Feds tell East Lansing to return $134,330 spent on 'ineligible' sidewalk project

EAST LANSING - Federal officials want the city to return a chunk of block grant money used for a sidewalk project that benefited the city's primary law firm.

In a letter received Tuesday, a U.S. Department of Housing and Urban Development official said the city should have sought a conflict of interest determination before starting construction on the project, completed in 2013.

HUD further determined that the project was ineligible for Community Development Block Grant money and wants the city to return $134,330, according to the letter from Keith Hernandez, director of HUD's Community Planning and Development office.

East Lansing officials disclosed the letter in a news release Wednesday, saying they are considering their options in light of the findings. The city has acknowledged it should have sought a conflict of interest determination but believed the project was eligible for block grants, they said.

"We believe this was the right project to do to improve walkability and safety for pedestrians on one of East Lansing's busiest roadways," East Lansing City Manager George Lahanas said in the release. "While we recognize that a mistake was made by not providing proper disclosures at the time, we did believe this project was eligible ... because it took place in the public right-of-way and it served a public benefit."

The project included a new, wider sidewalk and a new retaining wall along the west side of Abbot Road, between Fern Street and Oakhill Avenue. One of the properties along that stretch is the home of McGinty, Hitch, Person, Yeadon & 
Anderson, which represents the city primarily through partner Tom Yeadon.

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The potential conflict was the subject of a federal lawsuit filed by a former city resident in 2016. Philip Bellfy alleged the city failed to disclose that the project benefited Yeadon's firm. The city paid $20,000 to settle that suit late last year.

HUD's letter, dated March 19, said "there has been no national objective met with the rebuilding of a retaining wall on private property."

But in the news release, city officials said the wall is in the public right-of-way, not on private property. Property owners along Abbot donated easements to the city, they said.

Lahanas did not immediately return a phone message left for him by the State Journal on Wednesday, and it was unclear how the city might respond to HUD's findings.

Contact Ken Palmer at (517) 377-1032 or kpalmer@lsj.com. Follow him on Twitter @KBPalm_lsj.