Local judge under scrutiny after wife's nonprofit lands $1 home deal in Warren

(WXYZ) — Judges are supposed to avoid even the appearance of a conflict.

So why did the Macomb County judge who ruled in favor of Warren's mayor in a recent term limits fight not disclose that his wife's nonprofit had recently done business with the city?

And that's not the only concern Warren City Council members are raising about this transaction with the taxpayers.

It's no secret much of Warren's City Council and Warren's Mayor can't stand each other — they take each other to court a lot. And it's one recent court case in front of a local judge that has the city council crying foul.

"Macomb County Circuit Judge Toia got it right… And I respect Judge Toia" said Warren Mayor Jim Fouts during a press conference on May 18th.

Fouts has spent a lot of time lately praising Macomb County Circuit Court Judge Joseph Toia.

"The judge did a good job," Fouts said during an interview with the 7 Investigators on April 21st.

"Judge Toia is a well-respected circuit judge," said Fouts during a radio interview with WJR's Paul W. Smith on April 25th.

Back in March, Judge Toia ruled that Fouts could be put on the ballot for re-election, even though Warren's charter now has term limit rules that were put in place by Warren's voters in 2020.

The Court of Appeals later unanimously overturned Judge Toia's ruling and the Michigan Supreme Court reviewed the application for appeal and let the Court of Appeals decision stand, declining to hear the case. That means Fouts cannot run for mayor again.

At a recent press conference, Fouts not only suggested without proof that the state's highest courts were swayed by special treatment, accusing the higher court judges who did not rule in his favor of being wined and dined by law firms, he also complimented Judge Toia who did rule in his favor at least 7 times during his speech.

"Everybody I talked to said the opinion by Judge Toia is solid," said Fouts on May 18th.

Why does that matter?

Some Warren city council members say it matters a lot because of the sale of a small white house on Dodge Ave. for $1.

"Why don't I get the house for a dollar," asked Warren resident Donarae Wedyke, who lives next door to the home that was sold for $1. "I've been asking to buy it because it's been empty… Now that I know that they bought it for $1 [it] kind of makes me mad!"

That transaction involved members of the Fouts administration and a nonprofit run by Judge Toia's wife, Theresa.

Some city council members say it was a city employee who first flagged this potential conflict to them, after that employee questioned why the judge would hear this case because of this house transaction.

The 7 Investigators reviewed more than 1,000 documents, including purchase agreements, deeds, and city emails to try to understand what happened.

Here's what we found:

In 2019, after a tax foreclosure, the city of Warren bought the home on Dodge Ave. along with dozens of others from Macomb County.

Then in March of 2020, the Warren City Council was presented with something that looked like a great opportunity to help the community: A respected nonprofit called Friends of Foster Kids wanted to buy the house on Dodge for $1, even though it was valued at $43,419.

Theresa Toia is the President of that nonprofit.

As part of the deal that council approved: language in the purchase agreement that said "the Property, after renovated to code, will be used and occupied for the purpose of mentoring up to four (4) young adults "aged-out" of the state foster care program..."

"My understanding was the foster people were going to buy the home for foster children… That's not what happened," said Wedyke.

"The way the law works is we're only allowed to sell something for its market value, whatever that may be. To do it for less than that, we have to define a public purpose," said Warren City Council President Patrick Green.

Green, who's also running for mayor and regularly spars with Fouts, says in this case that ‘public purpose’ was housing aged-out foster youth.

Green says the documents the council approved came with restrictive covenants on the deed to serve that public purpose, and he says those were later changed.

"At some point in this transaction, somebody altered documents," said Green.

The 7 Investigators obtained a letter and purchase agreement from October of 2020. Warren Chief Assistant City Attorney Mary Michaels says she sent it to Theresa Toia, and in the agreement, you can see it still has the language about housing aged-out foster youth. But city records show, Theresa Toia sent it back with that part of the restrictions crossed out, added language allowing her charity to sell the home, and initialed the changes.

Mrs. Toia, Mayor Fouts and other city officials later signed that housing deal in 2021.

"New documents were sent out with the restrictive covenant removed," said Green.

"And the council never saw those," asked 7 Investigator Heather Catallo.

"No," said Green.

"Was the council required to see those," asked Catallo.

"Yes. That's a change of contract. And it eliminated the public purpose. It eliminated our ability to sell it for a dollar. So, I mean, it's a classic bait and switch," said Green.

The charity remodeled the house, and on March 13th of this year, records show Theresa Toia's non-profit sold the home for $95,000.

One week later, on March 20th, Judge Toia heard the case involving Mayor Fouts’ attempts to run for a 5th term in office.

"The timing is almost like a movie. The week before the court hearing, the house was sold and the nonprofit garners $95,000. And then a week later, we're in front of the non-profit's husband who's the judge. At the minimum, he should have recused himself," said Green. "It appears to be the classic case of a conflict."

"You would have to analyze whether the spouse's interest could improperly, under the facts of the matter, impact the impartiality of the judge in question," said University of Detroit Mercy Law Professor Larry Dubin who is a legal ethics expert.

"With the judge, it doesn't require an actual conflict. It requires the appearance of the conflict," said Dubin.

In another recent case between the Warren City Council and the Fouts administration, two different Macomb County Circuit Court judges recused themselves from the case to avoid the appearance of impropriety.

"The mere appearance of a conflict with respect to the role of a judge would infringe upon the potential impartiality that a litigant would feel coming before that judge," said Dubin.

The 7 Investigators reached Theresa Toia by phone. During that call, she denied any wrongdoing and said the sale of the house benefited foster children. Mrs. Toia and Judge Toia would not talk to the 7 Investigators on camera, but she did grant an interview to Warren's public TV station just days before her husband heard the Fouts case in his court.

Used in that Warren TV story were photographs taken at the house last fall with Theresa Toia and Mayor Fouts. City records reveal, Judge Toia was at the home when these photos with the mayor were taken.

The 7 Investigators have also obtained an email sent from Warren Economic Development Director Tom Bommarito to the Judge from February of 2020. Records show Bommarito sent him city documents about the house deal.

As for the City of Warren, Chief Assistant City Attorney Mary Michaels and Bommarito defended the sale of the home, saying it was sold to a young woman who had aged out of the foster care system.

But that's not true according to the new homeowner. She told the 7 Investigators, she's never been part of the foster care system at all and purchased the home using a real estate agent after seeing it online.

Then Michaels and Bommarito told us the city sells homes for $1 on a regular basis to other foster care and veterans’ agencies. But in those cases, city officials admitted someone related to the charity is living in the homes, fulfilling the ‘public purpose.’ The houses were not "flipped" and sold on the open market like the on Dodge.

Michaels at first agreed to talk to us on camera, but then cancelled the interview. She says the language in the purchase agreement requiring that aged-out foster youth live in the home was a carry-over from another contract. She also maintains the sale still benefited the charity and denies allegations of wrongdoing.

Meanwhile, neighbors say they don't trust the whole transaction.

"That's not right. There's all of us people around here are trying to do it the way we're supposed to," said Wedyke.

Warren Mayor Jim Fouts issued this statement to us, where he criticized the city council's legal counsel:

"This is a retaliatory investigation pushed by Jeff Schroder of Plunkett Cooney and the Warren Council because Judge Toia ruled on the fact that the term limit ballot question was not clear as is the past precedent of the State Supreme Court. Judge Toia and City Attorney Mary Michaels are well respected. Instead of an unfair attack on Judge Toia, Channel 7 should be investigating why the Court of Appeals and the Supreme Court did not take up oral arguments and rule on why the ballot proposal was legal when its language was not clear. Note: Philip Cavanagh is a Senior Attorney for Plunkett Cooney and the brother of Judge Mark Cavanagh. This was not disclosed during the case."