Schuette's office OK'd Flint order in alleged tainted-water crimes

LANSING — Attorney General Bill Schuette's office signed off on an environmental order that is central to new criminal charges Schuette filed last week in his Flint drinking water investigation, records show.

In bringing charges on Dec. 20 against two former emergency managers and two former City of Flint public works officials, Schuette and his investigators said a March 2014 administrative consent order issued by the Department of Environmental Quality never should have been issued, because it was based on a "sham" environmental calamity manufactured in part by former Flint emergency managers Darnell Earley and Gerald Ambrose  and former city officials Howard Croft and Daugherty Johnson.

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All four defendants face 20-year felonies for conspiracy and false pretenses and have entered not guilty pleas.

One of the three signatures on the administrative consent order (ACO), which the Free Press first scrutinized in a May article, is that of Assistant Attorney General Robert Reichel of the AG's environment, natural resources and agriculture division.

Signing on behalf of Schuette, Reichel approved the order "as to form."

Schuette alleges that Flint, which was under a state-appointed emergency manager at the time, was unable to borrow its share of the money to participate in the $285-million Karegnondi Water Authority pipeline to Lake Huron. The project was being pushed by Genesee County and Flint wanted to leave the Detroit system, which had been supplying it with treated Lake Huron water from Lake Huron, in favor of the new pipeline, which would provide the city with untreated Lake Huron water. By using an ordered environmental cleanup at a sludge lagoon used by the Flint Water Treatment Plant and tying that project to the KWA development, officials were able to use the administrative consent order to keep the KWA debt from counting against Flint's almost non-existent borrowing capacity. Schuette alleges the "sham" administrative consent order, which one of his assistants signed off on, also had the effect of forcing Flint to get its drinking water from the Flint River — with disastrous results — until the KWA project was completed.

Andrea Bitely, a spokeswoman for Schuette, said the AG was aware of the sign-off from his office when he brought the charges, and suggested Reichel may have signed it based on false information provided by another state agency, the DEQ.

"While I can't comment on the trial strategy going forward, we were aware of this when charges were filed," Bitely said in an e-mail to the Free Press.

"The (assistant attorney general) that signed off on the order did so following a legal review of the document in his role as counsel to the MDEQ," Bitely said. "In this case, the signature signifies the AAG reviewed the document and made a determination that it met all basic legal requirements as to form, not to content, because no AAG sets policy for a department. 

"AAGs are dependent on departmental experts, in this case, DEQ staff, for the factual information used in determining the document was legal as to form. If a department provides false or inaccurate information as the basis for a document like this, the AAG would have no way of knowing."

Also signing the order were former Flint Chief Legal Officer Peter Bade and Bryce Feighner, who was chief of the DEQ's office of waste management and environmental protection.

E-mails released earlier by the State of Michigan pursuant to Michigan Freedom of Information Act requests show that attorneys Miller Canfield, which was serving as bond counsel to the KWA, and Warner Norcross, which was advising the City of Flint on environmental issues, were also involved in crafting the administrative consent order. Attorneys from those law firms did not respond to questions e-mailed Tuesday.

Peter Hammer, director of the Damon J. Keith Center for Civil Rights at Wayne State University Law School and the author of a research paper on the Flint drinking water crisis that included an analysis of the 2014 administrative consent order, said Tuesday that "there are conflicts rife throughout the AG investigation."

The apparent conflict involving Schuette’s office and the administrative consent order, plus additional conflicts of interest surrounding the Flint drinking water crisis and related investigations, merit additional study, Hammer said.

Hammer said the inherent conflict in Schuette filing charges related to an order that his office signed off on "does not appear substantially different" from other conflicts in the Flint water crisis.

"A more basic question is why did (the Michigan Department of) Treasury approve the KWA project when it knew that Flint would be unable to finance it?" Hammer asked.

Another apparent conflict is the Treasury Department giving Flint the OK to leave the Detroit water system for the KWA, when both Flint and Detroit were under state-appointed emergency managers and it hurt Detroit financially to lose Flint as a major customer for its water.

What's more, the Treasury Department pushed for approval of the administrative consent order that is now under scrutiny in Schuette's criminal investigation.

Before the final approval of the order, which some DEQ officials had resisted issuing, Ambrose sent an e-mail to former Treasury official Wayne Workman, thanking him for Treasury help in getting the order approved, but saying it is "still in process," and "any additional assistance ... would be greatly appreciated."

Workman, who has since retired from Treasury, then sent a March 19, 2014 e-mail to other Treasury officials that asked: "Can we get a all in to the (former DEQ) Director (Dan Wyant) to push this through? No one appears to be doubting the need but they can't get to the (bond) market without DEQ approving the ACO."

Ron Leix, a spokesman for Treasury, declined to answer questions Tuesday about the order and Treasury's role in getting it approved, "due to the ongoing investigation."

Michael Shore, a spokesman for the DEQ, had no immediate response to questions about the order sent to his agency.

In a Dec. 21 interview with the Free Press, Gov. Rick Snyder said he wouldn't speculate on what effect the recent criminal charges could have on the future of the KWA project. But he said the state extensively reviewed the pros and cons of the KWA with Mayor Karen Weaver and other Flint officials after the state acknowledged the lead contamination of Flint's drinking water, around Oct. 1, 2015, and "the city itself made the determination that they want to move forward with the KWA."

Asked whether he had any role in approving the administrative consent order, Snyder said: "I have no recollection of that, at all."

Hammer said in an e-mail he sees Schuette's most recent charges as "a positive development, moving the investigation towards those with greater decision-making authority."

"What is 'criminal' in the colloquial sense, if not the technical sense, is that extraordinary efforts were made to raise money for KWA pipeline construction but no efforts were made to raise money for the costs of necessary upgrades to the (Flint Water Treatment Plant)," and to help Flint pay for Detroit water until construction of the KWA pipeline was completed, Hammer said. 

Flint turned to the Flint River for its drinking water as an interim measure in 2014 after failing to negotiate a deal to continue receiving treated water from its former supplier, the Detroit Water and Sewerage Department, while awaiting completion of the KWA. The move proved disastrous because the DEQ did not require corrosion-control chemicals as part of the treatment. Corrosive Flint River water caused lead to leach from pipes, joints and fixtures and into homes, resulting in a spike in harmful lead levels in the blood of Flint children.

Investigators are also investigating possible links between the switch in the drinking water source and deadly outbreaks of Legionnaires' disease in the Flint area.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.