PLAINTIFFS’ RICO CASE STATEMENT PURSUSUANT …media.mlive.com/newsnow_impact/other/Snyder RICO allegations.pdf · plaintiffs’ rico case statement pursusuant to the local rules’

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PLAINTIFFS’ RICO CASE STATEMENT PURSUSUANT TO THE LOCAL RULES’ STANDING ORDER IN CIVIL RICO CASES

Plaintiffs hereby file their RICO Case Statement as required by Local Rule 11.1 as follows:

Responses

1.! The alleged conduct that is claimed to be in violation of 18 U.S.C. 1962 (a), (b), (c)

and/or (d).

Plaintiffs assert claims for violations of 18 U.S.C. Sec. 1962 (c) and (d). The individual

RICO Defendants and Enterprise Actors named herein formed an association in fact

enterprise with the intent and purpose of balancing the Flint City budget through a pattern of

racketeering activity. This association in fact enterprise misrepresented the suitability of the

toxic Flint River water to Flint’s residents for approximately a two year period, and billed

Flint’s residents at rates that were the highest in the nation for toxic water that was unsuitable

for use. By collecting an estimated $50 million in revenue during the two year period Flint

was connected to the Flint River, Flint’s City budget deficit was reversed and resulted in a

3.3 million dollar surplus as of June 30, 2015.

Furthermore, the individual RICO defendants conspired to balance Flint City budget

through the sale of free toxic Flint River water known to be unsuitable for any use and

untreated pursuant established Federal, State and local water quality standards. The

individual RICO defendants and enterprise actors, named herein, formed the associate in fact

enterprise to further the conspiracy and ultimately balance the Flint City budget. For over

two years, this enterprise carried out numerous and repeated acts that furthered the

conspiracy many of which, qualify as predicate acts under the Civil RICO statute, giving rise

to RICO liability under 18 U.S.C. Sec. 1962 (c) and (d). The specific conduct and predicate

4:16-cv-11247-PDB-APP Doc # 1-1 Filed 04/06/16 Pg 1 of 30 Pg ID 119

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acts carried out by the RICO defendants and enterprise actors are set forth below in greater

detail in their applicable sections pursuant to Local Rule 11.1.

2.! The identity of each defendant and the alleged misconduct and basis of liability for each. Defendant Richard Snyder is the Governor of Michigan, sued in his individual capacity.

He was at all times acting within and outside the scope of his employment and/or authority under

color of law. Governor Snyder participated in, directed and facilitated the fiscal scheme to balance

Flint’s budget through the sale of free but toxic Flint River water. Defendant Snyder violated

clearly established Constitutional rights of Plaintiffs and the putative class.

Defendant Dennis Muchmore (“Muchmore”) was Governor Snyder’s Chief of Staff, and

at all times relevant hereto was acting within and outside the scope of his employment and/or

authority under color of law. Muchmore as the Governor’s Chief of Staff had numerous

correspondences with Snyder and others that provided Snyder ongoing and actual notice of the

continuing problems in Flint regarding the toxic water, which resulted in lead poisoning and

property damage to the residents caused by the fiscal deficit in Flint. Defendant Muchmore was

an integral actor in the scheme that intentionally defrauded, misrepresented and falsified

information and warning signs relating to the property and financial affairs of Flint as it affected

its citizenry, by planning, directing, coordinating and facilitating the State’s insufficient response

to the free but toxic Flint River water and failing to warn and protect the residents of the City of

Flint of the consequences of the toxic water regarding damage to their property and businesses.

Defendant Ed Kurtz served Governor Snyder as Flint’s Emergency Manager from August

of 2012, until July of 2013. Kurtz facilitated the switch to the Flint River as a primary water

source despite knowledge is was unsuitable for use and that unable to be properly treated via

Flint’s water treatment plant and budget constraints.


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Defendant Darnell Earley (“Earley”) was Governor Snyder’s Emergency Manager in

Flint from November 1, 2013, through January 12, 2015, and at all times relevant hereto was

acting within and outside the scope of his employment and/or authority under color of law. He is

sued in his individual capacity. Earley made the decision to switch to Flint River water on an

impossibly reckless timeframe, preventing Flint’s water treatment plant from properly analyzing

and treating a new source of corrosive water. Defendant Earley was an integral actor in an

enterprise that defrauded, misrepresented and falsified information and warning signs relating to

the property and financial affairs of Flint as it affected its citizenry. Earley made false and/or

misleading statements representing that the water was safe to drink as it poisoned thousands.

Defendant Earley violated clearly established constitutional rights of Plaintiffs and the Putative

class.

Defendant Gerald Ambrose (“Ambrose”) was Governor Snyder’s Emergency Manager

from January 13, 2015, until April 28, 2015, and was at all times relevant hereto acting within

and outside the scope of his employment and/or authority under color of law. He is sued in his

individual capacity. Defendant Ambrose was also an employee of the state as a financial advisor

for Flint’s financial emergency from January, 2012, until December, 2014. He was involved in

and directed the state’s decision to transition Flint from safe, treated water on an impossibly

aggressive timeline to corrosive, untreated water from an unprepared water treatment plant.

Defendant Ambrose was an integral actor in an enterprise that defrauded, misrepresented and

falsified information and warning signs relating to the property and financial affairs of Flint as it

affected its citizenry. When the City of Flint through its City Council attempted to disconnect

from the Flint River by a vote of 7-1, Ambroes vetoed the vote despite knowledge the Flint River

water was causing toxic condition in Flint and unsuitable for use. He also made false and/or


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misleading statements representing that the water was safe to drink as it poisoned thousands.

Defendant Ambrose violated clearly established constitutional rights of Plaintiffs and the putative

class.

Defendant Liane Shekter Smith (“Shekter Smith”) was at all relevant times Chief of the

Office of Drinking Water and Municipal Assistance for MDEQ, acting within and outside the

scope of her employment and/or authority under color of law, until she was removed from her

position on October 19, 2015. Defendant Shekter Smith was grossly negligent in that she

knowingly participated in, approved of, and caused the decision to transition Flint’s water source

to a highly corrosive, inadequately studied and treated alternative. She was an integral actor in an

enterprise that defrauded, misrepresented and falsified information and warning signs relating to

the property and financial affairs of Flint as it affected its citizenry. She disseminated false

statements to the public that led to the continued consumption of dangerous water despite

knowing or having reason to know that the water was dangerous. Defendant Shekter Smith

violated clearly established constitutional rights of Plaintiffs and the putative class.

Defendant Daniel Wyant (“Wyant”) was at all relevant times the Director of MDEQ until

the Governor accepted his resignation on or about December 29, 2015, acting within and outside

the scope of his employment and/or authority under color of law. Wyant participated in, directed,

and oversaw the MDEQ’s repeated violations of federal water quality laws, the failure to properly

study and treat Flint River water, and the MDEQ’s program of systemic denial, lies, and attempts

to discredit honest outsiders. He was an integral actor in an enterprise that defrauded,

misrepresented and falsified information and warning signs relating to the property and financial

affairs of Flint as it affected its citizenry. He disseminated false statements to the public that led

to the continued consumption of dangerous water despite knowing or having reason to know that


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the water was dangerous. Defendant Wyant violated clearly established constitutional rights of

Plaintiffs and the putative class.

Defendant Stephen Busch (“Busch”) was at all relevant times the District Supervisor

assigned to the Lansing District Office of the MDEQ and was acting within and outside the scope

of his employment and/or authority under color of law. He participated in MDEQ’s repeated

violations of federal water quality laws, the failure to properly study and treat Flint River water,

and the MDEQ’s program of systemic denial, lies, and attempts to discredit honest outsiders. He

personally falsely reported to the EPA that Flint had enacted an optimized corrosion control plan,

providing assurances to Plaintiffs and the putative class that the water was safe when he knew or

should have known that these assurances were false. He was an integral actor in an enterprise that

defrauded, misrepresented and falsified information and warning signs relating to the property

and financial affairs of Flint as it affected its citizenry. Defendant Busch violated clearly

established constitutional rights of Plaintiffs and the putative class.

Defendant Patrick Cook (“Cook”) was at all relevant times Water Treatment Specialist

assigned to the Lansing Community Drinking Water Unit of the MDEQ and was acting within

and outside the scope of his employment and/or authority under color of law. Cook is individually

liable because he, as the Lansing Community Drinking Unit manager, in a grossly negligent

manner, participated in, approved, and/or assented to the decision to allow Flint’s water to be

delivered to residents without corrosion control or proper study and/or testing. He was an integral

actor in an enterprise that defrauded, misrepresented and falsified information and warning signs

relating to the property and financial affairs of Flint as it affected its citizenry. Defendant Cook

violated clearly established constitutional rights of Plaintiffs and the putative class.

Defendant Michael Prysby (“Prysby”) was at all relevant times Engineer assigned to


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District 11 (Genesee County) of the MDEQ and was acting within and outside the scope of his

employment and/or authority and was acting within the scope of his employment and/or authority

under color of law. Prysby is individually liable because he, as the Engineer assigned to District

11, participated in, approved, and/or assented to the decision to switch the water source, failed to

properly monitor and/or test the Flint River water, and provided assurances to Plaintiffs and the

putative class that the Flint River water was safe when he knew or should have known those

statements to be false. He was an integral actor in an enterprise that defrauded, misrepresented

and falsified information and warning signs relating to the property and financial affairs of Flint

as it affected its citizenry. Defendant Prysby violated clearly established constitutional rights of

Plaintiffs and the Putative class.

The individuals affiliated with The City of Flint that participated in the bad acts set forth

herein and were a part of the association in fact enterprise include. (1) The Mayor of Flint Dayne

Walling (2) Howard Croft, Director of Public Works (3) Michael Glasgow, employee of the City

of Flint and Water quality Supervisor at the Flint water treatment Plant.

(a)!Dayne Walling represented to Flint residents on April 25, 2014 that the City

of Flint’s water from the Flint River was safe for use and of high quality while

he knew or should have known that proper corrosion controls had not been

implemented.

(b)!Howard Croft was the director of public works for the City of Flint and

distributed water from Flint’s known outdated and unprepared Water

Treatment Plant to further the fiscal scheme to balance Flint’s budget.

Engineering reports from defendants ROWE and LAN were provided to Croft

and his department, yet the required steps set forth in those reports were


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knowingly never implemented while Flint River water was distributed to Flint

residents anyway.

(c)!Michael Glasgow was the water quality supervisor for Flint’s water treatment

plant and knew that the required water treatment protocols set forth by

accepted water quality standards and the engineering reports produced by

defendants LAN and ROWE had not been implemented prior to distributing

Flint River water starting on April 25, 2014. Glasgow wrote correspondence

to MDEQ and Flint’s Emergency Manger stating this to be true, but nothing

was done to address these failures for two years until a State of Emergency

was declared and the City had become a toxic disaster zone.

Defendant Bradley Wurfel (“Wurfel”) was at all relevant times the Director of

Communications for MDEQ and was acting within and outside the scope of his employment

and/or authority under color of law. Wurfel resigned from his position on December 29, 2015.

Wurfel repeatedly denied the increasingly obvious disaster as it unfolded and attempting to

discredit the only reliable people in the picture. Wurfel repeatedly made public statements that

created, increased, and prolonged the risks and harms facing Plaintiffs and the putative class.

Defendant Prysby was an integral actor in an enterprise that defrauded, misrepresented and

falsified information and warning signs relating to the property and financial affairs of Flint as it

affected its citizenry. Defendant Prysby violated clearly established constitutional rights of

Plaintiffs and the Putative class

Defendant Linda Dykema, was director of the MDHHS Division of Environmental

Health, acting within and outside and outside her scope of employment and color of authority and

is sued in her individual capacity. Dykema continuously refused to turn over the blood lead levels


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regarding seasonal blood lead levels as compared to Flint and other cities in Michigan. Dykema

continuously refused to respond to FOIA requests and ignored the studies of Dr. Hanna-Attisha’s

and Miguel Del Toral. Dykema was an integral actor in the government scheme that defrauded,


affairs of Flint as it affected its citizenry.

Defendant Eden Wells (“Wells”), was at all relevant times Chief Medical Executive

within the Population Health and Community Services Department of the MDHHS and was

acting within and outside the scope of her employment and/or authority under color of law and is

sued in her individual capacity. Wells participated in, directed, and/or oversaw the department’s

efforts to hide information to save face, and to obstruct the efforts of outside researchers. Further,

Wells knew as early as 2014 of problems with lead and legionella contamination in Flint’s water

and instead of fulfilling her duty to protect and notify the public, she participated in hiding this

information. Wells violated state law by working only part time in her position as Chief Medical

Executive. Defendant Wells was an integral actor in an enterprise that defrauded, misrepresented

and falsified information and warning signs relating to the property and financial affairs of Flint

as it affected its citizenry. Defendant Wells violated clearly established constitutional rights of

Plaintiffs and the putative class.

Defendant Nick Lyon was at all relevant times Director of MDHHS and was acting within

and outside the scope of his employment and/or authority under color of law and is sued in his

individual capacity. He participated in, directed, and/or oversaw the department’s efforts to hide

information regarding the increased blood lead levels in the children of Flint to save face, and to

obstruct and discredit the efforts of outside researchers. He knew as early as 2014 of problems

with lead and legionella contamination in Flint’s water and instead of fulfilling his duty to protect


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and notify the public, he participated in hiding this information. Lyon violated state law by hiring

and supervising a part time employee as Chief Medical Executive. Defendant Lyons was an

integral actor in an enterprise that defrauded, misrepresented and falsified information and

warning signs relating to the property and financial affairs of Flint as it affected its citizenry.

Defendant Lyons violated clearly established constitutional rights of Plaintiffs and the putative

class.

Defendant Nancy Peeler was at all relevant times a MDHHS employee in charge of its

childhood lead poisoning prevention program, acting within and outside the scope of her

employment and/or authority under color of law and is sued in her individual capacity. She

participated in, directed, and/or oversaw the department’s efforts to hide information regarding

the increased blood lead levels in the children to save face, and actively sought to obstruct and

discredit the efforts of outside researchers. Even when her own department had data that verified

outside evidence of a lead contamination problem, she continued trying to generate evidence to

the contrary. Defendant Peeler was an integral actor in an enterprise that defrauded,


affairs of Flint as it affected its citizenry. Defendant Peeler violated clearly established

constitutional rights of Plaintiffs and the putative class.

Defendant Robert Scott was at all relevant times Data Manager for MDHHS’s Healthy

Homes and Lead Prevention Program, acting within and outside the scope of his employment

and/or authority under color of law and is sued in his individual capacity. He participated in,

directed, and/or oversaw the department’s efforts to hide information to save face, and actively

sought to obstruct and discredit the efforts of outside researchers. Even when his own department

had data that verified outside evidence of a lead contamination problem, he continued trying to


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generate evidence to the contrary. He also served a key role in withholding and/or delaying

disclosure of data that outside researchers provided that was needed to protect the people of Flint.

Defendant Scott was an integral actor in an enterprise that defrauded, misrepresented and falsified

information and warning signs relating to the property and financial affairs of Flint as it affected

its citizenry. Defendant Scott violated clearly established constitutional rights of Plaintiffs and

the putative class.

Rowe Engineering Inc. is a Michigan corporation with its principal place of business in

Flint Michigan. Rowe is a Defendant in this action based on intentionally providing negligent

professional engineering services in preparing Flint’s water treatment facility to treat water from

the Flint River. On June 29, 2013, Engineer Defendant Rowe met with representatives of Flint,

Genesee County Drain Commissioners Office and the MDEQ to discuss:

a.! using the Flint River as a water source;

b.! the ability to perform the necessary upgrades to the Flint Water Treatment Plant;

c.! the ability to perform quality control

d.! the ability for Flint to provide water to Genesee County;

e.! the ability to meet an April or May 2014 timeline; and

f.! Developing a cost analysis.

According to incomplete meeting minutes, “the conversation was guided with focus on

engineering, regulatory, and quality aspects…” of the items previously referenced and the

following determinations were made:

a.! The Flint River would be more difficult to treat, but was viable as a source;

b.! It was possible to engineer and construct the upgrades needed for the treatment

process;


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c.! It was possible to perform quality control “with support from LAN engineering

which works with several water system around the state, quality control count be

addressed[;]”

d.! The Flint Water Treatment Plant did not have the capacity to treat and distribute

sufficient water to meet the needs of Flint and Genesee County;

e.! There were many obstacles to overcome, but completion by the April or May 2014

timeline was reachable;

f.! The next steps were for Rowe to present Flint with a proposal that would include

engineering, procurement, and construction needs for the project along with cost

estimates.

g.! The ability to meet an April or May 2014 timeline; and

h.! Developing a cost analysis.

This 2013 meeting was actually a follow up analysis to a previously conducted Flint River

viability study performed by Rowe in 2011. The objectives and conclusions offered by Rowe and

accepted by the defendants blatantly contradicted Rowe’s previous 2011 feasibility study that

expressed major concerns that refuted the proposition that the Flint River could be utilized as a

viable primary water source. It was therefore known by all government representatives at the time

of the 2013 Rowe meeting that Rowe’s follow up report was contradictory to their original

conclusions, that substantial steps were needed to be taken before distributing Flint River water

to Flint residents would be an acceptably safe endeavor. The 2013 Rowe report set forth an

apparent plan for upgrading the Flint water treatment plant for purposes of treating the Flint River

water that would be distributed. Rowe’s plan emphasized the need to implement corrosion

controls and the continued involvement of LAN Engineering/Rowe to maintain the system.


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The follow up report and plan presented by Rowe, and adopted by the government

defendants, was nothing more than a piece of paper from an “expert” source to provide backing

and legitimize the defendants’ financially motivated decision to disconnect from the pricier

DWSD water source to the cheaper and toxic Flint River. The necessary steps provided for in the

Rowe / LAN report were never adequately implemented , and in some cases not implemented at

all prior to connecting to the Flint River on April 25, 2014. By taking no substantial steps to

combat corrosion and lead contamination prior to connecting to the Flint River on April 25, 2014,

Rowe, LAN, MDEQ, Flint government representatives, and all of the individually named

Defendants knew as a matter of fact that they were delivering water that exposed the entire city

of Flint to toxic conditions.

Rowe, through its agents, servants and employees, was an integral actor in the government

scheme that defrauded, misrepresented and falsified information and warning signs relating to

the property and financial affairs of Flint as it affected its citizenry. Rowe maintains an office in

Flint, Genesee County, Michigan; regularly conducts business in Flint, Michigan; and has

committed torts in Flint, Michigan, which are among the basis for personal jurisdiction under

MCL 600.705. Rowe, through its agents, servants and employees, was an integral actor in the

government scheme that defrauded, misrepresented and falsified information and warning signs

relating to the property and financial affairs of Flint as it affected its citizenry.

Defendant LAN is a Texas corporation with its principal place of business in Texas.

LAN is a defendant in this action based on its role of providing grossly negligent and/or reckless

professional engineering services in preparing Flint’s water treatment facility to treat water from

the Flint River.

LAN maintains an office in Flint, Genesee County, Michigan, regularly conducts business


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in the Eastern District of Michigan, and has committed a tort in the State of Michigan, among

bases for personal jurisdiction under MCL 600.705, and each of these bases extends to this

District specifically. LAN, was hired by the Enterprise Actors MDEQ, City of Flint, and RICO

defendant Emergency Managers to render engineering services. LAN, through its agents,

servants and employees, was an integral actor in the government scheme that defrauded,


affairs of Flint as it affected its citizenry.

VEOLIA NORTH AMERICA, LLC: Defendant Veolia North America, LLC (“Veolia”)

is a Delaware corporation with its principal place of business in Illinois. Veolia is a Defendant in

this action based on providing grossly negligent and or reckless professional engineering services

in reviewing Flint’s water system and declaring the water safe to drink. Veolia maintains an office

in Westland, Wayne County, Michigan, transacts business in the State of Michigan, including the

business it performed for the City of Flint in 2015.

Plaintiffs have a reasonable, good faith basis to believe that there are other

wrongdoers who will be identified during the course of discovery, including individuals who have

directed, approved, and/or known about the wrongful and unlawful conduct complained of.

3.! List the alleged wrongdoers, other than the defendants listed above, and state the

alleged misconduct of each wrongdoer:

The State of Michigan directs, controls, and operates the Michigan Department of

Environmental Quality (“MDEQ”) and the Michigan Department of Health and Human Services

(“MDHHS”). The State of Michigan also stood in the shoes of the City of Flint at all times

relevant hereto, having entirely absorbed the authority of the City of Flint.

Michigan Department of Environmental Quality (“MDEQ”) is the state-agency


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responsible for implementing safe drinking water laws, rules, and regulations in Michigan, and

Flint specifically. The MDEQ failed to require corrosion control for Flint River water in violation

of the federal Lead and Copper Rule, misled the federal EPA, conducted illegal and improper

sampling of Flint’s water, lied to the public about the safety of Flint’s water, and attempted to

publicly discredit outside individuals that offered evidence of the water’s contamination. The

MDEQ, through its agents, servants and employees, was an integral actor in an enterprise that

defrauded, misrepresented and falsified information and warning signs relating to the property

and financial affairs of Flint as it affected its citizenry. The MDEQ was consistently more

concerned with satisfying its own distorted perceptions of technical rules than carrying out its

duty to the people of Flint, and did so to carry out the State and Local government’s financially

motivated cost-cutting scheme.

Michigan Department of Health and Human Services (“MDHHS”) is the state agency

responsible for public health. Instead of protecting public health, MDHHS deliberately hid dat

confirming an increase in lead poisoned infants in Flint that would have revealed the public health

crisis. MDHHS, through its agents, servants and employees, was an integral actor in an enterprise

that defrauded, misrepresented and falsified information and warning signs relating to the

property and financial affairs of Flint as it affected its citizenry. MDHHS’s failure to properly

analyze data led it to conclude that there was no increase in lead contamination in Flint’s children,

and it resisted and obstructed the efforts of outside researchers and the county health department

to determine whether that was the case.

The City of Flint is a municipal corporation, who as described above, was financially

controlled by The State of Michigan via an “Emergency Manger” since 2011. Despite being

controlled by the State and Governor via “Emergency Managers”, The City of Flint through


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numerous employees that are named RICO defendants herein actively participated in the scheme

by distributing water known to be untreated and toxic to Flint’s homes and residents, and

repeatedly reassured Flint’s residents that the Flint River water was suitable for use.

4.! The Identity of the alleged victims and the manner in which each victim was

allegedly injured. 1.! Plaintiffs are residents, property-owners and business owners who at all relevant times

from April 2013, when Emergency Manager Kurtz decided to not renew Flint’s contract with

DWSD, consistent with the Governor and all other Individual Enterprise Defendants’ over-arching

fiscal scheme to balance the budget at all costs in conscious disregard of the property, and

prosperity of the citizens of Flint. When the Flint River came online in April, 2014, the plaintiffs

and the putative class and their property were immediately exposed and re-exposed to the toxic

water. This has continued unabated, in disregard for all reports, warnings and notices that the

water was unfit for any use, up and until the Mayor announced that water-billing was to be

suspended in March of 2016. Therefore, plaintiffs were fraudulently induced to pay for toxic Flint

River water for a span of approximately two years causing property damage, loss in property value,

and the cost of toxic water that average over $900/year per plaintiff.

2.! LAWRENCE WASHINGTON JR, TAYLOR WASHINGTON, MORGAN

WASHINGTON, CLOE WASHINGTON, MADISON WASHINGTON, LAWRENCE

WASHINGTON, CHRISTA GODIN, ANGEL ARRAND, AUSTON ARRAND, WILLIAM

ZIETZ III, DEBORAH SMITH, SHANIKA MIXON, ABY NDOYE and ROBIN DAVIS

5.! A description of the pattern of racketeering activity or collection of unlawful debts alleged for each RICO claim: The following predicate acts by the RICO defendants constitute violations of 11 USC 152

(7), which states that “in a personal capacity or as an agent or officer of any person or corporation,


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in contemplation of a case under Title 11 by or against the person or any other person or

corporation, or with the intent to defeat the provisions of Title 11, knowingly and fraudulently

transfers or conceals any of his property or the property of such other person or corporation,” and

violations of 11 USC 152(8), which states that “after filing of a case under Title 11 or in

contemplation thereof, knowingly makes a false entry in any recorded information (including

books, documents, records, and papers) relating to the property or financial affairs of the

debtor……”

a.! After Governor Snyder’s signing of PA 436 in 2012, addressing the Flint budgetary crisis, Flint’s, state run government had a “choice” of four options to remedy the fiscal crisis: (i) a consent agreement, (ii) Chapter 9 municipal bankruptcy, (iii) mediation or (iv) the appointment of an Emergency Manager with similar broad powers to the prior statute’s Emergency Manager.

b.! Under PA 436, Flint had to contemplate filing a Chapter 9 municipal bankruptcy petition. The government contemplated filing a chapter 9 bankruptcy petition but quickly rejected this option and opted to appoint an Emergency Manager in furtherance of the over-arching fiscal scheme to balance the budget at all costs in conscious disregard of the health, property, and prosperity of the citizens of Flint. This was the first of two predicate acts.

c.! Once the Governor appointed an Emergency Manager, instead of filing a Chapter 9 municipal bankruptcy, The Emergency Manager committed the second predicate. Specifically, the Emergency Manager had to choose between the same three remaining options: (i) a consent agreement, (ii) a Chapter 9 municipal bankruptcy or (iii) mediation to remedy Flint’s fiscal crisis. The Emergency Manager contemplated and rejected these options and instead he and his enterprise chose to deal with Flint’s “Financial Emergency” by, inter alia, doing prohibited acts under bankruptcy Sec. 152(7), fraudulently transferring assets, and/or (8), fraudulently misrepresenting assets Emergency Manager opted to conceal and mitigate the financial emergency by fraudulently switching to an unsafe and free water source for the two year interstice when they terminated the water contract with DWSD in March 2013. In so doing, by selling an estimated $50 million of toxic water to Flint residents, as part of his budget balancing scheme.

d.! This was fraudulent in that all knew they were switching to the unsafe, contaminated and toxic but free water source from the Flint River in furtherance of the over-arching fiscal scheme to balance the budget at all costs in conscious disregard of the health, property, and prosperity of the citizens of Flint.


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e.! This acts were done in order to prevent the irate citizens of the City of Flint from knowing that the money cost-cutting plan to save to balance the budget and alleviate the City’s Financial Emergency was to give them toxic water for two years.

f.! If the City and citizens of Flint had known the truth about the toxicity of the Flint River water, they could have filed involuntary bankruptcy petition against the Municipality of Flint under the protections of a Chapter 9 bankruptcy proceeding and the supervision of a bankruptcy judge forced the City of Flint, the municipal debtor, to stop balancing the Flint books by selling them poisoned drinking water. Involuntary bankruptcy petitions can be brought against municipalities.

Mail Fraud: The predicate acts by the Individual RICO defendants constituting mail fraud

in violation of 18 U.S.C. § 1341 which says “Whoever, having devised or intending to devise any

scheme or artifice to defraud………..for the purpose of executing such scheme or artifice or

attempting so to do, places in any post office or authorized depository for mail matter, any matter

or thing whatever to be sent or delivered by the Postal Service, any such matter or thing, shall be

fined under this title or imprisoned not more than 20 years, or both” include:

a.! The City of Flint has, and continues to mail water bills to Flint residents which

fraudulently misrepresent that Flint is providing its residents with safe, clean water in exchange for consideration. These bills, delivered by way of the U.S. mail, constitute mail fraud by the City of Flint. Flint continues to mail water bills to this day despite the declared state of emergency in an attempt to refute liability in this matter.

b.! The Flint Department of Public Works through Director Howard Croft issued a

statement in a press release that was known to be false and therefore fraudulently represented to the public on April 25, 201, “ The test results have shown that our water is not only safe, but of the high quality that Flint customers have come to expect. We are proud of that end result.” This statement was made at a time that the City of Flint was aware no corrosion controls were in place and that the Flint water treatment plant was not upgraded and therefore ready to distribute water to Flint residents.

c.! On January 2, 2015, the City of Flint mailed a notice to its water customers

indicating that it was in violation of the Safe Drinking Water Act due to the presence of trihalomethanes, which was a product of attempting to disinfect the water. It was claimed that the water was safe to drink for most people with healthy immune systems.


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d.! Bradley Wurfel, MDEQ Director of Communications, issued a press release on

September2, 2015 stating “ WE want to “[W]e want to be very clear that the lead levels being detected in Flint drinking water are not coming from the treatment plant or the city’s transmission lines… The issue is how, or whether, and to what extent the drinking water is interacting with lead plumbing in people’s homes….the results reported so far fail to track with any of the lead sampling conducted by the city. In addition, Virginia Tech results are not reflected by the blood lead level testing regularly conducted by the state department.”

e.! Bradely Wurfel of MDEQ again fraudulently misrepresented the quality of Flint’s

Water supply through publically disseminated untrue statements in a local newspaper by stating “Another Wurfel hit job on Professor Edwards and his team occurred on September 9, 2015, when he told a reporter: “[T]he state DEQ is just as perplexed by Edwards’s results as he seems to be by the city’s test results, which are done according to state and federal sampling guidelines and analyzed by certified labs.” This statement was made with full knowledge that at least one EPA employee had told MDEQ that its testing was not being conducted according to federal guidelines.

f.! In a September 17, 2015 letter, Defendant Wyant (Director of MDEQ) wrote a letter

in response to an inquiry from various legislators, disavowing any responsibility for reacting to Mr. Del Toro’s alarm- sounding memorandum: “With respect to the draft memo referenced in your letter, the MDEQ does not review or receive draft memos from the USEPA, nor would we expect to while it is a draft.” This statement was untrue as MDEQ had undeniably reviewed expert Miguel Del Toro’s report that charged MDEQ with highly credible evidence of notice of the toxic threats facing Flint residents as a result of their inadequate water system source and infrastructure. (para 266 complaint)

g.! On September 28, 2015, and after a significant uptick in infants in Flint have shown

elevated blood lead levels, Bradley Wurfel issues another public statement declaring Flint’s water to be safe.

Wire Fraud: The predicate acts by the Individual RICO defendants constituting wire

fraud in violation of 18 U.S.C. § 1343 (Fraud by Wire, Radio or Television) which says, “Whoever,

having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or

property by means of false or fraudulent pretenses, representations, or promises, transmits or

causes to be transmitted by means of wire, radio, or television communication in interstate or

foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing


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such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or

both” include:

a.! Plaintiffs incorporate all of the facts and acts set forth in sections i-vii under the mail fraud section as these statements and misrepresentations were also disseminated through wire-based communication mediums and resulted in fraudulent misrepresentations to Flint residents and the general public.

b.! On April 25, 2014, The Mayor of Flint Dayne Walling, who was subject to the

Emergency Manager’s control, went on TV to alert the public of the switch to the Flint River as the City’s primary water source, and in doing so touted the quality of the source when knowing the City’s water treatment facility had not had any of the necessary corrosion controls implemented.

c.! Furthermore, as property owners in Flint were receiving fraudulent water bills for

water that the City, State and private defendants each had knowledge was contaminated, many of them paid their bills online through the City of Flint website with credit cards or ACH or by returning the bill by mail with an enclosed check that was processed by their banks.

d.! This continued from the date of the original switch from the Detroit Water and

Sewer Department to the Flint River up and until the Mayor suspended billing on March 9, 2016 all in furtherance of the over-arching fiscal scheme to balance the budget at all costs in conscious disregard of the health, property, and prosperity of the citizens of Flint.

All of the above predicate acts relate to the enterprise described herein and common plan of

balancing Flint’s budget through the free Flint River despite the fact it was known to be toxic and

unsuitable for use. The enterprise continually fraudulently misrepresented that the Flint River

water was suitable for use, thereby inducing the plaintiffs to rely on , use and pay for toxic water

at rates that were the highest in the nation, and induced the plaintiffs to use the Flint River water

causing substantial property damage and other financial harm. In all, the City of Flint, under the

control of an Emergency Manager acting on behalf of the Governor, collected an estimated 50

million dollars in water bills while connected to the Flint River, and allowed for a budget deficit

of approximately 19 million dollars to be turned into a positive surplus of 3.3 million dollars in


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June of 2015. This budget balancing was done on the backs of Flint’s residents, who paid for

untreated toxic water that ruined their homes, property, and businesses.

6.! A detailed description of the alleged enterprise for each RICO claim:

The individual enterprise Defendants acted as an enterprise within the meaning of 18

U.S.C. 1961(4) which defines “enterprise” as “any individual, partnership, corporation,

associations or other legal entity, and any union or group of individuals associated in fact and

although not a legal entity”

a.! See Section 2 setting forth the individual RICO Individual defendants and section 3 herein naming the Enterprise Actors (who cannot be named as defendants) that jointly formed an association in fact enterprise.

b.! The Individual RICO defendants here are employees and/or agents of various levels of State and Local government in the State of Michigan. Together, and through their various government roles formed an association in fact enterprise. The enterprise consisting of the individual RICO defendants named herein and the enterprise actors set forth in Section 3, used their authority and power to develop and carry out the fiscal scheme to balance Flint’s budget through the sale of freely obtained, but toxic, Flint River water. The Flint River was known to be unsuitable for use and expensive to properly treat, so the enterprise had to involve individuals charged with regulating water quality, health, and safety to execute the switch to the Flint River without resistance. Hence why the enterprise involved individuals from various health and regulatory bodies in Michigan’s state and local government including MDEQ and MDHSS.

c.! The association in fact enterprise described herein did not employ any of the

individual RICO defendants.

d.! The defendants were employees of various government agencies and or government officers of the State of Michigan, as well as retained private experts that were hired by Emergency Managers and used to manufacture false reports that supported the Flint River’s viability as a primary water source. These they acted outside the scope of their duties as government officials and/or employees and formed an association in fact enterprise. The individual defendants’ roles and the authority conferred to them through their positions at various government positions allowed them to advance the fiscal scheme of the association in fact enterprise they formed that sought to connect to the unsuitable Flint River as a primary water source to effectively balance the Flint City Budget.


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e.! The RICO defendants are separate and distinct from the association in fact enterprise they formed. Their roles originate from different positions, employers, and areas of expertise.

f.! N/A as set forth in section (e).

7.! State whether you allege and describe in detail how the pattern of racketeering activities and the enterprise are separate or have merged into one entity:

The government entities named herein including The State of Michigan, MDEQ, and

MDHSS have an ascertainable structure separate and apart from the pattern of racketeering activity

of their separate and distinct enterprise described herein. The individual defendants named herein

that are employed by these various government agencies forced an alliance and created an

enterprise that engaged in racketeering activity as set forth in the applicable section herein.

In addition, the private engineering defendants including Rowe Engineering, LAN and

Veolia have an existing business structure that upon information and belief provides engineering

services that do not relate, and therefore are separate, from the claims and racketeering activity set

forth herein.

8.! The alleged relationship between the activities of the enterprise and the pattern of racketeering activity, including a description of the manner in which the racketeering activities differs, if at all, from the usual and daily activities of its employees.

The defendants named herein formed an association in fact enterprise that executed a plan

of balancing Flint’s budget through the sale of Flint River water that was freely obtained and

charged for at rates that were the highest in the nation. These individuals and government agencies

that made up the enterprise also had separate and distinct roles from the enterprise itself, which

included administration of government services and regulation that was unrelated to the City of

Flint and the distribution of water to the City’s residents. Ironically, the separate roles and


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responsibilities of the RICO defendants were related to implementing and enforcing policies

related to water quality, health and safety in the State of Michigan at the State and Local level.

9.! The benefits, if any, the alleged enterprise receives or has received from the alleged pattern of racketeering.

The financial savings realized by the City of Flint as a result of the transition to the Flint

River as a primary water supply are substantial and repeatedly referenced by the government

defendants in relevant correspondence . In 2011, engineering firm Rowe performed a “feasibility

report” assessing the viability of the Flint River as a primary water source for the City of Flint. In

conducting the analysis, the 2011 feasibility report, the River was rejected because the costs to

prepare Flint’s water treatment plant to treat Flint River water to applicable standards were

estimated to be in the tens of millions of dollars.

The City of Flint chose to proceed forward and connect to the Flint River as a primary water

source. In doing so, Flint’s then Emergency Manager Gerald Ambrose issued a memo on March

3, 2015 to the Michigan State Treasury claiming that reconnecting to Detroit’s water source

(DWSD) would cost at least ten (10) million dollars per year, with bills as high as one (1) million

dollars per month. As a result of those costs, it was determined by the government entities listed

herein that it was best to continue supplying Flint residents with the toxic water being drawn from

the Flint River. The state and/or City of Flint collected approximately 50 million dollars in water

bills from the date of connecting to the Flint River on April 24, 2014 to present with the knowledge

that the water being distributed and used did not have corrosion control, was toxic and unfit for

use.


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Moreover, the City of Flint raised an estimated $50 million in revenue by the sale of the free

Flint River Water that caused the City of Flint to substantially reduce its budget deficit of 19

million dollars to a 3.3 million dollar surplus by June 30, 2015.

10.!The effect of the activities of the enterprise on interstate or foreign commerce.

The enterprise activities set for herein involved interstate or foreign commerce through the use

of Wire and U.S. Mail that are channels of interstate commerce. Moreover, the association in fact

enterprise set forth herein involved members from outside Michigan and thus amounted to conduct

that qualifies as interstate commerce.

11.!If the complaint alleges a violation of 18 U.S.C. Section 1962(a), provide the following information:

This compliant does not involve a claim that arises from a violation of 18 U.S.C. Section

1962(a).

12.!If the complaint alleges a violation of 18 U.S.C. Section 1962(b), provide the following information:

This complaint does not involve a claim that arises from a violation of 18 U.S.C. Section

1962(b).

13.!If the complaint alleges a violation of 18 U.S.C. Section 1962(c), provide the following information:

a.! The individuals who are employed or associated with the enterprise: See response to Section 6(a).

b.! Whether the same entity is both the liable “person” and the “enterprise” under Section 1962(c)


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The association in fact enterprise set forth herein consists of numerous individuals that are not

part of a common entity, employer, or corporation. Therefor the liable individuals who formed the

enterprise are not both the liable person and the enterprise under 1962(c).

14.!If the complaint alleges a violation of 18 U.S.C Sections 1962(d), describe in detail

the alleged conspiracy.

The object of the conspiracy here is straight forward with the financial scheme involving

the enterprise balancing the City of Flint’s budget through the sale of toxic Flint River water that

was known to be untreated and unsuitable for use, but sold to Flint’s residents at the highest rates

in the nation. The switch to the known unsuitable Flint River required coordinated efforts from

State and Local representatives of Michigan named as individual RICO defendants named herein,

to ensure the checks and balances of the system tied to water quality, health, and safety would not

derail the financial decision to switch to the Flint River in order to balance the City’s budget. Water

quality standards and regulations were knowingly violated and misrepresented to be satisfied to

the public. Furthermore, private engineering defendants LAN, ROWE and Veolia aided the

enterprise by issuing reports that supported the switch to the Flint River, and its suitability, even

after the toxic conditions of Flint had surfaced and known to the individual RICO defendants.

While connected to the Flint River, the City of Flint had raised an estimated 50 million in revenue

from the use of the Flint River, thereby reversing the budget deficit that existed on the backs of

Flints residents through the sale of toxic water.

After this scheme back-fired in the form of a surge in lead poisoning complaints, public

outcry and toxicity complaints regarding the City’s water supply, the conspiracy required

concealment of the known toxic conditions that existed in Flint which included the willful refusal

to produce documents pursuant to the Freedom of Information Law (FOIL), public statements


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issued by the individual defendants for purposes of discrediting experts that condemned Flint’s

water supply as unsafe and requested the ability to inspect for what they reasonably believed to be

toxic conditions, and through the illegitimate use of experts such as Rowe, LAN and Veolia to

manufacture patently false reports to deter public scrutiny and regulatory bodies such as the EPA.

Once the conspiracy was uncovered in late 2015, many of the above individuals listed in Section

6 were fired and/or resigned without pay, and a criminal investigation continues on this matter

involving the FBI and other enforcement bodies.

15.!The alleged injury to business or property

Everyone has heard about the toxic conditions in Flint and the consequences that have been

felt by the City in terms of the population’s health. What has not been brought forward is the

substantial damage the plaintiffs’ have suffered as homeowners and business owners in the City

of Flint. The class of mass tort victims in this matter have suffered property damage, substantial

losses in property and home value, have been displaced from their homes and/or denied use of

their utilities due to the toxic exposure described herein, and have suffered the loss of business as

a result of pipe corrosion that caused the toxic inner linings of their lead based water pipes to

corrode and leach into their water system. These toxic conditions will require extensive repairs to

rectify the damage caused to these homeowner’s plumbing and water systems, and have eroded

the property values of the entire City of Flint as a result of the stigma that has been branded on this

tarnished City that is now commonly viewed as toxic.. Furthermore, business owners have lost

substantial business or have gone out of business as a result of the occurrence set forth herein. This

is particularly true for businesses like spas and hair salons that require the use of water to conduct

their business. As a direct and proximate result of the fears and stigma the city has developed for

the water of Flint, these services have been shunned by the community in fear of legionella, lead


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poisoning and or an otherwise toxic exposure to the City’s water supply. Finally, these plaintiffs

paid for water that the City and government defendants named herein represented to be clean, safe,

and proper for use in their homes and water systems therein. As a direct and proximate result of

these misrepresentations that were known to be untrue, plaintiffs have suffered all of the above

damages that require costly repairs to be made whole again and to return to a somewhat normal

life.

16.!The direct causal relationship between the alleged injury and the violation of the RICO Statute.

Plaintiffs justifiably relied on the misrepresentations and omissions made by the defendants

named herein, which repeatedly and falsely assured Flint residents that the water being delivered

to their homes was of high quality, safe, and acceptable for consumption. As a direct and proximate

cause of these misrepresentations and decision to distribute corrosive Flint River water to Flint

residents, plaintiffs’ homes require extensive repairs to ensure the lead based toxins are ridded

from their home and water supply in the future. To this day, flint residents still are required to

drink bottled water as a result of the harm caused to both health and property of Flint’s residents,

nearly two years after they were first exposed to the toxic conditions that persist today. Moreover,

the loss in property value in the Flint residential community is a direct and proximate result of the

toxic conditions that have plagued flint and its reputation as a habitable community. This toxic

disaster has branded Flint as uninhabitable on a National Scale and in the words of one resident

and GM employee seeking to sell his home “he can’t give his house away”.

17.!The damages sustained for which each defendant is liable.

As a direct and proximate result of plaintiffs relying on defendants’ misrepresentations

concerning the safety and quality of Flint’s water supply and decision to distribute toxic water to

the residents of Flint, plaintiffs were caused to suffer property damage that will require substantial


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and costly repairs to replace corroded pipes and water infrastructure so as to ensure Flint’s

residents can resume use of Flint’s water supply via a clean and acceptable source. The loss in

value to plaintiffs’ homes is also a direct and proximate result of the toxic disaster caused and

created by the defendants named herein. The consequential damages of being displaced from their

homes and/or living without a usable water source are extensive and substantial among the class

of plaintiffs represented herein. Finally, plaintiffs were defrauded by the defendants by

misrepresentations that caused them to pay or water that was toxic to their homes and property.

Plaintiffs also seek reimbursement for their funds that were paid for a product that was unsuitable

for use and not what was represented to be the product they reasonably believed they were paying

for.

18.!A description of the Federal causes of action, if any, and citation to the relevant statutes. a.! 42 U.S.C. § 1983 – SUBSTANTIVE DUE PROCESS – DEPRIVATION OF

CONTRACTUALLY CREATED PROPERTY RIGHT

b.! 42 U.S.C. § 1983 – PROCEDURAL DUE PROCESS – DEPRIVATION OF CONTRACTUALLY CREATED PROPERTY RIGHT

c.! 42 U.S.C. § 1983 –SUBSTANTIVE DUE PROCESS– STATE CREATED DANGER

d.! 42 U.S.C. § 1983 – SUBSTANTIVE DUE PROCESS – BODILY INTEGRITY

19.!A description of pendent state claims in the complaint, if any. a.! Breach of Contract

b.! Breach of Implied Warranty

c.! Nuisance

d.! Negligence

e.! Gross Negligence


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f.! Unjust Enrichment

g.! Conspiracy

h.! Trespass

i.! Intentional Infliction of Emotional Distress

j.! Negligent Infliction of Emotion Distress

20.!Any additional information plaintiff feels would be helpful to the Court in processing the RICO claim.

Plaintiffs believe and wish to emphasize that a significant volume of highly relevant

evidence supporting the claims herein will be obtained through discovery. Plaintiffs reserve their

right to supplement this form as this information comes to light so as to provide the Court with

these additional facts. For example, criminal investigations into this matter are pending and have

yet to disclose their findings or reports. In addition, plaintiffs had not had the chance to obtain

email correspondence that will likely further reinforce every fact and allegation contained herein,

as many of the individual defendants named herein have been fired, resigned, and/or been

reprimanded for this horrific set of events that caused thousands to become poisoned and severely

brain damaged and thousands of homes to be damaged.

BERN RIPKA LP 1-800-LAW-FIRM By: /s/ Chet Kern Ari Kresch, P-29593 Chet W. Kern, Pro Hac Pending 26700 Lahser Road Marc J. Bern, Pro Hac Pending Southfield, MI 48033 60 East 42nd Street, Suite 950 (248) 565-2099 New York, NY 10165 [email protected] (212) 702-5000 [email protected] EXCOLO LAW PLLC [email protected] Solomon M. Radner, P73653 26700 Lahser Road

Southfield, MI 48033 (248) 291-9712 [email protected]


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Documents

PLAINTIFFS’ RICO CASE STATEMENT PURSUSUANT …media.mlive.com/newsnow_impact/other/Snyder RICO allegations.pdf · plaintiffs’ rico case statement pursusuant to the local rules’