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DETROIT — Despite public warnings by the Detroit News and others advising the administration of Gov. Jennifer Granholm to avoid the appearance of “cronyism,” the state of Michigan awarded the sale of a state property to a company employing the governor’s campaign manager, David Katz. Even worse, the bid offered by the company employing Katz, Grand Sakwa Northville Seven Mile LLC, was not the highest bid offered. In fact, the “winning” bid was an incredible $700,000 lower than the one offered by Rock Construction Co., Inc., which appealed the state’s decision.
The state’s move ignored one of the admonitions repeatedly offered by privatization experts with regard to the pitfalls to be avoided when putting together a plan for privatization: Avoid conflicts of interest. Never hire a private contractor with ties that might constitute a conflict of interest, or that would even create the appearance of one.
The deal in question had to do with 400 acres of state land in Northville, which was previously the site of Northville Psychiatric Hospital, and was sold for $76 million. In June, the Detroit News pointed out not only that hiring a company employing Katz could create the perception of a conflict of interest, but that Katz is also being investigated by the federal government for contracting irregularities and other misconduct by the administration of former Wayne County Executive Edward McNamara.
“He should not be allowed anywhere near state business,” the News wrote, “at least until the federal investigation is concluded.” The paper added that “Had Grand Sakwa won the bidding, it would have been tough to convince the losers that Katz’s connection to the governor played no role.” As if on cue, Rock Construction said in an appeal filed July 18 that the deal “smacks of political favoritism and cronyism.”
Katz’s company backed out of the deal on Sept. 4. The land was subsequently sold to Real Estate Interest Group, Inc. of Bloomfield Hills for $76.5 million.
