State charges 2 contractors with sending $1M in bogus bills to Detroit demolition program

Two men face multiple felony charges for allegedly conducting separate criminal enterprises to defraud a federal program connected to demolition contractors in Detroit and Flint, Michigan Attorney General Dana Nessel announced Thursday.

David Jeremy Gillespie, 39, from Detroit, and David Holman, 48, from Metamora, were each charged with felonies for allegedly taking funds from the federal Troubled Asset Relief Program (TARP). The funds were available to contractors conducting demolitions for areas hit the hardest by the financial crisis, Nessel said.

Holman is accused of allegedly operating a scheme that fraudulently billed TARP and the city of Detroit more than $1 million collectively for dirt used to fill demolition sites that his company, Den-Man Contracting, obtained for free from prohibited or unknown sources.

Holman allegedly knew the backfill material was in violation of the terms of his multiple city contracts and failed to do any testing to ensure the backfill was not contaminated given the source, Nessel stated.

“Criminal enterprises target public funding programs, where hundreds of thousands, or even millions, of dollars are awarded in contracts to fulfill public work,” said Nessel in a statement. “We must vigilantly defend public funds from abuse and criminal greed, especially when those crimes impact public health and safety.” 

The city of Detroit has incurred more than $3.5 million in costs to test the sites where Den-Man Contracting’s prohibited-source dirt was used. Of Den-Man's work, 87 of those properties have failed testing standards for contaminants and 51 residential properties remain untested, Nessel stated.

It's the second time this year that the state has charged a contractor for sending $1 million in bogus bills to Detroit's demolition program.

Den-Man, a Warren-based contractor, specializes in commercial and residential construction projects, demolition, excavation, site work, underground water and sewer and concrete construction. The company could not be reached for comment Thursday.

Holman is charged with conducting a criminal enterprise, a 20-year felony; five counts of false pretenses of $100,000 or more, a 20-year felony; two counts of false pretenses, $50,000-$100,000 and a 15-year felony; four counts of false pretenses, $1,000-$20,000, a 5-year felony.

Gillespie, meanwhile, is charged with allegedly conducting a scheme where his company, Detroit Environmental Solutions LLC, fraudulently purported to be a distinct entity from another business, BBEK Environmental, to satisfy requirements of the TARP-funded demolition contracts. The contracts procured by BBEK required that air quality monitoring be conducted by an independent third-party business for dealing with asbestos and other harmful particles that can be uncovered during demolitions.

Gillespie and Detroit Environmental Solutions couldn't immediately be reached for comment. He was previously touted by city officials for being a "Detroit at Work" success story and hiring local asbestos abatement workers. 

Nessel's office alleges that the business was funded and operated by BBEK and the intent was to keep air testing expenses within the scope of revenue for BBEK.

Gillespie is charged with conducting a criminal enterprise, a 20-year felony; false pretenses: $20,000 - $50,000, a 15-year felony; an additional count of false pretenses: $50,000-$100,000, a 15-year felony; another count of false pretenses, $100,000 or more, a 20-year felony; and lying to a peace officer, a two-year high court misdemeanor.

Detroit Office of Inspector General issued an interim suspension of Detroit Environmental Solutions and any companies Gillespie may have ownership or interests in. The OIG previously issued a suspension against Den-Man in April.

"The asbestos abatement process, including air monitoring tests, involve the health and safety of our residents," Detroit's Inspector General Ellen Ha issued in a statement on the suspension. "Therefore, the OIG finds it is in the public interest to suspend DES and David Gillespie from conducting business with the City and not award either party any City contracts pending the finalization of the OIG’s investigation."

The investigations into Gillespie and Holman were conducted by the Attorney General's office, Special Inspector General for the Troubled Asset Relief Program and the Detroit Office of Inspector General. 

srahal@detroitnews.com