The Detroit Land Bank Authority Pays $1.5 Million To Resolve False Claims Act Allegations Relating To Blight Elimination Costs

DETROIT - The Detroit Land Bank Authority (“DLBA”), a public organization working on behalf of the City of Detroit and the Detroit Building Authority in the City’s redevelopment and demolition management efforts, has agreed to pay the United States $1,503,000 to resolve allegations relating to unsubstantiated backfill dirt costs invoiced by demolition contractors and paid by the DLBA from December 2016 through June 2022, in connection with the DLBA’s blight elimination program. The United States contends that the claims for payment violated the False Claims Act, 31 U.S.C. §§ 3729-3733.

Congress created the Troubled Asset Relief Program (“TARP”) in response to the financial crisis of 2008 to restore liquidity and stability to the financial systems of the United States. In 2010, the United States established the Hardest Hit Fund (“HHF”) using TARP funds to provide targeted aid in states hit hard by the economic and housing market downturn. Beginning in 2013, the City of Detroit received approximately $258 million from the HHF to help demolish blighted properties within the City of Detroit and assist neighborhoods with high vacancy rates and blighted residential properties. The DLBA allocated a portion of its HHF award for neighborhood improvement projects, which included acquiring properties, demolishing blighted properties, and providing ongoing property maintenance for neighborhood improvement projects.

“The False Claims Act is an important tool to deter and to hold accountable those who misuse public funds,” said U.S. Attorney Dawn N. Ison for the Eastern District of Michigan. “The Hardest Hit Fund’s blight elimination program is important to the safety and rebuilding of Detroit’s neighborhoods, and our office will continue to be vigilant in ensuring that taxpayer funds are properly used for that purpose.”

“I would like to commend the outstanding work of SIGTARP staff and the Detroit US Attorney’s Office in this investigation. This settlement stems from SIGTARP’s review of the Hardest Hit Fund Blight Elimination Program in Detroit, and the approval of unsubstantiated costs for backfill dirt by the DLBA,” said Melissa Bruce, SIGTARP Principal Deputy Inspector General. “The requirement to substantiate material costs before reimbursing contractors is critical to ensuring that TARP funds are properly spent on costs that are both reasonable and necessary to achieve the goals of this program.”

This case was investigated by the Office of Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”). SIGTARP was created as an independent law enforcement agency to investigate fraud, waste, and abuse related to the Emergency Economic Stabilization Act.

The matter was handled by Assistant United States Attorney John Spaccarotella from the U.S. Attorney’s Office for the Eastern District of Michigan.

The claims resolved by the settlement are allegations only; there has been no determination of liability.