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Company owned by Peñitas city manager ‘engaged in fraud’

Government Asset Services — a company owned by Peñitas City Manager Omar Romero — “engaged in fraud” during the Hidalgo County EMS bankruptcy, according to the federal judge who handled the case.

U.S. Bankruptcy Judge David R. Jones made the determination after a monthslong dispute between Government Asset Services and the civil division of the U.S. Attorney’s Office for the Southern District of Texas.

“It is established that Government Asset Services breached its fiduciary duties to the estate, engaged in fraud, and failed to make the required disclosures,” according to an order Jones signed on Oct. 20.

While the judge determined that Government Asset Services had engaged in fraud, the order came in a bankruptcy case — not a criminal case. No charges were filed.

Romero created Government Asset Services in 2017, according to documents filed with the Texas Secretary of State’s Office. Through the company, he became a consultant for local governments.

Romero also became a consultant for Hidalgo County EMS, a privately owned ambulance service that responded to 911 calls in Edinburg, Pharr and parts of rural Hidalgo County.

In 2019, when Hidalgo County EMS filed for bankruptcy, Government Asset Services became the chief restructuring officer.

Romero, who touted his business and management experience, agreed to charge $150 per hour, according to documents filed with the bankruptcy court. His associate, David Elliott, would charge $250 per hour for accounting.

Hidalgo County EMS struggled to stay afloat during the pandemic and clashed with the U.S. Small Business Administration over a Paycheck Protection Program loan.

The Office of the United States Trustee, which monitors bankruptcy cases, warned that Hidalgo County EMS was “hemorrhaging cash.” CEO Kenneth B. Ponce, meanwhile, pleaded guilty to conspiracy to commit bankruptcy fraud in March 2021.

After more than 19 months in bankruptcy, Hidalgo County EMS shut down in May.

The U.S. Attorney’s Office, which represented the federal government during the bankruptcy, still had big questions about the case.

“The biggest open question—and the one which requires discovery—is whether Government Asset Services knew of the conduct to which Mr. Ponce pled guilty,” according to a motion filed by the U.S. Attorney’s Office. “If it did, the next question becomes whether Government Asset Services facilitated it or just knew about it and said nothing. Either way would violate any fiduciary duty to the estate.”

During the bankruptcy, Government Asset Services paid itself.

Government Asset Services, though, didn’t file a fee application with the court until March 2021, when it requested approval for $214,000 in payments.

After reviewing bank statements, the U.S. Attorney’s Office found another $111,000 in payments. Government Asset Services disputed that math and denied that it received any unearned compensation.

The U.S. Attorney’s Office also accused Romero of failing to answer questions about the payments during the discovery process.

“After wrongfully taking about $100,000 from the estate, Mr. Romero decided not to make a good faith effort to respond to many of the United States’ discovery requests,” according to a motion filed by the U.S. Attorney’s Office. “It is understandable why Mr. Romero would want to conceal his past behavior, but the Federal Rules require Government Asset Services to answer discovery candidly.”

Jones, the federal bankruptcy judge, ordered Government Asset Services to respond.

Romero answered written questions, but the U.S. Attorney’s Office blasted his responses as disingenuous.

Peñitas City Manager Omar Romero incorporated Government Asset Services in 2017. (Photo courtesy of the city of Peñitas.)

“Interrogatory No. 5 asks Government Asset Services to identify who knew that the payment chart presented to the Court was false,” according to a motion filed by the government, which references a question sent to Government Asset Services during the discovery process. “Mr. Romero’s supplemental response goes to great length to try to shield himself—even though he signed the fee application—but it does not actually answer the question.”

After months of back-and-forth, the U.S. Attorney’s Office filed a motion for summary judgment. Government Asset Services never responded, leaving the judge without any other arguments to consider.

Jones concluded that Government Asset Services had failed to comply with court-ordered discovery and denied the company’s fee application.

“It is established that Government Asset Services breached its fiduciary duties to the estate, engaged in fraud, and failed to make the required disclosures,” Jones wrote in the Oct. 20 order.

Elliott said the decision surprised him.

“I think that that characterization, I would have strong disagreement with,” Elliott said, although he conceded it’s possible the judge knows something he doesn’t.

Government Asset Services kept Hidalgo County EMS operational during very difficult circumstances, Elliott said, and provided ambulance service to more than a million people in the midst of a pandemic.

Romero said he agreed with Elliott.

“Unfortunately my attorneys have asked me not to comment directly,” Romero said in a statement. “I feel that I have done everything within my power and authority to respond to the government with information that I have available.”

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