Hidalgo County EMS owner pleads guilty to bankruptcy fraud

The CEO of Hidalgo County EMS pleaded guilty to bankruptcy fraud on Wednesday, when he confessed to concealing assets from a bankruptcy court and siphoning cash from the struggling company.

Kenneth B. Ponce, 48, of Lyford — the CEO of Hidalgo County EMS, a privately owned ambulance company that responds to emergency calls in Edinburg, Pharr and parts of rural South Texas — pleaded guilty Wednesday morning to conspiracy to commit bankruptcy fraud.

“He’s just trying to get on with his life,” said attorney Crispin “CJ” Quintanilla of McAllen, who represents Ponce. “We’re trying to resolve his problems.”

Quintanilla said the government amassed “overwhelming” evidence against Ponce, who struck a plea agreement with prosecutors.

“Ponce failed to disclose or falsified certain transactions in order to conceal property from the bankruptcy estate,” according to a news release from the U.S. Attorney’s Office for the Southern District of Texas. “He also fraudulently received material amounts of property from the bankruptcy estate and permitted others to continue to do so.”

Ponce waived indictment and pleaded guilty to a criminal information, a type of charging document frequently used when a defendant is cooperating with prosecutors.

The criminal information detailed several schemes that allowed Ponce and his associates to siphon money from Hidalgo County EMS during the bankruptcy:

• Hidalgo County EMS leased two planes from WFAS, another company that Ponce owned. One of the planes, though, wasn’t always operational. Ponce didn’t cancel the lease “and continued to make, authorize, and/or receive” at least $270,000 in payments.

  Ponce used the planes for personal travel and made them available for chartered flights.

  “On at least some occasions, Hidalgo County EMS was required to charter additional planes to cover medically required transfers in the amount of $15,000.00 due to the leased WFAS planes being utilized for PONCE’s privately chartered flights,” according to the criminal information. “Despite the unauthorized use of the WFAS planes by or at the direction of PONCE, Hidalgo County EMS continued to pay costs associated with the airplane leases while PONCE kept any payments made for privately chartered flights for personal and private financial gain.”

• Ponce and an associate authorized nearly $68,000 in payments “in connection with a loan made to purchase a residence in McAllen,” according to the criminal information.
• Ponce authorized about $46,000 in payments for vehicles owned by an associate “and not for Hidalgo County EMS business,” according to the criminal information.

Ponce worked with “Co-Conspirator A” and “Co-Conspirator B” to commit bankruptcy fraud, according to the criminal information.

“It was part of the scheme that Defendant, PONCE, Co-Conspirator A, and Co-Conspirator B, attempted to and did defraud Hidalgo County EMS’s creditors,” according to the criminal information. They attempted to conceal the scheme by falsifying documents.

The criminal information doesn’t identify Co-Conspirator A or Co-Conspirator B by name. Details in the 11-page document, however, make clear that Co-Conspirator A is a businessman named Jose Luis Trejo.

“Prior to the bankruptcy proceeding, PONCE borrowed hundreds of thousands of dollars personally and on behalf of Hidalgo County EMS from Co-Conspirator A and/or Co-Conspirator A’s business entities,” according to the criminal information. “While some of the debt incurred by PONCE was secured by real property belonging to PONCE, personally, or Hidalgo County EMS, at least $300,000 of said debt was unsecured by any real property.”

Records filed with the Hidalgo County Clerk’s Office show loans from Trejo to Ponce.

“In or about July of 2014, PONCE entered into an agreement with Co-Conspirator A to purchase 1415 W. Owassa Road in Edinburg, Texas (“Owassa Property”) to be utilized by Hidalgo County EMS,” according to the criminal information. “As part of the agreement, Company A, a business owned by Co-Conspirator A, was to owner finance the purchase of the Owassa Property. The Owassa Property was to be sold for $675,000, with $100,000.00 as a down payment and the remaining $575,000 owner-financed by Co-Conspirator A.”

Trejo financed the purchase of 1415 W. Owassa Road, according to Hidalgo County property records.

A grand jury indicted Trejo on a money laundering charge in October. He pleaded not guilty.

Attorney Alejandro Ballesteros of McAllen, who represents Trejo, filed a motion for continuance on Monday.

“Because the basis for this motion includes matters that are subject to a Government motion
under U.S.S.G. §5K1.1, this continuance request has been filed under seal,” according to the motion.

That section of the U.S. Sentencing Commission guidelines addresses “substantial assistance in the investigation or prosecution of another person who has committed an offense.”

Both the Trejo case and the Ponce case involve the same investigator, FBI Special Agent Ricardo Ale, according to court records.

Ballesteros didn’t respond to a request for comment Wednesday. Trejo hasn’t been charged with any wrongdoing in the Hidalgo County EMS bankruptcy case.

The criminal information contains fewer details about Co-Conspirator B, a man on the Hidalgo County EMS payroll with the authority to approve financial transactions.

“During the course of the bankruptcy proceeding, Co-conspirator B obtained at least $50,000.00 from the bankruptcy estate that was not authorized as his compensation. PONCE accepted an interest payment from Co-Conspirator B on the funds taken from the Hidalgo County EMS bankruptcy estate,” according to the criminal information. “The sum taken by co-conspirator B and/or interest payment received or to be received by PONCE were not reported to creditors or the bankruptcy court as payments to an insider as required by the bankruptcy code nor were they otherwise disclosed to the bankruptcy court or creditors of Hidalgo County EMS during the bankruptcy proceeding.”

Co-Conspirator B also helped authorize fraudulent payments.

“During the course of the bankruptcy proceeding, PONCE and Co-conspirator B fraudulently authorized the payment of approximately $67,971.61 in payments to Company B, another company owned by Co-Conspirator A, in connection with a loan made to purchase a residence in McAllen, Texas,” according to the criminal information. “The payments were not to any critical vendor. For at least the majority of the bankruptcy proceeding, the residence was also not utilitized primarily for Hidalgo County EMS business, but at times was utilized by PONCE, personally.”

Ponce and other members of the Hidalgo County EMS management team had the authority to approve financial transactions.

They were initially supervised by Government Asset Services, a consulting firm owned by Peñitas City Manager Omar Romero, who became the chief restructuring officer.

Romero was replaced by Richard S. Schmidt, a retired bankruptcy judge, in September.

“I have no comment,” Romero said. “Right now I have full faith and trust in Judge Schmidt and I believe he’s looking into any allegations made by today’s plea. Right now everyone’s main focus is making sure there’s an orderly sale and transition of 911 service for the people down here.”

The schemes described by prosecutors in the criminal information happened months before Schmidt became chief restructuring officer.

While the FBI had requested documents from Hidalgo County EMS, the criminal case against Ponce caught Schmidt by surprise.

“First of all, we were pretty much shocked to hear of this happening,” Schmidt said.

Hidalgo County EMS terminated Ponce as an employee, Schmidt said. Ponce remains the owner of Hidalgo County EMS, but he will no longer be able to make any management decisions or collect a paycheck.

Schmidt emphasized the criminal case would not affect ambulance service or efforts to sell Hidalgo County EMS.

Everyone involved in the bankruptcy case is focused on preserving ambulance service, Schmidt said, and on protecting Hidalgo County EMS employees.

“And that predominates every decision that we make,” Schmidt said.

Ponce is scheduled for sentencing on May 26. He faces a maximum of five years in prison.