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Agua SUD’s fraud case against Performance Services Inc. heads to arbitration

The Agua Special Utility District agreed Wednesday to take a fraud case against Performance Services Inc., the company at the center of a major corruption case in western Hidalgo County, to arbitration.

Agua SUD filed a lawsuit against Performance Services Inc. last year, which demanded more than $1 million in damages.

Performances Services Inc. denied any wrongdoing. The company reminded Agua SUD they had agreed to address any problems in arbitration — not in court.

Agua SUD opposed arbitration. It claimed Performance Services Inc. wanted to “conceal and obscure its wrongdoing through the cloak of a private and confidential arbitration proceeding.”

After ten months of litigation, Agua SUD reversed course Wednesday morning. Attorney Matthew R. Beatty, who represents the utility district, made the announcement during a hearing at the Hidalgo County Courthouse.

“Because we believe we’ve got such a strong case, and because getting it resolved sooner than later is more advantageous to the client, that’s the approach that we decided to take,” Beatty said.

Attorney Tomas F. Tijerina of Brownsville and attorney Ray Thomas of McAllen, who represented Performance Services Inc. during the hearing, had no objection to arbitration.

Arbitration may reduce the cost of adjudicating the dispute and avoid appeals that could take years. Unlike a court hearing, however, the arbitration will not be public.

The dispute between Agua SUD and Performance Services Inc. stemmed from a $7.4 million contract the utility board approved in March 2018.

Under the contract, Performance Services Inc. replaced old, mechanical water meters with new, electronic meters.

According to the company, the electronic meters would provide more accurate measurements, especially during periods of low water usage. Customers would receive more accurate bills and Agua SUD would receive more revenue.

Performance Services Inc. also replaced old light bulbs with LEDs, which use less electricity.

Jonathan Blackwell, a “business development manager” at Performance Services Inc., promised the project would pay for itself by increasing water revenue and reducing energy costs.

Agua SUD amended the contract with Performance Services Inc. in March 2019 to add $4.1 million worth of work.

The contract amendment, which Performance Services Inc. called “Phase II” of the project, included more water meters, more LED lights and a solar array.

In 2020 and 2021, though, Agua SUD became concerned the projects hadn’t actually paid for themselves.

Agua SUD conducted an internal investigation, which concluded Performance Services Inc. hadn’t been honest with the utility district.

“As it turns out, PSI’s promises and guarantee were nothing but illusions,” according to the lawsuit. “And PSI knew it when it made them.”

Jim Adams, the general manager for Performance Services Inc. in Texas, denied the company did anything wrong.

“As we have always maintained, PSI strongly believes in the Performance Contracting process and fully stands behind all our projects,” Adams said in a statement after Agua SUD filed the lawsuit. “We look forward to defending this project in Court and refuting these allegations.”

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