DHHS APPEALS BOARD: GALLEGOS SR., JR. OF INTERNATIONAL EDUCATION SYSTEMS OWE $17,673,785.40 TO THE FEDS

Special to EL Rrun-Rrun

A decision affecting International Education Services – where Dr. Ruben Gallegos was its President and his son Ruben Gallegos Jr. was its Chief Executive Officer – by the Appellate Division of the Department of Health and Human Services Departmental Appeals Board has turned down their two appeals and found that IES owes the government $17,673,785.40. 

The decision was handed down Dec. 30, 2021 and was little noticed here. However, El Rrun-Rrun's sources in Washington D.C. have alerted us to the appeals board decision and we make the news public today.

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

However, on March 31, IES closed after the Office of Refugee Resettlement (ORR) Administration for Children & Families, declined to renew its grant funding after determining that family members employed at IES profited when IES leased properties they owned and executives at the nonprofit paid themselves salaries that were hundreds of thousands of dollars more than allowed, among other failures, according to a letter the federal agency sent to IES informing it of its decision.

That was only one year. In the year prior to shutting down operations, the Gallegos had given themselves raises amounting to more than $100,000 each. This from their last report.

At the time they were shut down, neither IES nor the ORR publicly explained why the grant funding was not renewed until The Brownsville Herald obtained that letter in late September through a Freedom of Information Act request that revealed a damaging audit conducted by the Office of the Inspector General, a government agency that serves as an internal watchdog.

“In September 2017, the OIG identified to Administration for Children and Families (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 from the ACF to IES stated.

Starting on Nov. 2 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.

On Feb. 21, the letter arrived at IES informing it that it would no longer receive nine grants to provide services for unaccompanied immigrant children.

A little more than a month later, IES terminated all of its employees and closed.

However, as 2018 progressed, IES faded into the background after President Donald Trump announced his administration’s zero-tolerance policy for immigration prosecutions that resulted in the separation of more than 2,000 children from their parents.

Scores of national media outlets descended on Brownsville and the Rio Grande Valley to report on the separations. Politicians from all over the country also visited Brownsville and McAllen to tour facilities where minors were held. Hundreds of protestors even gathered in front of the federal courthouse in Brownsville to denounce to policy.

All the while, IES and the ORR remained silent on why it closed its doors.

Gallegos Jr., IES’ chief operating officer, said in a brief interview then that he couldn’t comment on the audit’s findings because IES was in negotiations with the ORR.

(Even former State Rep. Eddie Lucio III had his hand in the IES cookie jar, serving as its legal counsel for $125,000 a year. His name appears second from last on the second salary chart above. In the photo Gallegos Jr. poses with the former state rep. Shouldn't he have known better? And Gallegos Sr. was unanimously appointed as treasurer of the Texas Southmost College Foundation which gives scholarships to the community college students.) 

The letter to IES did provide the nonprofit the ability to appeal the decision to cut off grant funding, both which were turned down in December 2021. The decisions on the appeals were stated as follow:

 "In its first decision, docketed under appeal A-18-46, ACF determined that it would not give IES a non-competing continuation (NCC) award for the second year under nine cooperative agreements (NCC Award Decision). In its second decision, docketed under appeal A-18-47, ACF disallowed multiple types of costs totaling $19,655,761.05 relating to awards made under 14 cooperative agreements (including the nine at issue in appeal A-18-46) (Disallowance Decision). 

"ACF made its decisions following a 2016 audit of IES’s Fiscal Year 2015 (FY2015)2 awards conducted by the United States Department of Health and Human Services (HHS)’s Office of the Inspector General (OIG), which found that IES, among other things, engaged in less-than-arm’s-length transactions in obtaining property leases, violated executive compensation requirements and conflict-of-interest requirements, and failed to comply with applicable cost principles.

"Challenging both decisions, IES asserts that the decisions are legally unsupportable because OIG’s audit was flawed and ACF wrongly disallowed costs that are allowable. However, IES has elected not to dispute $22,600 disallowed for consultant fees, personal property tax, charitable donations, and the proceeds from a related-party vehicle sale. Accordingly, on the disallowance determination, the amount remaining in dispute is $19,633,161.05, which represents the difference between the $19,655,761.05 disallowed minus the $22,600 for which IES does not seek Board review.

"We issue one decision for both appeals consistent with our prior order consolidating the appeals under lead docket number A-18-46. For the reasons and bases set out below, we uphold a total disallowance of $17,673,785.40. This amount accounts for disallowances of $851,756.35 in excess executive compensation, $217,500 in depreciation costs on related-party leases, $8,111,360.35 (of $10,070,736 disallowed) for related-party lease costs, and $8,493,168.70 for the San Benito shelter costs. We also uphold ACF’s decision to withhold a non-competing continuation award."