Day 30: Detroit water insider offers inside view of suspect deals

Defense lawyers spent hours Wednesday countering allegations a Detroit contractor lost $15 million in city deals because he rebuffed an extortion demand from ex-Mayor Kwame Kilpatrick’s pal Bobby Ferguson.

Water department Deputy Director Darryl Latimer told jurors there was nothing unusual about the 2003 decision to cancel a contract given to Lakeshore Engineering Services.

Defense lawyers also suggested the water department was plagued by cronyism long before Kilpatrick was elected in 2002.

Testimony resumes at 9 a.m. Thursday.

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Bobby Ferguson outside federal court.

The city yanked a $10 million deal from a Detroit contractor to save money, not to reward a firm working with Bobby Ferguson, a defense lawyer claimed.

Ferguson lawyer Michael Rataj solicited testimony from water department official Darryl Latimer to combat claims that a contractor lost the $10 million deal because he refused an extortion demand from Ferguson.

Rataj showed jurors city records indicating the contract was canceled in 2003 before the Board of Water Commissioners formally awarded the job to Lakeshore Engineering Services.

The $10 million deal was rolled into an existing contract awarded to Inland Waters, a firm connected to Grosse Pointe Farms businessman Tony Soave.

Inland Waters was teamed with Ferguson’s company.

Water boss Victor Mercado, who was convicted in connection with the corruption trial, made the decision to scrap the Lakeshore deal, according to testimony.

“This was a cost-saving measure by (the Detroit Water and Sewerage Department), correct?” Rataj asked water executive Darryl Latimer.

“Correct,” said Latimer, who is testifying as a government witness.

The Inland deal skyrocketed in value after August 2004, when a sewer collapsed along 15 Mile in Sterling Heights.

As mayor, Kwame Kilpatrick awarded the repair work to Inland on an emergency basis, bypassing City Council approval.

The city approved payments totaling $35 million to fix the sinkhole.

“It was a mess out there,” Rataj said. “Houses were ready to fall into the center of the earth. There was all kinds of chaos going on.”

It took a year to fix the sinkhole, a project and expense that led to lawsuits against several contractors, and Kilpatrick.

Prosecutors allege Kilpatrick made sure his pal Ferguson got $350,000 out of the project — even though his company did no work.

From left, lawyers Michael Rataj and Gerald Evelyn outside federal court with client Bobby Ferguson.

Defense lawyers are trying to blunt the impact of testimony from a contractor who alleges he lost $15 million worth of water department deals because he rebuffed an extortion demand from ex-Mayor Kwame Kilpatrick’s pal Bobby Ferguson.

Ferguson lawyer Michael Rataj is focusing on Kilpatrick’s former co-defendant, Detroit water boss Victor Mercado. Mercado had the power to cancel deals and there was nothing unusual about his 2003 decision to scrap a $5 million water contract with Lakeshore Engineering Services, Rataj claimed.

Lakeshore boss Avinash Rachmale earlier testified he was extorted by Ferguson and lost the $5 million deal in 2003 after refusing to share proceeds with Kilpatrick’s pal.

“(Mercado) canceled other contracts during his tenure,” Rataj asked water department executive Darryl Latimer. “That’s not something unusual, correct?”

“Correct,” Latimer said.

“You would agree (Mercado’s) goal is to provide clean water at the cheapest price possible?” Rataj asked. “He tried to do that, didn’t he?”

“Yes,” Latimer said.

The $10 million deal, meanwhile, was shifted to a firm tied to Kilpatrick benefactor Tony Soave, who partnered with Ferguson, according to testimony.

The engineering company that has claimed it “lost” a $5 million Detroit water contract because of interference from Bobby Ferguson had initially won the job with the help of two city engineers, a city official testified.

Avinash Rachmale

Detroit Water and Sewerage Department Deputy Director Darryl Latimer agreed that the engineers, both of Indian descent and one of whom was friends with Lakeshore Engineering’s Avinash Rachmale, who was born in India, scored Lakeshore the highest during bid evaluations.

The scoring angered a fellow department engineer who complained to Latimer in 2003  that the scores didn’t match Lakeshore’s performance “when none of their listed projects were completed on time or within budget.”

“It looks like these two were trying to steer the work to Lakeshore,” Ferguson defense attorney Michael Rataj said.

“Based on (water official) Mr. (Ed) Ramey’s opinion, yes,” Latimer answered.

The contract was one of two that Rachmale claimed was scuttled by Ferguson, a move that caused him to begin using Ferguson on future projects. After Lakeshore began partnering with Ferguson, it won more than $150 million in water and sewer contracts.

The revelation of inside help appears to undercut the portrait of Lakeshore as a victim of the contracting process.

Michael Rataj

Bobby Ferguson’s lawyer slammed a controversial former Wayne County deputy executive whose business deals involving Turkia Mullin emerged amid an FBI probe of county corruption.

While talking about contract shenanigans in the Detroit water department, Ferguson lawyer Michael Rataj referenced former department director Charlie Williams.

Charlie Williams

Rataj asked water executive Darryl Latimer if he knew that Williams had a relationship with big-bucks businessman and Kwame Kilpatrick benefactor Tony Soave.

Latimer said Williams was a subcontractor on at least one deal with Soave.

“He was a minority front?” Rataj said.

“I don’t know that,” Latimer said.

A minority front is, in most local cases, a black businessman hired by a white company to win contracts in Detroit set aside for minority firms.

The minority front performs little or no work but gets paid anyway according to previous testimony.

Williams is chairman of a Soave-related firm MPS Group.

Williams is a board member of the Detroit Metropolitan Airport authority who voted to appoint Turkia Mullin as its CEO after making $420,000 weeks earlier from a land sale she helped engineer, records obtained by The Detroit News show.

Lawyer James C. Thomas and Kwame Kilpatrick outside federal court.

The Detroit Water department was riddled with self-dealing engineers who tried to steer contracts to favored firms  and leaked inside information to pals, a city official testified.

Water department Deputy Director Darryl Latimer talked about cozy ties that existed long before federal prosecutors accused ex-Mayor Kwame Kilpatrick and pal Bobby Ferguson of corrupting the department.

When Victor Mercado — who recently pleaded guilty in the corruption case — took over in 2002, he tried to clean up the department, Latimer said.

“Would you agree that engineers leaked information to contractors and gave them an unfair advantage prior to contracts being publicized and released?” Ferguson lawyer Michael Rataj asked.

“Correct,” Latimer said.

Bobby Ferguson

“Would you agree that prior to Mr. Kilpatrick being mayor, certain engineers tried to steer contracts to favorite contractors?” Rataj asked.

“Correct,” Latimer said.

For example, former Detroit Water boss Charlie Beckham was indicted in the early 1980s amid a sludge-hauling scandal.

Beckham served two years in federal prison after he was found guilty of taking $16,000 from a sludge-hauling company named Vista.

Rataj also tried to combat Ferguson’s image as a violent contractor who threatened and extorted rival firms and capitalized on his friendship with Kilpatrick.

“He never threatened you in any way shape or form?” Rataj said.

“Never,” Latimer said.

“He never said if I don’t get paid I’m going to the mayor?” Rataj asked.

“No,” Latimer said.

Detroit Mayor Kwame Kilpatrick, left, walks with Bobby Ferguson as abandoned homes are torn down in Detroit in 2002.

A controversial decision to strip a $10 million contract from a Detroit firm and give it to a team that included ex-Mayor Kwame Kilpatrick’s pal Bobby Ferguson saved the city money, a water department official testified.

Water department Deputy Director Darryl Latimer said he was troubled by the move, but conceded it saved the city money.

Latimer testified about a $10 million deal taken away from Lakeshore Engineering Services in 2003. Lakeshore executives believe the contract was taken away after they refused to share the deal with Ferguson.

The move was a seminal moment for Lakeshore executives. They later concluded they needed to hire Ferguson and pay him millions for no-show work  in order to keep and secure city deals.

Under cross examination from Kilpatrick lawyer James C. Thomas, Latimer said water boss Victor Mercado decided to strip the contract from Lakeshore.

“You had no argument with his power to do that, right?” Thomas asked.

“Not at all,” Latimer said.

Tony Soave

He felt the move was unfair because Lakeshore had submitted a bid and was in the early stages of having the contract awarded by the department.

The $10 million project to replace sewers was folded into an existing contract with the firm Inland Waters.

Inland was headed by Grosse Pointe Farms businessman Tony Soave, a powerful businessman who says he was extorted into providing free private flights and other perks to Kilpatrick, mistress Christine Beatty and others.

Inland’s partner on the deal? Ferguson.

Inland agreed to slash its prices, Latimer testified.

Sam Riddle

Corruption trials make for odd bedfellows.

Ex-con political consultant Sam Riddle was spotted on the first floor of the federal courthouse this morning to attend a probation orientation, while ex-Detroit Mayor Kwame Kilpatrick stands trial eight floors above.

Riddle, who toiled alongside equally convicted Detroit City Council President Monica Conyers, was released into a halfway house in September to finish a 37-month prison sentence.

A court spy said the 66-year-old Riddle “looked great.”

Club Fed does a body good.

Riddle, who is scheduled to be released Jan. 29, had been serving time at the Butner Federal Correctional Complex in North Carolina since Feb. 23, 2011.

He was sentenced to 37 months in prison after pleading guilty in May 2010 to conspiracy to commit bribery and extortion.

Riddle was accused of bribing a Southfield councilman, evading taxes and extorting businesses when he worked as a Conyers top aide.

 

“Killer” likes serial killers. Who knew?

Bernard Kilpatrick, known on the street and in political backrooms by his nickname “Killer,” chatted during a break in the trial Tuesday about his favorite TV shows, his son’s health and the dangers of domestic flights.

Bernard Kilpatrick leaving federal court Aug. 8.

Here’s some color from my colleague Tom Greenwood, who endured a four-hour stint on U.S. District Judge Nancy Edmunds’s unforgiving hardwood benches to file this dispatch:

“I got into the courtroom at about 8:25 a.m. At 8:30 a.m. it was just me and Bernard. He was wearing a brown pinstriped suit. He seemed very pensive as he looked around the empty courtroom.

A few minutes later a female court employee greeted him and he lit up. Started talking about Kwame and what a terrible cold he caught over the weekend during a speaking engagement in California.

“He was walking to a pharmacy and got caught in the rain,” Bernard told her.

“He was in San Francisco on Friday and there was that cold wind coming in off the ocean. Then he flew to Los Angeles to see his sister and from there to Dallas. Then he had to fly here to Detroit.”

Bernard went on to talk about two of his favorite TV shows: Homeland and Dexter.

“Dexter is a serial killer, but he only kills bad people,” Bernard said.

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