Counsel questions DECs role in bridge project
Report shows company engineer had vested interest in subconsultants
By EMMA PEREZ-TREVIO
The Brownsville Herald
January 23, 2005 Dannenbaum Engineering Corp.s role in the Brownsville Navigation Districts binational bridge project raises serious questions about how taxpayers money was spent on a plan that lacked Mexicos support, according to an investigative report released Friday.
Special counsel Charles Willette Jr., contracted by BND to investigate the projects expenditures from 1991 through 2004, spent six months compiling the 62-page report.
His findings show that DEC and its engineer Louis Jones had a pivotal role in how BNDs $21.4 million were spent.
The majority of the money, $15.5 million, went to DEC, and Willette questions how the Houston-based company used BND funds to pay subconsultants in Mexico.
James Dannenbaum and Jones were not immediately available for comment.
CONTRACTING DEC
Willette found that it appears that DEC entered the picture in July 1997 after state Sen. Eddie Lucio Jr., D-Brownsville, introduced DEC to the BND.
In prior interviews with The Brownsville Herald, Lucio said that DEC contracted him for marketing, consulting and public relations work and that he introduced the firm to the BND board in the course of this work.
The board voted that month to terminate the engineering firm of Brown & Root that had been on the bridge project since 1995 and had charged BND $424,505. Willette said he found no evidence that Brown & Root had been doing a bad job or that its work was not in conformity with their contract.
The board went with DEC without requesting proposals. An in-house BND comparison showed that its fee surpassed Brown & Roots by $500,000.
BND Chairman Peter Zavaletta, who joined the board in 2004, questioned Friday the previous boards decision to fire Brown & Root and to hire DEC after Lucios introduction.
This was more of a shotgun wedding than a legitimate business relationship, Zavaletta said. One wonders if wed be in the position we are today if the Port (of Brownsville) had never divorced Brown & Root and married DEC.
Through a series of supplemental contracts, DECs original contract for $2,053,515 increased to $15.5 million through 2004. However, numerous clauses in the contract allowed for additional work and compensation if necessary.
Willette found that no one at BND was checking to see that the work was being performed.
It appears Louis Jones was the person the port (BND) relied upon in this regard and no one at the port was looking over his shoulder, Willette said.
When I inquired why no one at the port, such as someone in the engineering department, wasnt reviewing or at least looking at DECs engineering work, I really got no satisfactory answer other than it just wasnt done. Therefore, DEC and Louis Jones were not only doing the outside engineering work. They were essentially checking their own work.
Willette also found that the BND did not have any substantial engineering documents at BND offices until June 2004 when it asked DEC for its work product.
Willette said that Deputy Port Director Nino Gutierrez conducted an initial review of the documents that DEC submitted in 2004 and determined that the engineering work appeared from 80 to 85 percent complete.
Some board commissioners told Willette that former chief executive officer, the late Raul Besteiro, would agree with what Jones said needed to be done. Besteiro, who died in November, told Willette that the board made its own decisions.
The inquiry reflects that in June 2002, Commissioner Joe Gayman asked Gutierrez to review two supplemental contracts proposed by DEC and that Gutierrez requested a hold to study them.
When I asked Gayman if Gutierrez looked into them further, he said no and it appears it was because Raul Besteiro suggested this not be done. When I asked Raul Besteiro about this, he said he thought Nino Gutierrez was being overly critical and it would create hard feelings, which could hamper the project moving forward, Willette wrote.
Willette noted that Jones and Grupo Respira, the projects sponsor in Mexico, have said for months that BND has received Mexicos support on the proposed bridge, that they need a little more work and that even if Mexico says no, theyll be able to figure out how to regroup and get it approved.
That was in June 2004, and there is still no final diplomatic note received by the port allowing for construction, Willette said.
Lucio, who told The Herald he introduced DEC to BND around 2000 and has received from DEC about $140,000 for consulting work, said last week that he still represents the firm, but not on BND matters.
I have spoken with Mr. Dannenbaum, and I told him that based on the controversy, I prefer not to represent any of his interests at the Port of Brownsville, Lucio said.
Lucio said he feels that the firm has done nothing wrong. Now, if there is a perception that (the fees) are high, that is between the people that authorized those fees the navigation commission and Mr. Dannenbaum, Lucio added.
He said that he will continue with the firm until someone tells him that the company has done something wrong or is being investigated by the authorities.
I feel good about the reputation that the gentleman (Dannenbaum) has established over the years. Hes a very fine man, he said.
Lucio refused to identify other projects resulting from his work for DEC. He said its between him and the company.
SUBCONSULTANTS
Willette found that a provision in the DEC contract required that BND approve all subcontracts in writing prior to work being performed and that no subcontract relieves DEC of any responsibilities under its contract with BND.
However, DEC failed to request approval in writing for 16 of 17 subcontracts that DEC entered into.
The first time that BND saw invoices and contracts between DEC and its subconsultants was in June 2004.
Of the $15.5 million that BND paid DEC, the firm in turn paid $10,529,058 to the 17 companies that it subcontracted, Willette said.
Of this amount, Willette said that $9.2 million went to three companies from Mexico with ties to Jones called Comercializadora Binacional America (COBINA), Homeframes de Mexico, and Sistemas.
The inquiry shows that COBINA helps start up businesses. Sistemas provides security services and Homeframes is a real estate company.
Willette also said he didnt see any evidence of any work product to justify the payments to the three firms. He found that DEC contracted Homeframes on several occasions for the same work it had previously been contracted for.
More importantly, the board did not know the connection between these three subconsultants and Jones, Miguel Nagel (Leon) and Hector Larios (Santillan), Willette said. Nagel and Larios are the principals in Grupo Respira.
What was uncovered during the investigation regarding this is what raises questions about how DEC and Louis Jones conducted their business, Willette added.
Willette said Jones told him he did not own any interest in Grupo Respira or any other company that had received money as a subconsultant on the project.
Willette obtained certified documents from Mexico showing that Jones, Nagel, and Larios are stockholders in COBINA.
Steven Howard also is a stockholder and DEC subcontracted him for $92,449. (COBINA) was first formed in April 2001, which is the same month the first subconsultant subcontract between it and DEC is signed, Willette found.
Assuming these Mexican corporate documents are correct, and there is no reason to think theyre not, then this clearly appears to be a conflict of interest on Louis Jones part and could constitute self-dealing. This then raises a serious question about how forthright Louis Jones has been with the board in connection with how the ports money has been spent on this project in Mexico, not only in regards to just the money DEC paid to COBINA, but it puts in doubt about all the money paid to subconsultants in Mexico, Willette said.
The Herald uncovered last year that Jones, Nagel, Larios, Howard and others are partners in Earthwise Technologies Inc. Willette also found this in his inquiry.
Willette also found a link between Homeframes, Sistemas and Nagel.
There are documents showing that Miguel Nagel holds himself out as a representative of Homeframes and Sistemas, Willette said.
He also found that it seems that most, if not all, of the money that DEC paid to the three subconsultants was through wire transfers to money exchange houses in Mexico.
There appears to be a commonality between Homeframes, COBINA, and Sistemas, in regards to wire transfers to each of them to the same address and/or wire transfers sent to them at the same time and to the same money exchange house in Mexico, Willette found.
Willette noted that in a binder from Grupo Respira, a description of the group lists Jones, Nagel, Larios, Jose Carral Escalante and Ambassador Oleg Darushenkov as main shareholders in the group.
According to this, Louis Jones is not only a shareholder of GR (Grupo Respira), he is one of the main shareholders, Willette stated.
ASSESSING WILLETTES REPORT
Zavaletta said that he was pleased with the work that Willette performed for BND, its residents and taxpayers, but reflected on its sordid take.
Im reminded of the old saw: Pigs get fat, hogs get slaughtered, he said.
Zavaletta suggested BND didnt get what it paid for.
The only work the people of this district got in return for nearly $9.2 million were 49 small black binders, each with no more than a couple of pages of charts inside, he said.
All the while, DEC was (also) billing and being paid $1.7 million in success fees without calling them that and where there was no success to be paid for.
He added that Willette accepted what unquestionably was one of the most difficult and challenging assignments ever given a Cameron County private practitioner, stayed true to it, and reported the facts as he found them, with no regard to whose doorstep they led.
Willette submitted a second report to the BND board, but it is being kept confidential. It contains his recommendations regarding possible litigation.
eperez-trevino@brownsvilleherald.com
