LID COMES OFF I.E.S. SCANDAL: $22 MILLION MISSING

By Mark Reagan

Brownsville Herald
Various Sources

International Educational Services closed its doors six months ago after an audit determined that employees profited when IES leased properties they owned and that executives paid themselves salaries that were hundreds of thousands of dollars more than what was allowed, according to documents obtained by The Brownsville Herald.

Those are just two of multiple reasons listed in a letter sent from the Administration for Children & Families to International Educational Services informing the nonprofit that its grant funding was coming to an end.

The nonprofit, which was formed in 1985, aimed to provide physical and educational care for unaccompanied migrant children entrusted to its care by immigration officials who detained the children.

IES closed on March 31 and terminated the jobs of hundreds of employees. No one with IES or the Office of Refugee Resettlement, the agency in charge of ACF, has said why the nonprofit closed.

Shortly after IES shuttered, The Brownsville Herald filed a Freedom of Information Act request with the ORR, ACF asking for any correspondence informing the nonprofit that the federal agency would not renew its grant funding. 

After nearly six months, the ORR, ACF, provided the newspaper with a seven-page letter sent on Feb. 21 to the nonprofit from E. Scott Lloyd, director of the ORR, ACF, informing IES that it would no longer receive nine grants to provide services for unaccompanied immigrant children.

That letter reveals a series of failures at IES identified during an audit conducted by the Office of Inspector General that began in June 2016.

“In September 2017, the OIG identified to ACF findings that included less than arms-length agreements related to property leases, violation of executive compensation levels, non-compliance with conflict of interest requirements and procurement procedures, and numerous examples of substantial failures of IES failing to comply with regulations governing allowable costs under (Health and Human Services) awards,” the letter states.

Starting on Nov. 2, 2017, the federal government placed IES on costs reimbursement restrictions due to concerns about the organization’s lack of effective control over, and accountability for federal funds, property and other federal assets , according to the letter.

The OIG audited IES for the Fiscal Year 2015, which began Oct. 1, 2014, and ended Sept. 30, 2015.

However, all the names in the letter, including who the document is addressed to, are redacted because the federal agency determined that significant privacy interest in those identities could lead to an unwarranted invasion of privacy because the identities of those individuals are contained in a law enforcement file.

“Information has been redacted pursuant to Exemption 6 and pertains to the identities of individuals who have been named in a law enforcement file. Disclosure of this information would cause a clearly unwarranted invasion of personal privacy,” a letter to the newspaper states.

According to the ORR, ACF, the mention of an individual’s name in a law enforcement file will engender comment and speculation and carries a stigmatizing connotation.

EXECUTIVE COMPENSATION

The letter reveals that five employees at IES earned more than the $183,300 salary limit set by the grant, with the two highest paid individuals earning $300,000 more than that amount.

Based on an OIG review of W-2s, the five individuals were paid $506,003.22, $492,001.62, $377,060.96, $208,190.49 and $185,000.06.

While those five names are redacted, tax documents filed by IES for 2015 reveal the salaries of IES’ highest paid employees.

The nonprofit’s 2015 tax filings show that IES President Ruben Gallegos earned $519,200; Chief Operating Officer Ruben Gallegos Jr., the president’s son, made $505,202; Chief Financial Officer Juan J. Gonzalez earned $390,273; Vice President of Business Affairs Norberto Perez made $201,601; and grant writer Nelly Weaver earned $194,414. All of those figures include benefits.
(The newer returns for I.E.S. show that the salaries increased tremendously – by more than $100,000 for Gallegos Sr. and Jr. – the following year. See graphic. Click to enlarge.)

(Eduardo Andres Lucio is Texas State Rep. Eddie Lucio III, and is listed as receiving $125,000 a year as I.E.S. legal counsel. Since the story was published, they have erased all the pictures together on theirt Facebook page, especially when Ruben calls Eddie his business partner. Shouldn't the state rep have known better?)

The 2015 tax filing only lists five employees earning more than the $183,300 salary limit, but those salaries listed in the tax filings do not match the salaries the OIG took from W-2s, even when benefits are not included.

“IES did not comply with the award terms and conditions regarding the Federal Financial Accountability and Transparency Act of 2006 (FFATA), executive reporting requirements which requires large grantees to report the compensation of its top five paid employees,” the letter states.

The tax filings indicate that Ruben Gallegos set salaries.

According to the ORR, ACF, the Notice of Award for IES clearly stated that this condition applied to the IES grants.

Ruben Gallegos Jr. told The Brownsville Herald he wished he could give an interview about IES’ closure, but due to negotiations with the federal government regarding the nonprofit that he was unable to comment.

“Right now, we are in the middle of negotiating with the federal government. There is nothing that I can say on the record right now,” Ruben Gallegos Jr. said.

A phone number provided for Ruben Gallegos by Texas Southmost College, where he served as a trustee was disconnected.

                                             

IES LEASES

The ORR, ACF, tells IES in the letter that it failed to comply with conduct standards after the OIG audit revealed that family members received compensation under IES awards.

The names of those family members are redacted, though tax filings show that the two top executives at IES are related, Ruben Gallegos and Ruben Gallegos Jr., father and son. However, because of the redactions, the letter doesn’t reveal whether the ORR, ACF, is referring to Ruben Gallegos and Ruben Gallegos Jr. or other family members employed by IES.

According to the letter, “recipients are required to establish safeguards to prevent employees, consultants, members of governing bodies and others who may be involved in grant supported activities from using their positions for purposes that are, or give the appearance of being, motivated by desire for private financial gain for themselves or others, such as those with whom they have family, business, or other ties.”

The letter states that someone doing business as Ideal Realty maintained more than a dozen less than-arms-length leases with IES of either land or buildings.

Another person whose name is redacted also maintained a number of less than arms-length leases either by doing business as ILT Enterprizes or through a limited Partnership of GaCris, LP.

IES tax filings from 2015 show that GaCris received a $42,200 deposit from the nonprofit. (GaCris is owned by Gallegos Jr. and Luigi Cristiano, a former Port of Brownsville commissioner. A list of other "contactors" on the IRS report is below. Click on graphic to enlarge.)

(Hector Peña is a former Cameron County Commissioner and gained notoriety in 2005  for his involvement in a scam to cheat  TSTC of between $100,000 and $200,000 for faking Homeland Security, anti-terrorism and advanced criminal investigations training courses. He and a co-defendant claimed that 10 Brownsville school district police officers took the classes between Jan. 1, 2002 and Nov. 2, 2005, which they never did. Then-Judge Abel Limas sentenced the two men to five years deferred adjudication and fined them $1,000.)

Texas Comptroller records indicate that Ruben Gallegos Jr. is the director of ILT Enterprizes.

However, an independent audit conducted for Fiscal Year 2016, the same year the OIG initiated its audit, provides insight into some of those leases.

That audit states that Ruben Gallegos owns an ILT Enterprise, which owns the Los Fresnos Corporate Office, two portable buildings in Driscoll, the Arroyo City Recreational Area and the Los Fresnos Shelter. IES paid ILT Enterprise thousands of dollars during the Fiscal Year 2016 to lease those properties, including $259,800 annually for the Los Fresnos Shelter.

The Texas Comptroller’s Office does not list an ILT Enterprise, though it does list ILT Enterprize.

That same audit states that IES leased a portable building for the Los Fresnos Shelter from Gonzalez, the finance director, for $26,400 a year. The 2016 audit also notes that IES leased another portable building from a “related party” at the Los Fresnos Shelter for a total of $26,400.

Finally, that audit states that IES held a total of 12 leases for buildings, land, parking lots, recreational areas and portable buildings from its president, Ruben Gallegos, for a total of $855,660.

This audit states that all related-party lease agreements were approved by IES’ board of directors and by the ORR, ACF.

The OIG audit, however, states that more than a dozen leases with IES violated federal standards that establish safeguards to prohibit employees from using their positions for a purpose that constitutes or presents the appearance of personal or organizational conflict, interest or personal gain.

“In addition, IES appears to have entered into more than a dozen leases with Ideal Realty, which the leases show was a corporation controlled by [redacted] (the leases are actually between IES and [redacted] “dba Ideal Realty.”) 

IES also charged full rental for these leases, rather than following the regulations that would govern less than-arms-length transactions,” the letter to IES states. “Yet another lease shows that IES knowingly entered into lease agreements with [redacted] and, apparently, [redacted] relative [redacted] for portable structures. [Redacted] is the [redacted] of IES.”

Throughout tax filings between 2013 and 2015, IES admitted that an officer, director or key employee had family or business relationships with another officer, director, trustee or key employee.

However, in each of those years, on those same tax filings, IES states that it was not a party to a business transaction with a current or former officer, director, trustee or key employee; any family member of the same list; and any entity which a current or former officer, director or key employee, or family member thereof, was an officer, director, trustee or direct or indirect owner.

To read rest of story, click on link: https://www.brownsvilleherald.com/news/local/ies-migrant-shelter-under-scrutiny-of-government/article_3fbaacfe-c442-11e8-905f-73378a9fc251.html