Public Auditor: Governor's son-in-law illegally contracted hotel with financial ties to gov's family

Cruz says public contracting must be "open and fair to all those who chose to do business with the government, and not just a select few."

By Troy Torres

troy@kanditnews.com

An audit released today validates concerns raised in May last year about the emergency procurement of the Pacific Star Hotel as a quarantine facility. The procurement was led by then-governor's legal counsel Haig Huynh, who also is Gov. Lou Leon Guerrero's son in law. It resulted in the use of $1.2 million in public funds to pay the hotel, which had a multimillion dollar loan with the Bank of Guam at the time.

Mr. Huynh worked for the Bank of Guam prior to his employment at the Governor's Office, and reportedly went back to work after leaving the Governor's Office shortly after the controversy stirred. The bank is owned and operated by the governor's family.

"It appears there was a potential conflict of interest having [Huynh] in charge of the initial procurement when their immediate family had a financial interest with one of the awarded hotels, which was publicized in local media articles," Public Auditor Benjamin Cruz stated in his audit summary. "Hotel C’s [Pacific Star Hotel] mortgage was with a local bank that [Huynh] was previously employed at and his immediate family is currently employed with and owns, which would be a conflict of interest as identified in 5 G.C.A. § 5628 (a) . Upon discovery of an actual or potential conflict of interest, an employee shall promptly file a written statement of disqualification and shall withdraw from further participation in the transaction involved."

According to the section of the Guam Procurement Law immediately preceding the one cited by the public auditor, if Huynh broke any laws in executing this contract, he may be subject to criminal prosecution as provided in the criminal code of the island.

In his executive summary of the audit, Mr. Cruz provided a background of what led to the Pacific Star procurement, and the procurement of other hotels that resulted in about $3.1 million in audited questioned costs.

"In January 2020, the Guam Homeland Security Advisor was tasked to procure facilities for COVID-19 quarantine and isolation. However, the Governor tasked [Huynh] to take over the procurement in March 2020. [Office of the Governor] secured four facilities totaling $2.5M."

Mr. Cruz, citing Guam's laws, said the governor did not have the authority to have her son in law conduct the procurement, since the law placed that authority in a procurement office, and during a public health emergency, in her public health director. At the time, Linda DeNorcey was the director of public health. Ms. DeNorcey denied having conducted the emergency procurement of the hotels at the time of the controversy. She resigned from office shortly after.

"The OOG contends that it is within the Governor’s authority under the Organic Act and 10 G.C.A. Chapter 19 “Emergency Health Powers” to execute general supervision over GovGuam during a declared state of public health emergency. However, that authority shall not be in conflict with any Guam laws. In which, Public Law (P.L.) 16-124 specifically repealed the governor’s executive control of GovGuam procurement and transferred that authority to a centralized procurement comprised of the Policy Office, CPO, and Director of the Department of Public Works. In addition, the OOG’s justification for their procuring authority is inconsistent with prior treatment and practice of emergency procurement used in a public health state of emergency." - excerpt from audit

The conflict of interest was not the only problem with the procurement, though. As Kandit reported in 2020, the procurement record was incomplete "as it lacked sufficient documentation to provide a complete history of the procurement in compliance with 5 G.C.A. § 5215. This included the request for quotations (i.e. solicitations local hotels) and the award of the procurement (i.e. selection of the local hotels). There is no clear indication in the procurement record with regards to who and how the decision to use these facilities was made. Without a proper procurement record, it voids the mandated transparency and accountability in the procurement process."

Mr. Cruz also said the contracts for the hotels, which Mr. Huynh negotiated, were not done in conformance with either law or the governor's own executive orders on the public health emergency, "Specifically, 1) the contracted dates exceeded the 30-day limit for emergency procurement; 2) renewal terms disregarded E.O. terms; 3) total rooms procured conflicted with the Governor’s requested requirement; and 4) the CPO’s authorized signature was missing."

Chief Procurement Office Claudia Acfalle at the time of the controversy emphatically stated she had nothing to do with the procurement of these hotels. She recently told a legislative panel she was surprised to have read about and seen reports of movement in regard to the emergency procurements in the media.

Mr. Cruz, while recognizing the unprecedented nature of the public health emergency said "while there appears to be misjudgments made, we must take the lessons learned in the experience and make necessary changes to improve future plans."

"While emergency procurement was acceptable for the initial procurement of the quarantine facilities to use, GovGuam was working on procuring quarantine facilities as far back as January 2020. After three months of emergency procurement, GovGuam had sufficient information regarding room utilization rates and the long-term requirement for quarantine and isolation facilities to prepare and issue an IFB, instead of the extended use of emergency procurement.

"Issuing an IFB would have provided better assurance that GovGuam received the lowest overall cost. Further, an IFB shows that the procurement process ensured the opportunity to compete and is open and fair to all those who chose to do business with the government, and not just a select few. GovGuam stated that it plans to continue utilizing emergency procurement of the quarantine and/or isolation facilities. However, we recommend GHS/OCD and GSA prepare and issue an IFB instead."

He concluded his summary by committing to conduct more audits on other spending by the governor during the public health emergency "to highlight additional areas of improvement needed."