Feds Order City to Repay $134K Over City Attorney’s Conflict of Interest

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Tuesday, March 20, 2018, 6:23 pm
Alice Dreger

Above: City Manager George Lahanas (left) and City Attorney Tom Yeadon.

The U.S. Department of Housing and Urban Development (HUD) has determined that the City of East Lansing must repay HUD $134,330 in grant funds because the project funded included a conflict of interest involving City Attorney Tom Yeadon.

In a letter dated yesterday, HUD informed the City, “We have determined that there was a conflict of interest stemming from the contracted attorneys’ property receiving a direct benefit of the city’s re-construction of the retaining wall” using HUD grant funds.

The wall runs along the sidewalk on the Abbot-road side of the city attorney’s law office property, which is at the southwest corner of Abbot Road and Fern Street. The project involved rebuilding a crumbling retaining wall and the sidewalk. It used $134,000 in HUD funds plus approximately $15,000 in funds from the City of East Lansing.

HUD went on to say in its letter that “it has been determined that the project itself is an ineligible activity and should not have been paid for with CDBG [Community Development Block Grant] funds. There has been no national objective met with the rebuilding of a retaining wall on private property.”

HUD’s determination comes in direct response to a letter that City Manager George Lahanas was required to submit as part of a settlement agreement to a federal whistleblower lawsuit. The basis of that suit was the claim that the City misused the funds for the project and failed to tell HUD that the City Attorney owned the land adjoining the project.

In Lahanas’s November 2018 retroactive conflict-of-interest disclosure and request for an exemption to HUD’s conflict-of-interest rules, Lahanas claimed to HUD that “there was no significant financial benefit that arose to the property owners including the City attorneys from the project”; that the cost of the project “would have been cost prohibitive to the property owner”; and that it was a reasonable use of CDGB funds, which are meant to help low- and moderate-income people, because low- and moderate-income people might use that sidewalk.

Lahanas also claimed that the City “inadvertently” failed to make the conflict of interest disclosure earlier, despite citizen watchdogs raising the issue for years before the whistleblower lawsuit was finally filed.

The citizen watchdog who brought the False Claims Act suit, which was joined by the Department of Justice against the City, is Phil Bellfy, an East Lansing property owner and Professor Emeritus of American Indian Studies at Michigan State University. Asked for comment today, Bellfy told ELi by email,I'm very happy that HUD finally acknowledged that we were right from the get-go.”

In response to HUD’s determination, the City today issued a lengthy press release defending the City’s actions in the case. That includes the statement that City “officials did believe that the project was eligible for CDBG funds at the time of construction” and that “The retaining wall was in disrepair and the sidewalk was narrow and uneven. The sidewalk in that area also lacked ADA-compliant ramps that would allow a person with disabilities to access the sidewalk.”

But reading this, Bellfy says he believes that the City is still misrepresenting facts: “…the City's application was correct in that there were no curb-cuts along Abbot, given that there are no driveways along that stretch, but the City is still lying about the lack of ADA ramps at the two intersections. There were two ramps at the intersections long before they applied for CDBG funding.”

The City’s press release also troubles Bellfy in that it says, “City officials would also like to clarify that the retaining wall was and is in the public right-of-way, not on private property as stated in HUD’s letter. The property owners who had parcels adjacent to the sidewalk donated public easements to the City, which allowed the retaining wall to be pushed back to the edge of the public right-of-way in order to maximize the width of the sidewalk.”

Bellfy has noted that other private property owners in the City are required to pay for sidewalk and retaining wall repairs in almost every case. Private property owners are ordinarily assessed by the City for repair costs if they don’t make required repairs themselves.

Says Bellfy, “[T]he big problem with the City's claim that the sidewalk sits within the right-of-way [RoW] is that it is simply more obfuscation—every sidewalk in the City is within the RoW, and the adjacent property-owner, ‘in all cases’ (from the City Code), is responsible for the maintenance and/or replacement of that sidewalk. ‘In all cases,’ the property-owner is also responsible for the maintenance and/or replacement of that retaining wall.”

Today’s press release from the City says that easements provided to the City for the project by Yeadon and his business partners “will be used into perpetuity for a public benefit.” But the release does not mention that some of the easements for this project were reviewed and approved by City Attorney Tom Yeadon acting as attorney for the city without disclosure that he was also the property co-owner on the other side of the agreement. The property was in the name of a company called Woodland Pass Equity Company.

The issue of the conflict of interest was one of open debate by 2012. At the time, Yeadon accused this reporter of “libelous innuendo” for reporting on the undisclosed conflict of interest, and he demanded a retraction for that reporting. (We did not retract.)

Lahanas was City Manager at the time and took no public action to make any conflict of interest disclosure in the matter, until legally required by the lawsuit settlement to do so.

In early January, we reported that the current City Council approved the lawsuit settlement, paying Bellfy and his attorney $20,000, but that Council did not make public the vote, as required by the Michigan Open Meetings Act, until after ELi reported the story.

The firm of Foster Swift was hired to defend the City in this case. According to the City’s press release from today, “City officials will be reviewing the HUD matter internally and will be considering further options.”

Unless they find some other way to repay the funds to HUD, in this case, East Lansing taxpayers will have funded the $15,000 City-contributed funds for the project, the $134,000 due back to HUD, the $20,000 settlement, and all legal bills for defending the City in this case. Based on information obtained via the Freedom of Information Act, it looks likely that the total cost to East Lansing taxpayers will approach if not exceed $200,000.




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