GALLEGOS JR. DENIED BOND, TWO CO-CONSPIRATORS NOT NAMED IN THURSDAY'S 13-PAGE FEDERAL INDICTMENT

Special to El Rrun-Rrun

It all started way back in 2014, and it only got worse in the next four years when federal investigators began to scrutinize the dealings of the major officers of the International Education Services (IES) facilities to house unaccompanied migrant children. 

Ruben Gallegos Jr., the CEO of IES, a nonprofit corporation that contracted with the federal government to provide temporary shelter care for unaccompanied children, was arrested by FBI agents Thursday and accused of conspiracy and the theft of federal funds, according to an unsealed indictment.

Court records indicate that he made an initial appearance in federal court on Friday and is being held without bond  and his arraignment and detention hearing was set for Sept. 7 at 1:30 p.m. and he remains in the custody of U.S. Marshals.

A partially unsealed indictment charges him and two unnamed defendants with of approving transactions with Limited Liability Corporations (LLCs) controlled by Gallegos with less than arms-length transactions and used federal funds to – among other things – pay for construction on property owned by him even though reimbursement of such costs were not allowed by federal grant regulations.

Additionally, the indictment charges that the three contracted for unallowable consulting fees from related individuals or entities paid with federal funds. They are not named in the indictment, but w're sure there are some people who did business with IES losing sleep as the indictments start to rain.

Numerous sources say that both Gallegos have stepped down from public board, the senior from the Texas Southmost College Foundation and Jr. from the Cameron County Regional Mobility Authority, among others. Additionally, Gallegos Sr. set up the Ruben Gallegos Scholarships for qualifying disadvantaged students students with migrant backgrounds. 

According to the  Appellate Division of the Department of Health and Human Services Departmental Appeals Board, the total amount of IES expenditures of federal funds to house migrant children "disallowed" amounted to $17,673,785.40.  (DAB 3055, Docket Nos. A-18-46 and A-18-47 from Dec 30, 2021.)

The government charges in the indictment that the conspirators – and others not yet identified – took steps to hide the scheme that included, but not limited to:

*Using real-estate holding companies to conceal their ownership of properties that they were leasing to IES.

* Failure to report related-leases in audits

* Paying inflated salaries and related-party leases as unspecified indirect costs

*Listed prohibited construction costs as operational costs; and,

*Failing to disclose contracts for services with related parties

The indictment alleges that beginning in 2014 through 2018, Gallegos Jr. and two other unnamed defendants – believed to be his father IES President Dr. Ruben Gallegos and Chief Financial Officer Juan J. Gonzalez – periodically met and agreed to raise their salaries many hundreds of thousands of dollars past the cap limit of $183,3000. 

The inflated salaries came about, the indictment alleges, as a result of meetings between the three that were summarily approved by the IES board.

However, the indictments against Gallegos Sr. and Gonzalez remain unsealed and in all probability include a conspiracy charge as well. 

In an audit before the government stopped payments to IES, their salaries were, respectively,  $677,242 (Sr.), $663,240 (Jr.), and $546,877 (Gonzalez) in salaries and benefits.  

The government alleges that Gallegos Jr. and his co-conspirators caused IES to lease properties such as vacant lots and residential properties that were not used to provide any meaningful services to alien children, did not comply with competitive bidding, did not follow rental costs guidelines of the grants, did not comply with rental costs limits in less-than-arms-length transactions, and approved transactions in which IES executed multiple transactions on properties that belonged to them.

The scheme started in June 2014, the indictment charges, when Gallegos Jr. – through a related entity – purchased a property in San Benito for $1 million that would become the site of the IES San Benito Shelter. The defendants caused a grant application to be submitted to the Office of Refugee Settlement (ORR) requesting funds to operate the San Benito Center claiming they were ready to house 1,040 children 

However, the indictment charges that although the application was submitted then, the center would not be operational until FY 2015.

That July, IES agreed to rent the San Benito property from Gallegos Jr. through a related entity, at a rate of $35,00 per month ($420,000 per year), far in excess of the limits imposed by federal legislation. However, prosecutors say that for the first 14 months of the lease agreement, no children were housed at the San Benito Center, and that in addition to the inflated lease payments, they authorized the payment of $3.2 million for prohibited construction costs there.

The government also gave notice of forfeiture for $100,200 in cash and for several properties on Maverick Road, in southeast Brownsville. 

A federal magistrate denied bond for Gallegos Jr. Friday on the charges and he will remain in federal custody until September 7 when he is formally arraigned. The government did not indicate whether the other two alleged co-conspirators have been arrested.

But other sources say that Gallegos Sr. will be arrested next week and that Gonzalez will be allowed to turn himself in also next week.