Detroit city officials are embroiled in what is being called one of the biggest local government scandals in decades, according to The Detroit Free Press, and it involves a contract with organic fertilizer maker Synagro Technologies Inc. of Houston. According to the Free Press, at least four of nine city council members, as well as staffers, are being investigated by the FBI. The city council had in November 2007 voted 5-4 for a waste management contract with Synagro.
When the FBI fingered Synagro executive James Rosendall for making payoffs to local officials, the paper said he opted to help the FBI in further surveillance and audio taping of those taking payoffs. The Free Press identified Rosendall as vice president of marketing for Synagro and said the company announced his suspension June 30. Synagro had not returned calls at press time. Another Synagro representative, Rayford Jackson, is also reportedly under investigation.
Already embattled Detroit Mayor Kwame Kilpatrick has denied any involvement in the Synagro matter. The City Council, which now has its own problems, has been trying to oust Kilpatrick in a whistle-blowing scandal.
In the meantime, John Clark, chief of staff of Council President Ken Cockrel Jr., has reportedly resigned over the matter. However, Cockrel did not vote for the project. Sources told the paper that some of those taking payoffs took relatively small amounts. Clark allegedly took $4,000.
The Synagro contract was worth almost $47 million per year, according to The Detroit News, which said the Council’s other alternative was to pay $52 million per year and run a 40-year old incinerator that was going to require $125 million in federally-mandated upgrades. Synagro was reportedly planning to burn 60 percent of the sludge using fluid bed incineration, with the remainder being treated and applied by Michigan farmers as fertilizer.
The formerly public Synagro was taken private last year after it was bought by The Carlyle Group (GM March 12, 2007, p. 11) for $772 million, including $310 million in debt. At the time, Synagro said it was the only national company focused exclusively on the estimated $8 billion organic residuals industry. Synagro said it serves 600 municipal and industrial and wastewater treatment accounts with operations in 37 states and the District of Columbia. Net income applicable to stock for the year ending Dec. 31, 2006, was $8 million ($.10 per share) on sales of $345.8 million.