By Jacob Nakamura
Governor Lou Leon Guerrero has said publicly that the costs to quarantine at numerous Guam hotels will be reimbursed by the Federal Emergency Management Agency, but her conflict of interest has put that at risk. And that has led to the use of $7 million under the CARES Act that otherwise could have been used for cash relief to struggling families, according to a document from her budget director Lester Carlson to the speaker of the Legislature. Ms. Leon Guerrero directed her son in law and legal counsel Haigh Huyhn to negotiate directly with several hotels to be paid hundreds of thousands of dollars by the government of Guam to quarantine residents.
In a March 21 email from Mr. Huynh to Civil Defense administrator Chuck Esteves, where he lists hotels, laundry, and medical services for government quarantine sites that "I have procured and I am waiting for fully executed documents to catch up."
"I am handing over the management of some services we have contracted ... PLEASE TAKE NOTE --- NEGOTIATED PRICING REQUIRES PAYMENT UPON INVOICE. The places need to be paid promptly to meet their cash flow demands. For the most part, I have checked with Lester (Carlson) on a budget prior to proceeding. All other times, I have acted on the direction of the Governor." (emphasis added) - Haig Huynh
The hotels they chose have outstanding massive mortgages and loans with the governor's family’s bank, the Bank of Guam. Prior to becoming his mother-in-law's legal counsel at the Governor's Office, Mr. Huynh was her lawyer at the Bank of Guam. GovGuam is seeking reimbursement for these costs under the FEMA Public Assistance Grants Program, according to Mr. Esteves. "We conducted the preliminary call (with FEMA)," he said. "We still need to have the exploratory meeting. And actually working with FEMA recovery to determine what is reimbursable and how much will be reimbursed."
The paper trail following that March 21 email to Mr. Esteves from the governor's son in law reveal a frenzy among the Governor's Office, the government's financial and procurement officers, and the Attorney General's Office to reconstruct the procurement record on the hotels, which are considered by FEMA as non-congregate shelters. The documents are all dated prior to March 27, when Congress passed the CARES Act and before any funding source but the federal Stafford Act could be considered.
On March 25, at 1:15 p.m., Mr. Huynh wrote directly to Mr. Esteves, telling him, "I have forwarded all the unsigned contracts to you. The AG is asking that I complete a sole source procurement record prior to him signing off. I am awaiting some docs from GHRA to help me complete it."
In that email, the governor's son in law details that he negotiated the rate of $100 per room per day with the hotels, among other negotiations.
It was at 6:01 p.m. that night that Mr. Esteves sounded the alarm to Mr. Huynh and to the Governor's Office, the Bureau of Budget Management and Research, and the Department of Administration about the potential misuse of federal funds:
"Attached is a fact sheet to be reimbursed for non-congregate sheltering i.e. quarantine facilities. The guidelines are very clear."
He alerted the parties to FEMA procurement guidelines and policy guidance that specifically states that states and territories must follow local procurement laws and regulations. Mr. Esteves attached the documents, which also has a reference to Title 2 of the Code of Federal Regulations.
In order for the Government of Guam to use this FEMA grant program that Mr. Huynh was directing Mr. Esteves to use as a funding source for the hotels Mr. Huynh selected for quarantine, then GovGuam is subject to the Federal procurement standards found at 2 C.F.R. §§ 200.317 – 200.326. One of the first rules you find is §200.318 (c)(1) under “General procurement standards.” That section states “The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.” According to a 2016 mortgage between the Bank of Guam and the company that manages the Pacific Star Hotel, Marianas Properties, LLC, the PacStar's owners are indebted to the governor's family's bank for $32 million as of the execution of the mortgage.
A series of March 18 letters to the owners of the hotels to be used for quarantine was issued by Ms. Leon Guerrero herself, including to Ajay Pothen of Marianas Properties, with which she has a direct conflict of interest.
Nearly all of the documentation disclosed by Mr. Esteves to Kandit News depicts that it was Mr. Huynh, not fallen chief of staff Anthony Babauta, who led the negotiations and directed the fast tracking and payments to the hotels, including the ones with which he himself had a direct conflict of interest from his previous job at Bank of Guam.
Following Mr. Esteves's March 25 warning email, Mr. Huynh wrote to Mr. Babauta and copied Claudia Acfalle, the government's Chief Procurement Officer, budget director Lester Carlson, cash director Ed Birn, his deputy counsel Sophia Diaz, and Mr. Esteves and admitted:
"There are several things missing in these contracts.. I understand that and we are working with the AG, OHS/OCD, FEMA, to reconcile the needed language for reimbursements later. The unfortunate thing is that these vendors were only able to provide us with these accommodations if we agreed to pay as we go. They all have cash flow issues and would need to pay their own staff and vendors. So if at all possible, would you help facilitate the payment of invoices (I've sent them to Chuck Esteves already). The contracts will follow ass soon as the AG is done with review and all the other signatures are captured."
This email was a directive from the governor's son in law and legal counsel to the government's procurement and financial officers to break the law and process payments on an unfinished, illegal procurement to vendors who would be paid money into enterprises that would then pay the Bank of Guam for outstanding loan balances.
The nail in the coffin for Mr. Huynh, and his implication of his own mother in law is written by his hand in the next sentence of the email:
"I do believe the governor's executive order allows for the fast tracking of these. In fact, it may allow us to forego some things as well."
Due to the escalating problems with the procurement of the hotel facilities and issues facing them with violating federal procurement regulations that apply to the FEMA PA Grants, Ms. Leon Guerrero instead has transferred Cares Act funding given to GovGuam to pay for those costs. But that means that the failure by her legal counsel/son in law to follow federal procurement regulations and both of their conflicts of interest because of the Bank of Guam will give Guam residents the short end of the stick. The funds she will be tapping into instead can be used for a multitude of major public initiatives such as housing for the poor and homeless, food, education, and transportation for the majority of the people of Guam, who are facing financial ruin because of the governor's failed policies.
Instead, at least some of that money will be paid to businesses that owe her bank in loans.
And according to her son in law, she approved it all.
This story has been forwarded to the Office of the United States Attorney for Guam and the Northern Mariana Islands, and to the Federal Bureau of Investigation.