City Administrator Howard Lazarus requested an internal investigation into potential conflicts of interest in the awarding of city contracts, according to emails obtained by the Daily and verified by Lazarus and members of City Council.

In an email addressed to City Council and the mayor on Saturday, Lazarus wrote he had requested the city’s purchasing department to inquire whether ethics rules were violated in awarding approximately $1.3 million in city contracts to companies affiliated with seven political appointees to city boards and commissions between 2010 and 2016.

Lazarus also wrote this was initiated in response to a concerned email from Ann Arbor resident Patricia Lesko and a formal request from City Councilmember Jack Eaton (D–Ward 4). Eaton confirmed the authenticity of the email obtained by the Daily. The Daily also confirmed these numbers were consistent with City finance records.

“I received the e-mail below from Ms. Lesko late yesterday afternoon, and the request from Mr. Eaton this afternoon,” Lazarus wrote to the City Council members on Saturday. “Kindly note that I have asked Purchasing staff to inquire into the means by which the contracts with the organizations cited have been awarded. We will also look at the dates of service of the individuals identified with the dates of award.  Finally, this provides an opportunity to review and validate our contracting procedures with regard to conflicts of interest.”

In an email to the Daily on Monday, Lazarus confirmed an internal investigation had been initiated, and it would determine whether any ethics rules were violated. He said the investigation will also review the city’s contracting process.

Councilmember Chuck Warpehoski (D–Ward 5) said it would be premature to conclude ethical rules had been violated before the internal review is completed.

“On the one hand, we want to take the concern seriously, on the other hand we also don’t want to assume malintent until it’s been found,” Warpehoski said. “(But) I’ve seen no evidence of impropriety.”

Eaton echoed Warpehoski and added that the investigation would provide an opportunity to examine the consistency and oversight of the city’s contracting process.

“Part of the review Mr. Lazarus has requested will be a review of contracting procedures,” Eaton wrote in an email to the Daily. “If we find our policies to be deficient, we will take steps to address those deficiencies. Council member (Sumi) Kailasapathy (D–Ward 1) and I are discussing an ordinance that would address the ethical standards for members of boards and commissions.”

Ann Arbor residents have raised allegations that several prominent members of the Downtown Development Authority, Planning Commission, Local Development Finance Authority and Public Art Commission have been benefitting from approximately $1.33 million worth of city contracts. According to Lesko, the city’s finance records reflect that once certain members were appointed to their respective boards and commissions, the companies they own or work for began obtaining city contracts they had not received prior.

Following resident concerns, Lesko began to investigate on the city’s website. All the city’s vendor contract records are available to the public through A2OpenBook. Lesko sifted through contracts filed between 2010 and 2016, first looking solely at McWilliams’ media agency Q+M, formerly Quack!Media.

Lesko argued there needs to be more oversight on city contracts that involve city-affiliated personnel to prevent conflict-of-interest cases.

“What I’ve said to Mr. Lazarus in my email is that they need to do some investigating going back at that case, so that the public knows over the last ten years how much money total in city contracts … have gone to city board and commission members,” Lesko said. “I think every time something comes to City Council where city staff are recommending a former city staff member or a current board or commission member or their employer, Council must be told in public.”

Warpehoski noted that, though stringent oversight is necessary, having local business leaders on city boards and commissions can have a positive impact.

“I don’t think we should have a policy where the only way to serve on a board or commission is to give up your hope of being able to do any business with the city or the DDA or the AAATA,” Warpehoski said. “I want our local units of government supporting local businesses. I want local business leaders sharing their expertise of local government and contributing in that way. But I don’t think that should give anybody any special treatment.”

According to Lesko, just 10 percent of the contracts were above the threshold price of $25,000 that would have required a City Council vote. City Administrator Lazarus has the discretion to award contracts under the $25,000 threshold.

In many cases, the council looks to insight from appropriate boards and commissions for recommendations on contracts.

“More frequently, staff will seek input from a board or commission during the development of a statement of work prior to commencement of the formal solicitation process to help define an approach to achieve a City goal,” Lazarus wrote in an email.

This is a developing story, stay with the Michigan Daily for updates. 

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