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Accused of pocketing Detroit pension dollars, connected developer avoids charges

Posted: 10:46 PM, Jan 18, 2018
Updated: 2018-01-19 04:26:38Z

A politically-connected Detroit businessman accused of pocketing a small fortune belonging to one of the city’s pension systems avoided criminal charges--after quietly paying the pension system nearly $700,000 in October.

For just over 30 months, Douglass Diggs was a court-appointed receiver for the Detroit Police and Fire Pension System. He was brought in after the pension board gave a $10 million loan to an investor that promised to buy distressed properties throughout the city that he would then resell. 

But the deal turned out to be a scam.  The pension board lost millions and was left holding on to thousands of homes, many of them in poor condition. To help pick up the pieces, a judge turned to Diggs to serve as the pension system’s court-appointed receiver. 

As a well-known and politically-connected developer inside the city, Diggs comes from something of Detroit political royalty.  His father was a Congressman; his mother, Detroit’s first black female federal judge.

But instead of cleaning up the mess, the pension board said he created a whole new one.

Other people's money

When Diggs sold off homes, he was supposed to deposit the proceeds into a special fund set up for the pension system.  But he didn’t always do that.

In fact, when Diggs sold one bunch of properties for $144,000, he deposited the money in his own company’s bank account. A few days later, according to bank records, he wrote a check for $115,000 from that account to himself.

“Of course it’s concerning,” said John Serda, Chairman of the police and fire pension board. “That’s why we looked into it, that’s why we had our attorneys look into it.”

Diggs was ultimately removed as receiver and the pension board dug into just how he handled its money. In June of 2016, Diggs was deposed and when a lawyer asked him why he put the pension system's money in his company’s account, Diggs replied: “I don’t know.” 

“It is a little bit incredible to say, ‘I have no idea how that check got in to my bank account,’ said Peter Henning, a former federal prosecutor and a law professor at Wayne State University.

“We’re not talking about a $20 refund check. We’re talking about over $100,000.”

Prosecutors contacted

The pension board believed a crime had been committed and fired off letters to Wayne County Prosecutor Kym Worthy, Attorney General Bill Schuette and then-U.S. Attorney Barb McQuade asking if they’d bring charges.

Letter to McQuade by WXYZ-TV Channel 7 Detroit on Scribd

They never did. In fact, according to pension board officials, neither Worthy, Schuette nor McQuade’s office said they’d even investigate.

“I don’t understand why there isn’t anyone looking into it,” said Reginald Crawford, a retired Detroit Police officer who relies on his pension.

The offices of the U.S. Attorney and Attorney General declined to comment on this case. 

The Wayne County Prosecutor’s office said they only respond to referrals from other law enforcement agencies, and not to requests like what they received from pension board. 

Even still, they say they couldn’t have pursued the case if they wanted to because of  a conflict of interest. According to a spokesperson, Prosecutor Kym Worthy would have to pass on any case involving Douglass Diggs, because she is friends with his wife.

Funds returned, and then some

Diggs may not have been charged, say legal experts, because he agreed to pay back funds after the pension board confronted him.

The board never could come to a final tally of how much money was missing, but Diggs agreed to pay a total of $683,000, a figure that included his fees. 

7 Action News has also uncovered a settlement agreement Diggs signed in October, saying just because he gave the money back didn’t mean he was guilty of anything.

“If someone had come up to Mr. Diggs and taken $180,000 from him, that would be prosecuted to the fullest extent of the law,” Henning said.  

“That he put it in his pocket but then returned it makes it at least questionable enough that I could see a prosecutor saying, ‘Let’s not take this any further.’”

Diggs refused repeated requests for an interview and when 7 Action News tried to talk him about outside of his home, he wouldn’t talk to us then either.

"I'm on my way to a meeting," Diggs said before stepping into a vehicle.

“If it was criminal, then there should be criminal prosecution,” said Crawford. “Mr. Diggs is no better than anyone else. There shouldn’t be a different standard here”

Contact 7 Investigator Ross Jones at ross.jones@wxyz.com or at (248) 827-9466.