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Transcript of March 7, 2012 Responsible Vendor Hearing for L. D'Agostini & Sons, Inc.

Transcript of March 7, 2012 Responsible Vendor Hearing for L. D'Agostini & Sons, Inc.

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March 7, 2012, Hearing Committee of Detroit Board of Water Commissioners, Responsible Vendor Hearing re L. D'Agostini & Sons, Inc.
March 7, 2012, Hearing Committee of Detroit Board of Water Commissioners, Responsible Vendor Hearing re L. D'Agostini & Sons, Inc.

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Published by: Peter Cavanaugh on Nov 15, 2012
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2:11-cv-13101-RHC-MKM Doc # 253-4 Filed 11/14/12 Pg 2 of 35 HEARING (D'AGOSTINI) March 7, 2012

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Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Responsible Vendor Hearing (D'Agostini), Taken at 735 Randolph, Detroit, Michigan, Commencing at 2:15 p.m., Wednesday, March 7, 2012, Before Laura T. Krystopowicz, CSR-5882. IN RE: RESPONSIBLE VENDOR HEARING (D'Agostini) __________________________________/ STATE OF MICHIGAN RESPONSIBLE VENDOR HEARING March 7, 2012

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Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALSO PRESENT: Bob D'Agostini Gino D'Agostini James D'Agostini Mark McAlpine COMMISSIONERS: Brad Kenoyer Jim Thrower Brian Williams

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Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 COMMISSIONER KENOYER: Good afternoon. Let's get started on our final responsible vendor hearing. For those of you who were not in the room before, my name is Brad Kenoyer. I've got Brian Williams down there on that side of the table and Jim Thrower over here. The three of us comprise the Hearing Committee of the Board of Water Commissioners. So, before we get started, I'd like to briefly review what happened before today as well as how today's hearing will be conducted. On January 26th, we sent David Zack -- is this David Zack that we have in front of us here? MR. MCALPINE: No. I am Mark McAlpine. Mr. Zack works in my office. COMMISSIONER KENOYER: Okay. Thank you. A letter by overnight mail apprising L. D'Agostini and Sons that the Board of Water Commissioners had decided to review their status as a responsible vendor. In the letter, we apprised D'Agostini that our review of its status will be based on its conduct and performance related to DWSD contracts, including CS1368 and CM2014, Detroit, Michigan Wednesday, March 7, 2012 2:15 p.m.

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Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as discussed in the third superseding indictment, United States of America v. Kwame M. Kilpatrick, case number CR1020403-NGE. So, at that point, we requested D'Agostini submit ten written copies of their written response by February 7th. On February 1st, 2012, we sent D'Agostini another letter rescheduling the hearing for today and extending the time for submission for response until March 2nd. So, before we get started today, I would like to point out a few points. We are digitally recording this hearing. So, anyone who is speaking, witnesses or the vendors themselves, please speak clearly in the microphones. We also have a court reporter here keeping notes that will be published. And also Brian Williams will be our official timekeeper. So, please respect whatever directions he is giving, as it's required to keep this hearing on schedule. So, the hearing schedule today will be as follows: D'Agostini will be entitled to make a presentation of 30 minutes. Followed by approximately 20 minutes of question and answer. And then we will be concluding with the vendor summary. In total, we're allotting 1 hour, 15 minutes to the overall proceedings. So, with that, I would like to ask my fellow

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Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 route. COMMISSIONER KENOYER: Yes, thank you. I know I'm speaking for myself, but I would appreciate some extra time to digest what's said here today commissioners if they have any other comments before we get started. Commissioner Williams. COMMISSIONER WILLIAMS: I think in fairness, because the D'Agostini people should know that, and I think they were in the room, but we should clarify that the previous matter with DLZ was continued over until next Wednesday commencing at 1:00. I think that there is certainly a possibility we'll do the same here. But we'll let you know before we conclude as to how this proceeds. But there is a possibility that this will continue. If it does continue, it would continue to next Wednesday afternoon. And it would follow the DLZ continued hearing. And then, just for the record, any decision by the Board with respect to the status of D'Agostini and Sons would be Wednesday the 14th at a special board meeting, which will begin at 2:30 in this room. COMMISSIONER THROWER: And they must have information in by? COMMISSIONER WILLIAMS: Well, if we go that

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Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 because we take it very seriously. So, with that, please go ahead with the 30-minute presentation. MR. MCALPINE: Good afternoon. My name, as I said, is Mark McAlpine. I'm an attorney that represents D'Agostini. With me is Bob D'Agostini, president of the company, Gino D'Agostini, the vice president and one of the project managers for the sink hole project, and Jim D'Agostini, owner and vice president and general counsel. Let me just start by saying that we are here in a spirit of cooperation. We applaud your effort to address correction in the procurement process for DWSD. And if we can do anything to help you in that regard, we're happy to do it. We've made no secret of our objections to the process that we're in, however. We have been told only that the indictment is what the Board is looking at in connection with its inquiry. Our concern is that clearly the indictment does not allege that D'Agostini has done anything wrong. I'm going to go through the specific allegations in a moment. But beyond even that, it is an indictment. They are unproven allegations. There is a trial coming up this fall. Who knows whether the government is going to be able to prove its case or not. Who knows

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Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the context in which the text messages occurred. There are a lot of unknowns. And that is also at the base of our objections in going through the process based on that document. Our client is happy to answer any questions you have about the performance of this or any other project. They're proud of the work they've done for the DWSD. They've got a long distinguished relationship and they're happy to talk about it. But for purposes of today, even though we've had a number of conversations with your lawyers, the only thing we're told is that we need to focus on the indictment and the language that's in the indictment. So, that's all we did. Your lawyer admitted in federal court that we don't know the basis for the indictment. We don't know what documents the grand jury saw or the testimony, and we don't know either. That means we're left as the lawyers and the client to read the indictment and try to figure out what it means. So, that's what we've done. We did nothing more than what a transactional lawyer would do in reviewing a contract. To look at the language and see what it means. So, let's do that. Before I get there, your notice mentioned two contracts, CS1368 and CM2014. As near as we can tell,

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Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there are no allegations in the indictment regarding D'Agostini's involvement with CM2014. And, therefore, we really have no knowledge of any concerns that the Board may have with respect to that contract. We can answer questions, if you have them, but the indictment doesn't tell us anything at all about that contract as it would relate to D'Agostini. So, other than answering questions, I am not going to address that. We will address the sink hole contract. That's the specific allegation in the indictment. Now, there are about four or five things to say about the indictment. First, there's an allegation that Mr. Ferguson thought he had an agreement with D'Agostini to share work on the sink hole project 50/50. That's in a text from him. There is no involvement of D'Agostini in that chain of communication. But the more important thing, this Board responded to a FOIA request. And according to its own documents, it is clear that no 50/50 arrangement ever existed. On this project, ultimately Ferguson was paid about $2.5 million, but as a subcontractor to Inland. D'Agostini had no relationship, subcontractor or otherwise, during this project with Ferguson. I contrast that with the fact that D'Agostini, with its subs, was paid roughly $28

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Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 million. Obviously, from your own documents, you can see that there was no 50/50 sharing agreement. But go the next step, there is a suggestion in one of Mr. Ferguson's texts that somehow D'Agostini was in charge of the subcontracting process on this project. But you know, from your records, that Inland was the general contractor. L -- or I'm sorry. D'Agostini was only one of around 20 subcontractors to Inland. Ferguson, apparently, was one of them. It's also important to know that as the general contractor, Inland was the party who was deciding who was going to be awarded what contracts and for what amounts. D'Agostini, as a simple subcontractor, wouldn't be involved in that process. And more than that, wouldn't know what other subcontractors were getting, what their money, how much they were paid, what their scopes of the contract work. A subcontractor simply isn't privy to that kind of information in the hands of the general. Now, beyond that, again, if we go back to the indictment, there's no allegation that D'Agostini actually did what Ferguson thought he was getting. There is no allegation that D'Agostini paid any money to anybody for not working or for services that weren't provided. It's just simply the case that there are no

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Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 allegations of wrongdoing on D'Agostini's part. But go beyond that, again, we'll have to read the documents. So, if you read that count carefully, you see that Mr. Ferguson thinks he has some sort of a deal. He's got -- he thinks he's got some sort of way to get involved in the project. But you'll see, if you read on in the allegation, there is a point where the allegation or the indictment talks about Ferguson starting to pester Inland to be paid monies for work he didn't do because he didn't get the work he thought he was going to get on the project. And ultimately, the allegation is that Inland paid Ferguson in response to those -- that pressure. If there was a deal between D'Agostini and Ferguson, he would have been pressuring D'Agostini for payment. There was no deal. There was no approach. Now, given the fact that we can't see any part of the indictment that identifies anything we did wrong, we're left at a loss for what else we can say other than to tell you what the logical reading of the indictment means. But we're here anyway. We're going to try to answer your questions. What we're going to do is give you some background on the project. Bob D'Agostini is going to describe what it was. What were the circumstances that led to D'Agostini being hired on

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Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the project. Gino D'Agostini, who was the co-manager of the project with his now deceased father, will talk to you about what actually happened on the project. And then finally, Jim D'Agostini, general counsel, will talk about his involvement in the project and the part he played, the company played, in the investigation that led up to the indictment. And then we'll be happy to answer your questions. COMMISSIONER KENOYER: Thank you. BOB D'AGOSTINI: Good afternoon. COMMISSIONER WILLIAMS: Good afternoon. COMMISSIONER THROWER: Good afternoon. COMMISSIONER KENOYER: Good afternoon. BOB D'AGOSTINI: I'm Bob D'Agostini and I'm a principal in L. D'Agostini and Sons and I have been with L. D'Agostini and Sons for all my working years, which is over 40 years. L. D'Agostini and Sons is a family-owned business. We're the third -- on the third generation. We're a well-known business throughout the state, throughout the communities. I've been in business over 50 years. We have an impeccable reputation for integrity, for treating our clients fairly, and getting the work done in a timely and efficient method. I want to say that we work for municipalities, counties, cities throughout three

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Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 different states. And we have never been accused of any dishonesty or have we ever been debarred from procuring work. As far as with DWSD, we have a long and successful relationship. We have been working with them for at least 40 years that I can remember. We built approximately north of $250 million worth of work. While at times our relationship with DWSD has been intense in negotiating change orders or timely payments, we consider that we had a good relationship with DWSD. As I say, our company is known for taking on the toughest of jobs and getting it done and getting it done right in a timely manner. And we think that is why DWSD approached L. D'Agostini and Sons to work on the 15 Mile sink hole emergency repair project. To give you a little bit of project overview, the project involved a sudden collapse of an 11-foot diameter sewer, interceptor sewer, that was approximately 60 feet below the surface. Our first order of business, once we arrived on the job site, was to try and stabilize the areas at the sink hole and immediately adjacent to the sink hole. There was danger of losing houses. The residents had to be evacuated. We had to try and stabilize the sink hole by injecting cementateous grout, sinking, dewatering

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Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 wells to lower the water table, and placing sheet piles to support the adjacent earth. At the same time, a bypass pump system had to be in place, put in place, to relieve the interceptor, which handled up to 30 million gallons per day of sewage. At the same time, the sink hole was growing larger and larger and larger. The dynamics of the situation were just incredible. But a lot of things were happening. The bypass pumping, temporary bypass pumping, involved sinking 20 foot diameter shafts 60, 70 feet deep upstream and downstream in the damaged interceptor and placing bulk heads for the use of divers going inside and placing bulk heads. At the same time, the bypass pumping was put into effect. We had to excavate down. This sink hole is approximately 250 feet long and maybe 80 feet wide. We had to excavate the material, get down to the damaged sewer, assess the situation, and try and determine what was to be done to fix it. The repair was made and the site was back filled. Numerous utilities that were above and adjacent to the damaged utility had to also be replaced and the road surface replaced. The work was continuous 24 hours a day for five months, approximately, with only one day off, Christmas day. The bypass pumping that was put into place, just to give you an oversight about how there

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Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was an emergency repair is the bypass pumping that was put into place could only handle about -- it could only handle a portion of the flows and it would not be able to withstand or would not be able to handle pumping all of the water should we have a significant rain event. So, that's why the 24 hours a day. At the times that we had rain, we would have to evacuate the excavation until the water subsided, the temporary bypass pumping caught up, and then we would go back into the excavation inside the existing pipe and continue to do our work. Thankfully we didn't have a major rain event. And, therefore, there were no steps backward in this project. We just kept working forward and we got it done. It took us six months, but we restored the flow. And I consider that to be a minor miracle, looking back at it now. In 2006, the American Society of Civil Engineers cited this project as a project that was well managed, well engineered, and well put together and done in a very short period of time. I don't know if anybody in this room can remember, but as a kid, I remember going by the sink hole of 1978, which happened about 500 feet east of this location, and I used to go by there wondering -- you know, not a bit of repair and I would just look at it, because I've been in this

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Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 business since I was nine years old. But anyways, that project took three and a half years to complete. And there was corn fields and a two-lane road at the time. With that being said, I want to tell you that at no time did we have dealings with Ferguson or his companies on this project. No one from the city or anyone from DWSD ever approached us to apply pressure to use Ferguson on this project. And until the indictment was released, I can tell you that I wasn't even aware of Ferguson working on the project. And if you remember at the time this project was being built, there was nothing about what we know of today with the Kwame administration and what was going on. But anyways, with reference to our subcontracting on the project, we just take care of what we have to take care of as the subcontractor getting the work done. We handle our paperwork. At no time did we have access to the general contractor's paperwork, which indicated, you know, the subcontractors, the amount, or any other information. It's just not normal for a subcontractor to know what's going on with the general contractor's line of business and his dealings with the subcontractors. In fact, the only thing unique about this project is that it was an extreme emergency and that

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Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there was, you know, safety and property damage that had to be considered. And we didn't see anything that could be construed as out of the ordinary. And I'll tell you what, we were floored when we learned of the allegations and the indictment. And if the allegations and the indictment are true, we had no clue, not a whiff. We had no clue that anything like that was going on. I would like to thank you for the opportunity to present myself to you. COMMISSIONER KENOYER: Thank you very much. Did you have an additional speaker, witness? GINO D'AGOSTINI: Good afternoon, Ladies and Gentlemen. My name is Gino D'Agostini, Jr. I have been with LDS since as long as I can remember. I, as Mark eluded to earlier, I did co-manage this project with my father, the 15 Mile Road sewer. I mainly did a lot more of the night work. But him and I did overlap a lot, pretty much every day, for the time that I was out there. I worked with all the subcontractors. I interacted in meetings. There was a lot of work that was being done. So, I was from one side of the site to the other side of the site. And I can assure you that there was a lot of work being done and we were out there doing the biggest portion of it, which was

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Page 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 restoring flow to the sewer and getting the work completed. It was an extremely urgent project by nature because of the area that it facilitated and its -- other than that, though, it was a pretty typical project, particularly deep, pretty wet, but nothing that was out of our realm of expertise. During the project, I didn't have any reason to believe that there was any foul play or any on-goings other than what we were there assigned to do, which was repair the sewer in a timely manner and for the most cost effective way possible. I can also tell you that on this project, we did not have any dealings with Bobby Ferguson or his companies and that we were not responsible for hiring any of service subcontractors. We hired some other subcontractors. But Ferguson was not hired directly by us. We didn't split or share any of the work with Ferguson. There was never any deal that might have been eluded to in these text messages. But I can assure you that there was no deal between us and Ferguson to split any work. I mean, the proof is in the pudding. We did the majority of the work. We repaired the sewer and in a timely manner. We never paid anything to Ferguson on 15 Mile Road. We never had any access to any of their files, you know, any of Inland Water's files, their

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Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 subcontractors. We had access to what we had, which was our files, what was submitted to DWSD, and our dealings with DWSD and Inland, in particular. Like I said before, there was a lot of other subcontractors other than just out there and we did not hire all the subcontractors. I did see Ferguson equipment on the site. But that was nothing out of the ordinary. They're -- at the time, in 2004, I didn't know what I know now, but at that time, he was known as a, you know, respected minority contractor who was qualified to do certain work that was available at that site. And as far as I knew, as far as I can say to the best of my knowledge from my father, what he knew, that everything was on the up and up. We were there to repair a sewer, plain and simple. At no time during the project, when I was out there, did I witness anybody pressuring any of your employees or agents, anybody, my father, to have to hire Bobby Ferguson. I was never approached or pressured to hire Bobby Ferguson. We never hired Bobby Ferguson. I was interviewed by the FBI regarding this matter. They asked me if I had ever been pressured by anybody to hire Bobby Ferguson on this project, or others. I've never been approached to do any of that. I would just like to make that point clear.

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Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In closing, I would just like to say that, like my uncle described, the project was very complex and it took a lot to get it done. We're very proud of what we did out there. It's unfortunate that other people were associated with it. But, at the same time, we would still like to remember it for the great project that it was. So, thank you for your time. JAMES D'AGOSTINI: Good afternoon, Commissioners. I'm James D'Agostini. I was introduced by Mr. McAlpine earlier. I'm the general counsel of L. D'Agostini and Sons. I oversee all the legal. I hold other offices too, secretary and treasurer. I oversee the legal, financial, and sophisticated matters of the company. I review and sometimes I -- I'm principally involved in setting policy, or even exclusively. Our company has a high standard of quality work. And equal to that is our long-standing reputation of integrity. Our company follows a strict policy that we will not tolerate, engage in, or be a participant in, in any form or manner, in any unethical or wrongful conduct. We earn our business and we continue to earn it based on good work and a reputation for integrity. That goes back to the day when the company was founded by my father. He passed away a long time ago. But to this day, he stands as the most

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Page 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 hard working and honest man that I ever met. And he passed that, those values, down to all of us who run this business today. The 15 Mile project, which is obviously the focus of the indictment and this hearing, well, I wasn't directly involved with the project. You know, I was aware of what was going on and the kind of work we were doing. I did -- I would normally be called upon, for example, to review contracts, subcontracts, any issues relating to those matters. And from my perspective, this project flowed and ran just like any other one that we had ever done. Except for the fact that it was a very large complex and emergency repair, it was another construction project. And nothing unusual really happened. I mean, it could have, based on the severity of the problem we were facing, it could have resulted in a major catastrophe. But actually, the project went relatively well, exceedingly well, given those circumstances. The only issue actually, as I recall, that ever came up, that even deserved my going out there and having any type of formal meeting was the idea of site safety. You know, there had to be a pretty thorough and well thought out site safety plan for that project. It was unusual conditions that we were facing. And so, I actually attended that meeting

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Page 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 at the site to be involved in that process. But other than that, everything was quite normal. And I can tell you, unqualifiedly, that no one ever, as has been previously stated, to my knowledge, asked us to funnel any work to anybody, Mr. Ferguson or his companies, to pay off anybody, to do anything that was referenced in this indictment. In fact, I really didn't have any knowledge or even a hint of any improprieties affecting that project until we were asked to be interviewed by FBI agents. In fact, Gino has already indicated that he was interviewed and so was I. We were interviewed separately. This is back in 2010. And as I recall, pretty clearly, the FBI was looking for information to assist them in what they described as a several-year investigation by the FBI into corruption involving the city of Detroit. The interview focused almost exclusively on whether our company was being pressured by city officials, or anyone else, to hire Bobby Ferguson for the 15 Mile Road project, for example, or any other project. And, of course, I stated that I wasn't aware of any. There was no deal making, no request for immunity, no sort of asking for any kind of protection. We weren't a target of the investigation, as I was informed. In fact, from what I can tell, we weren't even a suspect of any wrongdoing. I think what

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Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 they saw was some of these text messages and they wanted to know what we knew. And we shared everything we knew, which isn't anything, because we were not aware of those matters that were discussed in those text messages. And in deed, I can say this without any -- without qualification, I understand one of the agents is actually in this room and I was led to believe that that person would corroborate anything I state here. But I don't recall a single allegation or statement made by the agents to indicate that we had, in fact, done anything wrong. That we had committed any sort of act of wrongdoing. Gino, he was interviewed as well. Both he and I went there separately without counsel. And we went freely. Now, as has already been discussed by our outside counsel, the Kilpatrick indictment does not really allege anything, from my interpretation. I read it over and over again. It doesn't really allege that we did anything wrong. There is no activity on our part that we engaged in that was wrongful. I read the indictment as just saying simply that Ferguson was trying to have his influence with the Mayor to try to get work on the 15 Mile Road project. But that never got down to us. Because, as stated, Ferguson didn't work for us. And we were not involved with any kind of

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Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 splitting or sharing of any work. The facts will clear it up fairly clearly that no work was split up on a 50/50 basis clearly. You have those records in your files just to show that very clearly. In fact, we did a FOIA request to see what you had and that's exactly the evidence that you do have. Ferguson wasn't our subcontractor. We didn't have any dealings with him on that project. And you know, according to the indictment, Ferguson was apparently unhappy with the amount of work that he got. So, he targeted Inland, whose party he had a contract with, to exact something out of them. There's just no single allegation, even by the U.S. attorney, that we did anything wrong in this whole thing. And we didn't have any knowledge, as I said earlier, of any of this going on. You know, the city has done their own investigation. You should be aware of these facts. In fact, we're baffled over why the Board would, in December, without notice to us, debar us. And even based on the facts today, consider us for barring us now. Debarring of the company is simply completely unjustified and unwarranted and it would effectively destroy a company like ours. Since our founding, more than 50 years ago, the bulk of our work has been in

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Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 public works and almost invariably, any bid for a public project, and even private projects for that matter, require disclosure of a debarment. Debarment for an alleged fraud or unethical violations would almost certainly disqualify our company of getting -or any affiliate of our company, from being awarded just about any project. We would be out of business. I'll just wrap this up to say that, you know, the city of Detroit has been one of our best customers. We feel that we've been a trusted vendor and reliable and effective vendor over the years. We want to continue that relationship. And there's no valid reason why it shouldn't be continued. We're prepared to answer any questions. Thank you. COMMISSION KENOYER: Okay. Thank you very much. I appreciate everyone's presentations today. I would also like to recognize the fact that I appreciate and recognize the tone intended for this hearing, which is non adversarial and this committee is here to merely collect facts, and we appreciate your appearance here. That ends the opening speech time. So, I would like to move into the Q and A period. It looks like Commissioner Williams is gathering a few questions here. So, perhaps I'll look to the floor to see if

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Page 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to. And this comes from the fact that paragraph 32, "On or about September 1st, 2004, after visiting the site of the sewer collapse, Kwame Kilpatrick schemed with Ferguson about how they could get Ferguson work at the site. Ferguson advised Kilpatrick that although Inland Water would be overseeing the overall project, subcontractor D'Agostini had hired all the subcontractors at the site. Kilpatrick responded Commissioner Thrower has any questions he would like to start with. COMMISSIONER THROWER: Thank you, Commissioner Kenoyer. I'm going to say I really appreciate the family coming today and giving us information as it relates to the indictment of Kilpatrick. But there are certain procedures and processes that we must follow also and certain questions that we must ask as a matter of process here. So, the question that I would ask -COMMISSIONER WILLIAMS: I was deferring with counsel. So, I'm sorry. COMMISSIONER THROWER: Yes, sir. COMMISSIONER WILLIAMS: Did you ask a question? COMMISSIONER THROWER: No. I'm getting ready

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Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 perfect, that's what I needed. Ferguson replied that Ferguson and Kilpatrick needed to meet about how Ferguson would move in, given the arrangement of company, saying we need to meet on how I move in. I got a great idea, sir." That brings about a question here. Is it true that D'Agostini hired all the subcontractors at the site? And was it ever true that D'Agostini hired any subcontractors at that site and why and who? MR. MCALPINE: Let me preface the answer by letting you know that our office, as outside counsel, has conducted investigations of the company and we've asked those questions ourselves. The answer I can tell you, and if we need more factual support from the participants we will get that, but the fact is, and this again is reflected in your documents, Inland Waters hired roughly 20 subcontractors directly. One of which was D'Agostini. D'Agostini had a series of subcontractors under it that assisted in constructing the repair portion of the project. You can essentially look at the project as the repair, which is the stabilization, the access shafts, and then the excavation repair work. That's what D'Agostini did. Inland handled all the support stuff. The pumping systems and all the other things that needed to make

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Page 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the project work, like cleaning the pipe when it was done and so forth. But as general contractor, Inland was the party that hired subcontractors. We had some under us, but the majority of the subcontractors were under Inland. COMMISSIONER THROWER: All right. COMMISSIONER KENOYER: I would like to have Commissioner Williams speak. COMMISSIONER WILLIAMS: Can you clarify, because I think it was discussed before in a formal contract Mr. D'Agostini would have reviewed. My recollection is what one of you said was that you were out on the site almost immediately because of the emergency nature. Can you describe how you got there, who asked you to the site, if you recall? MR. MCALPINE: Let me have Bob answer that question. He was one of the first representatives of the company on site. BOB D'AGOSTINI: What I can tell you in regard to that question is that I received a call, it was a Sunday morning and it was around 5:00 in the morning, and Gino's dad, and my brother Gino, Sr., was on the site. He had been called to investigate a sink hole collapse. He arrived at the site and he called me and asked me to come up and take a look at it with him

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Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 because it was a little bigger than what everybody had -- was led to believe that it was. And if my recollection is correct, I went out there, it was him and I. There were some people from Detroit Water and Sewer there. One of them was Mr. McConnell and I can't recall the others. I would be guessing. But -- and then within hours, there were lots of people there because of the -- I mean, this thing was just growing. When we were looking at it, it was as big as maybe half of this room. And then within four hours, it was twice the size of this room and it just kept growing and growing. So, there was a lot of things going on. And that's what I can tell you. COMMISSIONER WILLIAMS: If I can follow up, D'Agostini and Sons' involvement at the site was because of a contact from DWSD, not from Inland, and not from anybody in the Mayor's office initially? BOB D'AGOSTINI: Yes. As far as I know, and I was one of the first ones there, this phone call to me, the phone call to my brother, visited the site, and we looked at it. That's the first contact that we know of. COMMISSIONER WILLIAMS: Okay. COMMISSIONER KENOYER: I have one quick question for you. I realize you stated earlier that

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Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you were not aware that Ferguson was on the job. But I wondered if you can speak, in general terms, as to what type of work Ferguson was there to perform? BOB D'AGOSTINI: Honestly, I can only tell you that Ferguson's company is a construction company. I was involved on the project maybe the first two weeks. I mean, I'm sure there's things on the project that he could perform, but I can honestly tell you that I was never aware of him performing any work on the project. COMMISSIONER KENOYER: Okay. I believe that concludes the question and answer period. Do we have any other questions? COMMISSIONER WILLIAMS: No. COMMISSIONER THROWER: No. COMMISSIONER KENOYER: Okay. At this time, I would say we are going to enter the final portion of the hearing, which is the vendor summary. So, I would like to welcome anyone to give a summary. MR. MCALPINE: Just some very brief comments. As I said at the very beginning, we certainly applaud the process we see you going through. We have our concerns about timing and information being shared ahead of time and we're not abandoning those concerns. I can certainly understand why this Board would respond

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Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to the indictment. Clearly, there are some issues in there that you must be concerned with. There are contractors in different positions. D'agostini is one of those contractors who just happened to get mentioned in the indictment to give context to what the charges were being brought and how they were being described. That doesn't make those allegations true, at least as to D'Agostini. And the facts demonstrate, at least, that whatever Mr. Ferguson thought he was going to, that was not known to D'Agostini. There was no agreement, as we saw it. And your documents show that he never did get any work from D'Agostini, let alone be involved in the sharing process. The concern -- and I know this Board will do this. And I'm happy to see this kind of an effort to make sure that you don't take a rash and unfounded step. And that's why we're happy to provide you with information, and any more that you would like. But at the end of the day, we're confident that this Board would not take such a harsh and Draconian measure based on an indictment that doesn't even mention any wrongdoing by our client and where the indictment still hasn't been tested in court. So, our request is that you don't throw the baby out with the bath water. You've got a good

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Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 contractor here. They've had a long successful relationship. They got your sink hole fixed. They got it done in record time. You don't want to lose that. And they don't want to lose you as a good customer. Thank you. COMMISSIONER KENOYER: Okay. Thank you for that final statement. I would like to open it up to final comments or motions from the Board members or from the committee members. COMMISSIONER WILLIAMS: You know, let me make a comment first on the materials and the presentation, and this is purely from my standpoint. I found the candor of the three D'Agostini's who spoke refreshing, enlightening, and frankly anticipated almost every tough question I had. I guess it's a sign of a good lawyer preparing them. I would say this, that -- and I would like to phrase this in the context of a motion, which for my other two commissioners to consider, but I want to be clear that in the life of the relationship between DWSD and all of its contractors, those of us who are newly appointed to the Board and are new at this, we don't have the 50-year history. So, it's simply based on the facts that are -- have come to me to date. On that basis, I would make a formal motion, which is that this committee recommend to the full

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Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 board for its consideration at its March 14th meeting, that at the present time, the committee is not in possession of sufficient facts or other evidence which would enable it to conclude that L. D'Agostini and Sons, Inc. is not a responsible bidder. Now, this is carefully crafted by lawyers. So, you'll see there are two negatives. But that effect is, and I'll repeat it if you want, that we're not, at least in my opinion, we're not in possession of sufficient facts which would enable us to conclude that you're not a responsible candidate. So, that is my motion. COMMISSIONER KENOYER: Okay. We have a motion on the floor. Commissioner Thrower, would you like to second that motion? COMMISSIONER THROWER: Commissioner Kenoyer, Commissioner Williams, I will second the motion. COMMISSIONER KENOYER: Okay. Excellent. I would like to call a vote then. All in favor say I. COMMISSIONER WILLIAMS: I. COMMISSIONER THROWER: I. COMMISSIONER KENOYER: I. All right. So, it's the committee -- or the Hearing Committee's recommendation to the full board, which will be voted on on the 14th, that we have fully

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Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 endorsed Commissioner's motion. So, with that, I would like to conclude these hearings. Thank you all -- oh, I'm sorry. It looks like we have one additional comment. COMMISSIONER WILLIAMS: What that means, it means you don't have to be here at 1:00 next Wednesday. You may want to be here at 2:30. MR. MCALPINE: Very good. COMMISSIONER KENOYER: Okay. Thank you everyone. (The hearing was concluded at 3:00 p.m.)

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Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 LAURA KRYSTOPOWICZ, CSR-5882 Notary Public, Macomb County, Michigan. My Commission expires: July 5, 2012 I hereby certify that I reported stenographically the foregoing proceedings and testimony under oath at the time and place hereinbefore set forth; that thereafter the same was reduced to computer transcription under my supervision; and that this is a full, true, complete and correct transcription of said proceedings. CERTIFICATE OF REPORTER STATE OF MICHIGAN ) ) SS COUNTY OF MACOMB )

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