chutkow asked Latimer.

“No,” Latimer said. “These were not my words.”

“Did you tell (Mercado) that?” Chutkow asked.

“Uh, I told him I had a level of discomfort,” Latimer said.

“What else did you say?” Chutkow asked.

“I didn’t say too much,” Latimer said. “We work in an environment in which we’re basically given direction and you execute that direction.”

A high-ranking Detroit Water department official defended indicted contractor Bobby Ferguson four years ago amid concerns about lucrative deals awarded to the close friend of ex-Mayor Kwame Kilpatrick.

Darryl Latimer

Darryl Latimer, the water department’s deputy director who is testifying for the government late Tuesday morning, vouched for Ferguson, who had obtained taxpayer-funded deals in a process prosecutors allege was tainted during a widespread racketeering scheme.

In 2008, The News analyzed Detroit records and revealed that Ferguson and his firms 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:

Most water department jobs awarded to Ferguson were bid on by at least a half-dozen other companies, records show. Ferguson has earned a reputation for doing good work for the city, said Darryl Latimer, the water department’s contracts and grants general manager.

“A lot go after bigger jobs,” he said. “His niche is excavation … and he’s good at it.”

Avinash Rachmale

Prosecutors refocused testimony Tuesday from a businessman who was bruised by defense lawyers over his cozy ties with a City Hall insider.

The government asked businessman Avinash Rachmale how he feared losing city contracts unless he paid ex-Mayor Kwame Kilpatrick’s friend Bobby Ferguson $1.7 million for no-show work.

The so-called “climate of fear” is an essential part of the government’s racketeering case against Kilpatrick, Ferguson and the ex-mayor’s father, Bernard Kilpatrick.

“If you had not been worried about your contracts being canceled, would you have paid Bobby Ferguson $1.7 million?” Assistant U.S. Attorney Mark Chutkow asked.

“No,” Rachmale said.

“You testified that you didn’t want to upset Mr. Ferguson. Did you have that concern about any other subcontractors working with you?” Chutkow said.

“No,” Rachmale said.

The government also tried to dampen the impact of defense questioning, which revealed Rachmale’s company Lakeshore Engineering Services, often teaming with Ferguson, received city deals totaling $157.8 million during Kilpatrick’s tenure.

Rachmale said the large dollar amount is misleading.

Most of that money — 92 percent — goes to subcontractors and to pay for supplies.

Lakeshore is left with about eight percent.

“Did your company actually do the work for that $12 to $13 million?” Chutkow asked.

“Yes,” Rachmale said.

“You didn’t receive any no-show payments?” the prosecutor asked.

“No,” Rachmale said.

Rachmale’s company, which grew into a federal contractor with defense projects in Afghanistan and Iraq and deals worth about $500 million, has suffered, the businessman said.

“Have you ever felt that you had to pay a contractor because you were afraid the contracts would be canceled otherwise?” Chutkow asked.

“No,” Rachmale said.

Avinash Rachmale received the 2009 Champion Award for Entrepreneurial Success from President Obama.

The firm’s involvement in the corruption case yielded negative publicity and cost the company city deals, Rachmale said.

“This is bringing a hardship to our company,” Rachmale said. “We have had a hard time the last few years.”

Construction energy kudos and White House visits suggest otherwise.

In May, Lakeshore was named one of the Top 100 contractors by an engineering group.

The report ranked firms based on construction revenues in 2011.

Defense lawyers were not sympathetic.

“You’re a multimillionaire, aren’t you?” Ferguson lawyer Gerald Evelyn asked.

Prosecutors objected to the question. Sustained, U.S. District Judge Nancy Edmunds said.

“Through the hardship you’ve experienced, your company has exploded in growth, hasn’t it?” Evelyn said.

A businessman allegedly extorted by Kwame Kilpatrick denied trading on his friendship with a city employee to obtain Detroit contracts.

Assistant U.S. Attorney Mark Chutkow asked Avinash Rachmale the point blank question following a defense grilling about his cozy ties with city official Dilip Patel.

Assistant U.S. Attorney Mark Chutkow

Defense lawyers suggested Rachmale traded on that friendship — a la Bobby Ferguson and Kilpatrick –in a bid to undercut his testimony on behalf of the government.

“Did you ever ask Mr. Patel for inside information about the price of a competitor’s bids on contracts?” Chutkow asked.

“No,” Rachmale said.

“Did you ever use your relationship with Mr. Patel to get payments from other companies for no work?” the prosecutor asked.

“No,” Rachmale said.

“Did you ever use your friendship with Mr. Patel to threaten to shut down other contractors’ projects if they didn’t pay you?” Chutkow asked.

“No,” Rachmale said.

Ex-Detroit Mayor Kwame Kilpatrick is sentenced by Judge Kenny at the Frank Murphy Hall of Justice (larger basement courtroom) in Detroit, Michigan on May 25, 2010.

A businessman allegedly extorted by Kwame Kilpatrick said Tuesday he regretted penning a letter seeking leniency for the former mayor in 2008.

Bloomfield Hills resident Avinash Rachmale testified he didn’t fully understand the criminal case against Kilpatrick when he signed a letter urging a Wayne County Circuit Court judge to go easy on the former mayor.

“If I had known, I would have done different,” Rachmale said.

Wayne County Circuit Judge David Groner

In 2008, he fawned over Kilpatrick, praised his work as mayor and begged a Wayne County judge to give the ex-mayor a lenient sentence amid the text-message scandal.

The Lakeshore Engineering Services chief executive was one of several business leaders who wrote personal pleas to Wayne County Circuit Judge David Groner in 2008.

From the letter (written before Kilpatrick got four months in jail):

“This letter is in support of Kwame M. Kilpatrick who I have had the pleasure of knowing for approximately eight years,” Rachmale wrote. “As a business and property owner in the city of Detroit for 13 years, I can see the progress that the city has made under Mr. Kilpatrick’s leadership. I have been inspired by his vision, intelligence and his ability to get the job done.

“He knows he made some serious mistakes and thoroughly regrets what has happened as a result of his actions.

“He has apologized to all of us, family, friends, supporters and citizens, who have been affected by this most unfortunate situation. I accept his apology and know that he is very remorseful.

“I implore you Judge Groner to assess all the wonderful contributions Kwame Kilpatrick has made to the city of Detroit, and ask you to consider a more lenient sentence for him. He and we are looking forward to him once again making a positive difference in the city.”

Bobby Ferguson walks towards the Federal Courthouse in Detroit on September 21, 2012.

Bobby Ferguson’s lawyer continued to attack the credibility of key government witness Tuesday who allegedly was extorted by the contractor and his close friend, ex-Mayor Kwame Kilpatrick.

A day after Lakeshore Engineering Services owner Avinash Rachmale denied that city worker Dilip Patel doubled as a Lakeshore employee, Ferguson’s lawyer showed him a Lakeshore employee roster that included the man.

“He worked for you, didn’t he?” Evelyn asked.

“No, he didn’t,” Rachmale said.

Lakeshore is based in this building along Woodward in Detroit. The firm leased office space at one time to Kwame Kilpatrick’s campaign.

The ties between Rachmale and Patel appeared to undermine the businessman’s testimony that he was extorted and paid Ferguson for no-show work to ensure future city deals.

Rachmale testified Tuesday that Patel has an ownership stake in Lakeshore’s headquarters along Woodward in Detroit.

Patel invested $75,000 in the building, which once housed campaign space for Kilpatrick and his mother, ex-U.S. Rep. Carolyn Cheeks Kilpatrick.

“He still has an interest in the building,” Evelyn said.

“No,” Rachmale said. “He has personally told me to keep the money — he doesn’t need the money. He trusts me.”

The building also has office space for another extorted company, A&H Contractors.

The company’s vice president is Diana Stewart, the aunt of Kandia and DeDan Milton, former Kilpatrick aides who were convicted in the City Hall corruption probe.

Both men are among at least 11 felons expected to testify later in the corruption trial.

Testimony in the Kwame Kilpatrick corruption trial was dull Monday. How dull? So dull Kilpatrick’s Ferris Bueller-worthy coughing fits drew attention away from the alleged extortion victim on the witness stand.

At least until things got gossipy.

Kilpatrick appears to have flown back from his Texas home on a Buddy Pass with an unwanted buddy — a cold.

Hizzoner hacked repeatedly during testimony, rested his head on the defense table, wiped his face with a hanky, blew his nose and held his head in his hands.

Kilpatrick isn’t the only one ailing.

Today, U.S. District Judge Nancy Edmunds’s case manager is sick.

Robert Snell
Robert Snell is the Detroit News federal courts reporter. He can be reached at rsnell@detnews.com or (313) 222-2028.