Weslaco investigates Valley Nature Center construction fraud claims as contractor asks for more money

March 15--WESLACO -- This city is investigating what it fears may be fraudulent invoices from the contractor of the now-stalled Valley Nature Center facility.

The project had already had problems with numerous subcontractors claiming they hadn't received payment. Construction is more than 14 months delayed and now halted as contractor GAS Enterprises demands more money from the city.

Armando Cubas, a painter on the project, signed an affidavit in January that his contract had been for $28,425, even though GAS told the city his services cost $32,500 and received reimbursement accordingly.

Cubas affirmed that the subcontractor application for payment listing $32,500 had been blank when he saw it, and GAS filled in the numbers only after he had signed it. He also said he had been instructed to keep only a portion of the reimbursement and give the rest back to GAS.

A report by Prodigy Construction Management in February called the situation "possible fraud" and referred to Cubas as a whistleblower.

The Monitor agreed to delay reporting on the fraud investigation after receiving that information last month, upon the city's request, to allow leaders more time to evaluate the situation without compromising the ongoing construction.

But as the situation deteriorated, GAS President Rene Salinas sent the city a letter March 3 saying builders needed an extra $175,000 on top of their $1.3 million budget to complete the project. Funding for the project is split between the city of Weslaco, the Economic Development Corp., nature center fundraising and state and corporate grants.

City Manager Leo Olivares replied March 7 saying that because the build was a construction manager-at-risk contract -- which, unlike a traditionally bid project sets a maximum price that cannot be exceeded -- the city would not be providing GAS additional funding.

Olivares also informed Salinas that the city was aware of "forged requests for payments," "padding invoices" and "requests for reimbursement for items, materials and labor that you did not pay."

One subcontractor reported to architect Bob Simpson that he believed his signature had been forged on a payment application to the city, Simpson said.

Thursday, Olivares said he was aware of at least two affidavits from subcontractors saying that payment invoices to the city were inaccurate or forged and that those had been turned over to the Weslaco Police Department.

Salinas did not respond to requests for comment on the situation. He sent a letter to the city Tuesday arguing that none of the subcontractors had questioned the documents to him.

"I would note that the subcontractors in question have all been paid on the documents that have been claimed to be forged, and that such payments have been retained," he wrote. "It is our position that by retaining the payment, the subcontractors have in effect ratified the documents in question."

"He didn't deny that he forged them, he basically said it was a nonissue," Olivares said Thursday.

WHAT HAPPENS NEXT

The almost-finished building sat silently last week as GAS waited to hear whether the city would grant the additional funds. Remaining construction could take as little as a few weeks if it gets back on track.

Under a manager-at-risk project, contractors do not bid for a low price but instead agree to adhere to a fixed maximum price. If the project goes over budget, the contractor is bound to cover the extra cost without additional reimbursement.

Olivares said that the builder's argument that the subcontractors had been more expensive than anticipated was not a valid reason to request more money under such a contract.

"If your subs didn't honor your price, that's between you and your subs," he said. "I need a legitimate reason for them to ask for additional funds."

But the contractor dug in his heels.

"Whatever your legal position may be, the simple fact is that due to the problems with the subcontractors not honoring their prices, GAS Enterprises Inc. is unable to complete the project as originally contemplated," Salinas wrote. "If it is your desire to take some action to keep the matter from falling into the hands of the bonding company, please advise."

The City Commission will meet Tuesday to discuss what to do next. Options include letting the bonding company, which acts as insurance on the project, take over, but that would likely take a lot more time. The city still has $250,000 of the original contract to GAS unpaid, which it could use to hire a new builder independently, but bringing in someone new would likely be more expensive.

Or they could give in and let GAS finish the project at the higher price, but -- in addition to the frustrations of the company not holding to its manager-at-risk contract -- that would mean leaders paying even more money to a company they suspect is defrauding them.

"That is a problem, obviously," Olivares said, but said all options remained on the table.

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