Kilpatrick on Trial: Day 29

Published On: Nov 27 2012 09:33:10 AM EST   Updated On: Nov 27 2012 01:03:27 PM EST
DETROIT -

9:02AM Still getting used to the shortened defense table without Victor Mercado. Harold Gurewitz, another defense lawyer aside from Jim Thomas for Kwame Kilpatrick, is also in the courtroom. Curious if Kwame is over the nasty cold he was overdosing on Sudafed for yesterday. 

Avinash Rachmale is set to take the stand again today. Gerald Evelyn has a few more things to cross-examine Rachmale on. 

9:05AM Evelyn continue his cross of Rachmale. Looking at an email from Rachmale to Victor Mercado which thanks him for meeting on June 10th 2003. They discussed Lakeshore Engineering, Black and Vetch and they were excited about bidding on upcoming contracts. 

Rachmale doesn't remember where the meeting took place. 

Rachmale says the discussions were brief, about a minute or two.

Evelyn asks Dilip Patel never worked for you? Yes says Rachmale.

Rachmale says that he gave all the information he had on Patel to the government.

Evelyn says that Patel and his wife invested $75,000 in the Sky Group building. He was bought out but the initial investment is still held in escrow. Rachmale says Patel doesn't have investment in the building and Patel has told him he can keep the initial investment.

Rachmale says ownership has changed and stocks have been distributed. "He told me to keep the money because he trusted me," says Rachmale about Patel.

9:11AM Looking at Sky Group LLC business card for Dilip Patel. Rachmale tells Evelyn he never authorized it. The card says construction and property management.

Now looking at list of contact numbers for Lakeshore Engineering employees. It has Rachmale on it as well as many others.

Evelyn asks if any employee ever saw him move Patel's things into his office. No says Rachmale.

Dilip Patel is on the Lakeshore Engineering employee list with his email. There is no specific designation.

He worked for you didn't he, asks Evelyn. No says Rachmale.

9:17AM Now looking at email from February 1st, 2008 from Rachmale to Patel. It discusses a disagreement over payment with Bruce Washington. A concern that Dilip Patel felt he shouldn't be paid a certain amount of money.

Second page starts with email from a Brian Caldwell. Patel questionning payment to Bruce Washington. The payment should be for about $45,000 range. Email says that it is unfair for Washington to continue work without being paid as per agreement.

Caldwell was with A & H which is why he was involved in discussion. Further in email chain, Tom Hardiman also says Washington should be paid.

Evelyn asks if Patel had authorization to stop payment. No says Rachmale.

Evelyn says email chain talks about Patel stopping payment. Rachmale says he voiced concerns.

Evelyn says he stopped payment. No says Rachmale.

Email chain incorrect. No it's correct says Rachmale.

9:23AM Jim Thomas for Kwame Kilpatrick cross examines.

Thomas asks if he knows Diana Stewart, VP of Operations at A & H. Yes says Rachmale.

Who is she the aunt of asks Thomas. Kandia Milton's aunt.

Looking at letter on October 20th, 2008 to Judge David Groner. Written by Rachmale. Written in support of Kwame at sentencing. Indicated in letter that he know Kwame for 8 years.

Did you indicate you owned business in Detroit for 13 years? Yes says Rachmale.

And that you saw progress for the city under Kwame? Yes says Rachmale.

And you were inspired by his vision and intelligence? Yes says Rachmale.

So you indicated in letter that you supported Kwame when he decided to run for mayor in 2001? Yes says Rachmale.

And you were on transition team? Yes.

There are only a select number of people on the transition team says Thomas.

You were aware he was going to be sentenced in a felony court. Yes says Rachmale.

And it's a true statement that Kwame apologized for his mistakes. Yes says Rachmale. 

You gave the letter freely. Yes says Rachmale. This was about personal issues. Rachmale says he didn't know about indictments if he had, it might have been different. 

Thomas done. 

9:30AM Government redirects. Mark Chutkow mentions a housekeeping matter. Submits 2 pieces of evidence. 

How long have you known Patel? Since 1994-1995. 

Are you friends with him? Yes I know him through temple. 

Do you know what Patel did when you first met him? Know I just know he worked for city. 

And you know his wife Meena? Yes. 

Are you friends with her? Yes. 

And you have business interests with her? Yes in 1996-1997, Rachmale says he saw lots of opportunity to rehabilitate old homes. He and Meena purchased 12 to 15 new homes and started rehabilitating those. 

When did you start purchasing those together? In 1996-1997. 

At that time did you have any business with the city? In 1997 had business with housing department. 

Rachmale says he and Meena renovated buildings and rented them out. Rachmale says main business was taking Lakeshore to the next level. 

Rachmale says Meena and Dilip were mostly taking care of tenants. He paid them for it. 

Rachmale says the relationship with Meena strained as a result of the investigation. "There is a perception that I'm doing something not kosher," says Rachmale. 

Rachmale says he purchased the Sky Group building on Grand blvd from the state. 

Chutkow asks if he had access to the building because he was part-owner. Yes says Rachmale. 

Chutkow points out other names on the Lakeshore employee list from Ohio, Oklahoma and Vermont who are contracted workers. 

Rachmale says its basically a contact list. 

So not just employees says Chutkow? No says Rachmale. 

Have you ever taken advantage of your friendship with Dilip Patel to get work from the city of Detroit? No says Rachmale. 

Has he ever been a cabinet level employee of the city to your knowledge? No says Rachmale. 

Two tenths of 1% of Lakeshore's revenue comes from building department says Rachmale. 

Rachmale says they waited 6 to 8 months to get payment from housing department. 

Whereas Water Department has a 1 billion budget asks Chutkow? Yes says Rachmale. 

Have you ever used your relationship with Mr. Patel to shutdown other companies' projects if they didn't pay you? No says Rachmale. 

9:43AM You were asked about a letter you wrote in support of Kilpatrick at sentencing. You were asked what you knew and did not know? Yes says Rachmale. 

Looking at text messages between Kwame and Bobby Ferguson about 1361 contract Lakeshore was involved in. 

B: 1361 is the same contract prices may be less...." 

Did you know they were discussing this at the time you wrote letter? No says Rachmale. 

Another text message exchange Kwame and Bobby on May 2nd, 2003. Mentions that Tom Hardiman at Lakshore was attempting to reach out to the mayor's office. 

Kwame responds: LOL. 

Did the Water and Sewerage Dept did they issue you a contract? Yes. 

Were they happy with the work? Yes. 

After 849 did you get other contracts from water department? Yes we got 865 which was similar. 

You were asked why you paid Ferguson $1.7 million for outfalls contract? Yes. 

Were you worried about other contractors? No says Rachmale. 

Do you usually have to pay a subcontractor more than $1 million for no work? No says Rachmale. 

If you had not been worried about the contract being cancelled would you have paid Ferguson? No. 

Rachmale says $700,000 paid from Lakeshore and $1 million from contract.

You were shown a DWSD proposal from CM 2014? Yes for water construction management. 

What were you considered on this bid? Project Manager. 

How did E & T come part of your team? Ferguson didn't want his company listed on proposal says Rachmale so he told them to use E & T. 

Did you have an understanding that Ferguson was bidding with other company? Yes. 

Is that why you did not list him on the project? Yes. 

Looking at 2014 contract and scope of work? Rachmale reads about completion of deleted contract WS 671. 

Did you end up doing any work on the contract that was closed? We did not do any work on 671 but we accommodated city by completing work on 2014. 

Why did you agree to do this for the department? Because we had a longstanding relationship with the department. 

Looking at Lakeshore Engineering Timeline of contracts. Total contract value of more than $157 million. 

Rachmale says that 92% goes to subcontractors and materials. Then 8% is left for Lakeshore. Of that, 4% is left for profit and then after taxes it's only 3%. So every year they are making 10 to 15 million annually from those contracts. So that is only 3% towards the profits of Lakeshore's business. 

So 8% is really only 12 to 13 million total revenues for contracts that go to Lakeshore. 

10:00AM Did Lakeshore do its work for 849? Yes says Rachmale. 

Contract 807 was under what administration? Under the Archer administration. 

Is that the contract that you paid Ferguson a 5% change order fee? Yes says Rachmale. 

Did you do the work for those contracts? Yes. 

So you didn't get no show payments? No says Rachmale. 

Your company has grown and now do work all over the country and the world? Yes says Rachmale. In 1997-1998, started to get more work in the city. Between 2002 and 2005 had less business in the city because of the politics going on. So started to focus more on the federal side. 

"We 're the loser then, we're the losing during and we're the loser now," says Rachmale. 

Rachmale says that the company's involvement in the Kilpatrick controversy has cost them money. 

Rachmale says they have had a really hard time the last few years. 

In any other part of the country have you had to pay because you were afraid contracts would be cancelled otherwise? No says Rachmale.  

10:07AM Jim Thomas from crosses. 

1361 and 1387 were 2 contracts you talked about for $5 million and $10 million? Yes says Rachmale. 

And they were for as needed sewer repairs says Thomas? Yes says Rachmale. 

And as needed sewer repairs could be canceled at any moment? I don't know about that says Rachmale. 

You sent in a bid proposal and it was reviewed and award was made? Yes says Rachmale. 

The city puts aside money for sewer repairs? Yes says Rachmale. 

Doesn't the city reserve the right to cancel as needed repairs at any time? Yes says Rachmale. 

You were aware that 1361 and 1387 were assigned to someone else? I don't know about 1387. 

But 1361 was assigned to someone else? Yes says Rachmale. 

They don't need a reason to terminate contract, correct? Yes says Rachmale. 

Without any knowledge about possible cost savings, you've ascribed that you think Mr. Kilpatrick was involved in cancellation of contract? Yes says Rachmale. 

Looking again at text from Bobby to Kwame about contract 1361.

Thomas says prior to seeing this text you did not think that Kwame was involved in cancellation? I had my suspicion says Rachmale. 

You had plenty of opportunities to see Kilpatrick subsequently and you never complained about losing 1361 and 1387? No says Thomas. 

Looking at letter Rachmale received from Mercado in 2003 regarding cancellation of contract 1361. 

You made $157 million from DWSD? No says Rachmale.

10:17AM Gerald Evelyn re-crosses. 

You've indicated that on the $157 million dollars you only made 3 or 4 million? Yes says Rachmale. 

You're a multi-millionaire asks Evelyn. 

Government objects. Judge sustains. 

Through this hardship you've experienced you're company has exploded asks Evelyn?

Nothing further

10:46AM 20 minute break over. Court back in session. Kwame looks vaguely recovered from his nasty cold in a dark sports coat and reddish tie. 

Government calls next witness. 

10:47AM  Mark Chutkow questions Darryl Andrew Latimer. Currently works for DWSD, currently deputy director. He's the number three guy. There are about 1,978 employees with water department. 

Started this position in February 2010. Prior to that, construction and grants manager. August 2010 through August 2011 became interim director. 

Has worked for the water department for about 24 years. Started in 1989. 

When Kilpatrick became mayor, he was head governmental analyst. Later promoted to contracts and grants manager on March 2003. Contracts and grants pursue grants and loans to fund contracts. 

Chutkow asks about 1361. 

Latimer says 1361 was an emergency sewer repair job. 

Looking at document sent by DWSD on contract 1361 to Avinash Rachmale. It went out under Latimer's name. 

Chutkow says at this stage you are basically giving them contract documents to sign? Yes says Latimer. 

After signed, they are sent to City Council for approval. Once approved, sent back to DWSD to initiate start of project. 

Was 1361 awarded on merits? Yes says Latimer it was Request for Proposals. 

Latimer says they also had capital improvement projects. 

Kwame maybe not so recovered from cold. Hacking away. 

Was this project 1361 described as needed? Latimer says that the company would be used on as needed basis. Company would be on standby. 

Is funding source important for projects? Yes says Latimer. There are 2 types of funding. Amongst them capital funding. 

So with capital funding department goes out to Wall Street to sell bonds? Yes says Latimer. 

Looking at Lakeshore proposal. Latimer says it would have been taken to an evaluation team that includes various emkployees from different parts of operation. They would have expertise in evaluation project- engineers, inspectors... 

On the proposal, Lakeshore indicated they had filled 100% of criteria of Detroit-based business. It exceeds the required 30%. 

The proposal indicates Detroit Based Business and Small Business Enterprise breakdown. 

What kind of company is Hayes Excavating? They do a lot of excavating work. 

Do they have a history with the department? Yes says Latimer. 

And their performance? I wouldn't know exactly but I've never heard complaints about their work. 

Now looking at Board letter from Victor Mercado on February 26th, 2003. Latimer says at this stage a recommendation has been made. 

This is basically one of last steps before contracts is implemented? Yes says Latimer this is one of the last steps. 

The document is signed by Victor Mercado and shows that it has been approved by the Board. 

Government submitting a Board of Water Commissioners Agenda. On it Awni Qaqish recommends executing contract 1361. 

Latimer says the justification for contract is for company to provide services to sewer lines on an emergency basis. 

How much work has been done to get to this point? Latimer says they have prepared documents, taken in documents, paid for advertising and staff has taken time to evaluate contract. 

Latimer says it's a 3 to 4 month process to get to this stage. 

11:08AM Including RFP, we're talking 6 months or more? Yes. 

We're is the funding coming from? The operating budget says Latimer. This is the source the contract will draw its payments from. 

The agenda discusses that during a meeting of December 18th, 2002, staff was granted permission to conduct negotiations. 

On page 3 in the motions section, it was approved unanimously. The document was ready to be moved to city of Detroit to be executed by city council. 

Was there a delay? Yes says Latimer.

Chutkow submits another document which identifies subcontractors. The subcontractor form relates to 1368. Dated March 13th, 2003. This is a capital project that requires Wall street financing.

Was there a holdup on this contract? Yes. 

Do you know what caused it? No. 

Did it go ahead? Yes. 

More coughing from Kwame. 

Now discussing email from Latimer to Victor Mercado relating to cancellation of contract 1361. Dated July 14th 2003. The scope of contract added to 1368. In department's best interest to increase scope of 1368 as a money saving measure. 

1368 contract had Ferguson's name on it. 

Chutkow asks why he wrote the email? Latimer says because Mercado asked him to. 

Latimer had written another email on 1361 stating there were other options and there wasn't a need to cancel it.

11:19AM Latimer says his opinion was that 1361 really didn't need to be cancelled. Could reduce price or timing. The contract had already been signed off by director. 

Latimer says he was told to write email. 

Would it save money? Latimer says it might have saved work hours but there were different sources of funding. 

Did Mercado know that? Latimer affirms that he did. 

Why did Mercado change his position after 1361 had already gone through system? After what he had explained to me. 

Where you comfortable with writing it? No. 

Why? Because those were not my words says Latimer. 

Latimer says I didn't ask many questions because we worked in an atmosphere that when you were given a direction you followed it. 

Did you feel comfortable doing it? No. 

Did you tell him? No says Latimer. 

Document sent saying contract was being cancelled. Dated July 15th 2003, Day after the email he was directed to write to Mercado. 

It explains that 1361 will now fall under scope of 1368. Sent from Mercado to Latimer. 

Why did Mercado have you write email about cancellation of contract? No says Latimer I believe...

Thomas objects. Judge sustains. 

Memo copied to a number of engineers. 

Latimer looking at spreadsheet that shows scoring for evaluation team. It is for CM 2014. 

Also a spreasheet that shows scoring for 2015. 

Latimer says 2014 and 2015 were construction management broken down in east and west. 

Latimer says he was involved in administration of CM 2014 and 2015. 

The document containing rankings of different evaluations. Three columns, standard which takes lowest cost and every other company is scored against that. that is the typical was of doing. Under standard it says April 19th, 2006. Under standard scoring, Lakeshore ranked #5. 

On these 2 contracts, the director said he didn't want one company to have both contracts. 

Under standard ranking, Superior ranked #1. 

Bobby Ferguson lawyer Mike Rataj asks for sidebar.

 Apparently over the break, Kwame was telling Bernard that his son scored 21 points in a basketball game over the weekend. Sidebar over. 

Back to summary. On standard scoring Superior (DLZ as subcontractor) #1, EBI #2, DPM #3, Jenkins Walbridge #4 and Lakeshore (Fergson enterprises as subcontractor) #5. 

After seeing this, Mercado said he had some concerns with the wide range of pricing. Latimer said he had a problem with it and didn't want to move it as it was. 

Latimer suggested throwing out 2 companies: Vision consultants #7 and EBI #2 because they hadn't substantiated their pricing. 

Latimer explained to Mercado that they had grounds to disqualify the 2 aforementioned companies. 

Director explained that he didn't want to throw any of the companies out. 

Mercado asked about other methods used to score costs. Mercado approved average cost method and asked Latimer to go ahead with it. 

Latimer said he explained it was usually used on consultant contracts that didn't typically have materials but just man hours. 

Latimer says he expressed concern about implementing average cost method half way through the evaluation process. He was concerned that it shouldn't just be correct but look correct to the public.

11:42AM Did you express concern to Mercado. 

Did you explain to him why changing cost method halfway was a concern? 

Did you testify that "it doesn't look good"? Yes I explained that changing a process after getting a result doesn't look good. 

Jim Thomas keeps objecting about opinion versus what was actually said. 

Latimer says he told Mercado it didn't look good because they had set out with a particular method. 

Can you recall a construction average cost method was used on previously? No. 

After this can you recall using average cost method again? No says Latimer. 

Under average cost method, Superior (DMZ) remained at #1, DPM (Detroit Project Management joint venture with Ferguson's Xcel) #2, Jenkins Walbridge #3 and Lakeshore moved to #4. 

On CM 2015, same results on standard and average cost method scoring. 

Latimer met with mayor who asked about concerns. Latimer discussed companies that has unusual high scoring for economic development. 

Mayor responded with asking about certifications. Mayor specifically asked about DLZ, as an example. Latimer told him it was not headquartered in Detroit, Michigan but in Columbus, Ohio. DLZ was subcontracted to Superior for both 2014 and 2015. 

Latimer explained that having certification was the difference between winning and losing. That was the end of conversation with the mayor. 

DLZ subsequently got its certification yanked which caused it to topple from the top ranking on both 2014 and 2015. 

Michael Bullotta passes a note to Mark Chutkow. Chutkow asks for a 5 minute break and judge agrees. 

11:56AM Bobby Ferguson typically sharply dressed in a grey suit is huddled with all three of his defense lawyers.

12:06PM Still on break but Mark Chutkow and Jim Thomas approach the witness to get some explanations. 

12:07PM Back in session. Chutkow hands Latimer a page out of the mayor's calendar, May 4th, 2006. 

Letter sent to Human Rights department head Gerard Philips asking him to investigate DLZ's certification status. The letter is dated May 5th, 2006. Day after Latimer met with the mayor. Mercado asked Latimer to write the letter 

Latimer says he had previously checked into companies' certification status but not quite like this with the director copied. 

Looking at email from Dan Edwards to Kim Harris of Human Rights department  Also to look into DLZ's certification status. 

Letter from Phillips of Human Rights department to Latimer saying that DLZ's certification has been revoked. 

Now looking at letter from Detroit Program Management joint venture letter of submission accompanying their proposal. Dated March 23rd, 2006. The 2 joint venture partners are Detroit Contract and Xcel. They ultimately won contract 2015. 

Do you know if DLZ was ever notified that their headquarter status had been revoked? I don't know that says Latimer.. 

Letter from Gerard Grant Philips on November 26th, 2007 to Mercado, Latimer, Gary Fujita, deputy director of DWSD. Subject line is DLZ certification status. It is certfied with the Human Rights department and will expire in August 2008. 

Philips never explained why he changed course and re-certified DLZ. 

Going back to cost scoring of contract 2014. With standard scoring, Superior with subcontractor DLZ were at number 1. After average cost method, still #1. But after DLZ's certification was revoked, it moved to 3rd position. 

Do you know if Superior was ever advised that its subcontractors certification had been revoked? Not that I'm aware of. 

Did Superior and DLZ win either f these contracts? No says Latimer. 

Now looking at A & H Detroit business certification document. 

During evaluation project, Edwards identified that Lakeshore had a company that was down as Detroit headquartered but had no certification. 

Latimer investigated it with Human Rights. 

Normally if there is not one in the file, can you have a new one? 

Did you have that type of certification for A & H? No says Latimer. 

When the certification for A & H arrived late, Latimer asked Mercado what they should do about it. Mercado said to add it. 

12:29PM After late certification arrival what position did Lakeshore move to? Second. 

And who got contract 2014? Lakeshore. 

Did you discuss with Mercado who the contracts should go to? Yes he didn't want both to go to one company so DPM would get 2015 and Lakeshore would get 2014. 

Mercado "didn't like to put all his eggs in one basket" by giving both contracts to one company. 

Had you ever seen certifications being revoked or issued like this? No it only happened on one other contract that I can remember. 

Latimer says the pulling of the certification for DLZ reduced their score and put Lakeshore in the running. 

Do you know if Ferguson Enterprises was sub-contractor on 2014? I believe so. 

Did Superior's technical proposal meet all the standards? Yes.

12:34PM A recommendation from Latimer to Gary Fujita and Mercado in May 25th 2006 on awarding contract 2014. 

Latimer recommended the contract go to Lakeshore. Lakeshore's costs are about $1.6 million higher than Superior Engineering? Yes. 

Another recommendation from Latimer in May 2006 this time on May 23rd 2006 on contract CM 2015. 

Detroit Program Management team was recommended. Superior's costs were about $2 million less than DPM team.

If they had gone with Superior would that have resulted in saving costs? Latimer says he can't say for sure. 

If superior had performed contract as anticipated would that have resulted in cost savings to department? Yes says Latimer. 

Thomas objects as speculation. Judge sustains  

12:39PM Jim Thomas for Kwame Kilpatrick cross-examines. 

Thomas says he wants to talk about what was going on in the city of Detroit at the time. 

Discusses the hiring of minority persons. 

Were you aware of preferences given to minorities? Latimer says that was in the past but it was struck down. 

But there was in the 24 years a preference. and the reason for that? Because there was a disparity in terms of business says Latimer. 

Thomas asks Latimer to explain multiplier factor. 

That was struck down by the supreme court says Thomas. 

When did Detroit headquarter business come into effect? Latimer says not sure somewhere around 2000. 

But it was in effect around the time of these businesses we were talking about? Correct says Latimer. 

That is still in effect even now? Correct says Latimer. 

Looking at negotiation recommendation for CM 2014 in May 2006. Thomas says certain things going on in the city: All Star game, Super Bowl. 

These were huge undertaking for DWSD? Yes says Latimer. 

Unprecedented? 

Thomas corrected. Super Bowl had already occurred by May 2006. 

"I was on a roll but I wasn't right," says Thomas. 

Looking at the scoring on the negotiations recommendation with DPM listed as #1. 

There is a cost to giving preferences? Yes. 

"As an African-American male would you say there is a cost to not giving preferences," asks Thomas. Yes responds Latimer. 

There are executive orders under Archer and Kilpatrick that say those things need to be considered? correct says Latimer. 

That money that is going to be money in city of Detroit is going to make 3%? Correct says Latimer. 

Then we talk about multiplier effect which is very important to a city where so many are moving out says Thomas. 

DLZ had misrepresented that they were Detroit headquartered because they were in Ohio? Latimer says I can't say they misrepresented. 

Did you know company was run by 2 brothers and that they split and 1 came back to Detroit? I know there was a rift says Latimer. 

Looking at document prepared by IMG. Do you know them? Yes they were working for Judge Feikens and they were overseeing various aspects of the contracts. 

Did you know Judge Feikens? Yes he was the Judge put in charge of DWSD because of suit brought by EPA over waste in the rivers. 

So Judge Feikens was tasked with overseeing quality of water in Detroit. Which has vastly improved? Yes says Latimer. 

It was brown and now if we look out, it's blue? Yes says Latimer. 

Feikens was placed in charge by an order? Correct. 

So he was like a Water Czar? Yes. 

So he was looking to streamline the process of contract awarding? Yes. 

Talking about different types of contracting- CM or CS (consulting services). 

Thomas points out that a special administrator designated even before Kilpatrick was mayor. Coleman Young was first special administrator. 

Is the conventional design build process applicable to 2015, 2015 and even 1361? Yes says Latimer. 

Thomas wants to run through it. Judge Edmunds says let's wait and run through it tomorrow morning. 

1:00PM Court recessed until 9am tomorrow.

 

About the author:

Alexandra Harland is a Princeton undergrad and has a masters degree in International affairs with Columbia. A Montreal native, she worked with the Daily Telegraph newspaper for a few years before transitioning to TV, when she worked at ABC News with Peter Jennings. Alexandra has also worked in newsrooms in both Detroit and Boston.