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District Attorney’s Office closes Agua SUD case without any criminal charges

After an exhaustive, eight-month investigation, prosecutors closed the Agua Special Utility District case on July 13, concerned the evidence wouldn’t support criminal charges.

Prosecutors started investigating last year, when the district approved settlement agreements with utility Project Manager Armin Garza and utility Community Relations Coordinator Oscar “Coach” Salinas — who both serve on the La Joya school board.

aguasudGarza collected $268,000, according to utility district records. Salinas received $221,000.

“It looked bad. It smelled bad,” said Hidalgo County District Attorney Ricardo Rodriguez. “Obviously there was a whole lot of money that was given to these individuals. But based on the investigation, we just couldn’t find what crime they could be charged with.”

Working with the Texas Rangers, prosecutors investigated the settlement agreements. They sifted through stacks of documents, searching for links between the settlement agreements and promotions at the La Joya Independent School District, where a majority of the utility board members work. And they pored over personnel records, searching for no-show jobs.

“There was nothing there that we could make a case on,” Rodriguez said.

The Texas Rangers weighed a first-degree felony charge against former Executive Director Oscar Cancino, according to Texas Department of Public Safety records. Prosecutors also reviewed whether or not the utility board violated the Texas Open Meetings Act.

Ultimately, though, prosecutors didn’t believe the evidence would support criminal charges.

The utility district welcomed the news, describing the decision as “vindication.”

“While we have not received any official notification in writing, we have been advised that the investigation regarding the Agua Special Utility District has been closed, indicating that the District has been cleared from any wrongdoing,” utility board President Roger Hernandez said in a statement. “This is the vindication that we have been waiting to hear for many months. On behalf of the Agua SUD Board of Directors and staff, we are encouraged at the resolution of this case, and we will continue to keep working diligently for our Agua SUD clients and operating the District in a responsible and transparent manner.”

Garza and Salinas said they were happy the investigation, which cast a cloud of suspicion over them for months, had been closed.

“I’m pleased to hear that (the) DA’s Office has reviewed this matter to leave no doubt to the public,” said Garza, the La Joya school board president. “Though it has been hard on myself and all those affected, I respect the process.”

Salinas said he wanted to thank everyone who supported him during the investigation.

“I’m grateful that it’s over,” Salinas said, adding that he found the accusations alarming and, at times, disheartening. “I always knew that I had never done anything wrong.”

Senate Bill 814

The series of events that prompted the settlement agreements started on Sept. 26, 2016, when the utility board called a special meeting.

Four members of the board wanted to make major changes.

They replaced utility board President Ricardo Ochoa. Executive Director Julio Cerda resigned. And over objections from other board members, they hired a new attorney, selected a new insurance agent and discussed replacing the district engineer.

Standing in the back, state Sen. Juan “Chuy” Hinojosa watched quietly. Someone asked him to speak, but Hinojosa politely declined.

While he didn’t say anything that day, the meeting clearly concerned Hinojosa, who considered the shakeup part of a larger problem.

At the time, four members of the utility board — Cesar Rodriguez Jr., Lloyd A. Loya, Roger Hernandez and Esequiel “Zeke” Ortiz Jr. — worked for the La Joya school district.

Meanwhile, two members of the school board — Garza and Salinas — worked for the utility district.

Elected officials hiring each other isn’t anything new in Hidalgo County. The arrangement tends to make school board trustees particularly powerful because they control hundreds of high-paying jobs.

More than 4,500 people work for the La Joya school district, accounting for nearly 50 percent of all jobs in western Hidalgo County, according to the 2016-2017 Comprehensive Annual Financial Report published by the school district. Every member of the Peñitas City Council works for the district, along with a majority of the Palmview City Council.

Hinojosa, however, became concerned that members of the school board had started manipulating the utility board. He authored Senate Bill 814, attempting to address the potential conflict of interest.

The bill proposed adding new employment restrictions to Chapter 7201 of the Special District Local Laws Code, which established the utility district.

“If a director is an employee of another taxing entity within the district, the board may not employ as an employee, as a consultant, or on a contract basis: an elected official of the other taxing entity that employs the director,” according to the bill, which Hinojosa filed on Feb. 10, 2017.

That provision would block elected officials from hiring each other at the utility district — and force the school board trustees to choose between public service and public employment.

Lawmakers passed the bill. The utility district, though, already had a backup plan.

The Settlement Agreements

After the Texas Senate passed the bill, the utility district approved five-year employment contracts with Garza and Salinas.

Contracts weren’t common at the utility district. Not even Cancino, the executive director, had an employment contract.

“The whole purpose of drafting the contracts was to subvert the law and to defraud the public,” Hinojosa said.

Auditors also took a dim view of the contracts, labeling them “unreasonable and unnecessary,” according to the 2017 Comprehensive Annual Financial Report published by the utility district.

Three weeks later, the bill passed the Texas House. Garza and Salinas hired an attorney.

“It has come to our attention that your client is considering terminating both of my clients’ employment as a result of new legislation that was introduced and passed during this past legislative session,” attorney Ben Castillo wrote to the utility district on June 19. “Please be advised that my clients fully intend to enforce their current employment contracts with Agua SUD. If there is any attempt by Agua SUD to interfere with my clients’ contractual rights, they are both prepared to file suit to ensure that Agua SUD fulfills its contractual obligations.”

Attorney Javier Peña, who represents the utility district, responded by email.

“Due to SB 814 becoming law, your clients are no longer eligible for employment by Agua SUD,” Peña wrote on July 7. “This was not a decision of Agua SUD. Any power to make a decision regarding your client’s continued employment has been taken away from Agua SUD by Senator Hinojosa’s bill.”

After discussing the matter during executive session, the utility board delegated Cancino broad authority “to resolve any potential dispute with employees who will be affected by Senate Bill 814.”

Utility board Director Homer Tijerina voted against the motion, which passed 5-1.

“Right now, I’m just shocked,” Tijerina said, when told prosecutors wouldn’t press charges. “I still feel that what they did is wrong.”

Garza and Salinas weren’t forced to quit, Tijerina said, adding that they chose the school board over the utility district.

Cancino authorized a $268,000 settlement with Garza and a $221,000 settlement with Salinas, according to utility district records. In exchange, they signed away the right to sue.

The utility district went to extraordinary lengths to keep the payments secret.

Along with confidentiality clauses, the agreements included a novel legal argument: Boeing v. Paxton, a Texas Supreme Court ruling that protects sensitive business information from public disclosure, made the settlements secret.

When the utility district refused to release the records, Hinojosa submitted a request himself.

News about the settlement agreements broke on Nov. 3, 2017. Prosecutors sent the utility district a grand jury summons six days later.

The Investigation

The summons demanded copies of the settlement agreements and all related records, according to documents released under the Texas Public Information Act.

Prosecutors requested more documents in January, demanding emails, text messages and personnel records. They also contacted the Texas Rangers for assistance.

The Department of Public Safety assigned the case to Texas Ranger Reid Rackley, who met with Assistant District Attorney John Ball about the investigation.

“I was advised by ADA Ball that Oscar Cancino was the former Executive Director of Agua SUD,” according to a copy of the Texas Rangers report released by the Department of Public Safety. “ADA Ball explained to me that there had been two large payouts to two former employees of Agua SUD which were possibly improper or unauthorized.”

Through an attorney, Cancino denied any wrongdoing.

The District Attorney’s Office and the Texas Rangers attempted to answer several thorny questions: Were the settlement agreements legitimate? Or were they the result of a complex plan to pay Garza and Salinas six-figure settlements? And if so, who masterminded the scheme?

They also investigated whether or not the school board rewarded members of the utility board with promotions and stipends for approving the settlement agreements.

The evidence didn’t support criminal charges.

“It’s pretty obvious that they defrauded the public. Whether it’s criminal or civil? I don’t know,” Hinojosa said. “Maybe a civil lawsuit will be more appropriate to get the money returned to taxpayers.”

When the initial line of inquiry flopped, the Texas Rangers started reviewing other potential leads, including a rumor that Garza and Salinas had collected paychecks without actually working. They couldn’t prove that either.

The District Attorney’s Office formally closed the case on July 13 with a letter to the Texas Rangers.

“Based on the information we have obtained, I do not believe there is sufficient evidence to obtain convictions,” Ball wrote to Rackley. “If additional credible evidence comes to light, we are amenable to reopening this investigation.”

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