Maverick County Public Facility Corporation approves to terminate Financial Advisor Southwestern Capital Markets, Inc.
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
Maverick County Public Facility Corporation (MCPFC) Board of Directors unanimously approved to terminate the financial advisory contract of Roberto G. Rodriguez and Southwestern Capital Markets, Inc. and to provide 30 days notice of termination at a public meeting held on Thursday, January 29, 2015, at Commissioners Courtroom in Eagle Pass, Texas, raising many potential legal questions for the Maverick County Public Facility Corporation and the Maverick County Detention Center(MCDC).
The Maverick County Public Facility Corporation Board of Directors approved a financial advisor contract with Southwestern Capital Markets, Inc. on May 15, 2014 at a public meeting of its newly reorganized Board of Directors.
Maverick County Public Facility Corporation Board President and County Commissioner Roberto Ruiz opened the meeting by stating: “By the power vested in me, I now call the meeting of the Maverick County Public Facility Corporation to order.”
“We have an established quorum. We have present Vice-President Jesus Sanchez, Secretary, I guess, will be Mrs. Rosy Cantu (County Commissioner of Precinct 2) being here by virtue of being in this position and also as part of this meeting and Board, Commissioner Jose Luis Rosales, Sheriff Tom Schmerber, Judge Saucedo, and we have a quorum.”
The first legal question raised is whether County Commissioner Rosy Cantu has been formally appointed by the Maverick County Commissioners Court to serve as a member of the Maverick County Public Facility Corporation. The Eagle Pass Business Journal was unable to find any Commissioners Court agenda item and vote to formally appoint Commissioner Rosy Cantu to the MCPFC. Although Commissioner Rosy Cantu was elected on November 4, 2014 and sworn-in on January 1, 2015, there are no Commissioners Court minutes appointing her to the MCPFC Board.
After establishing quorum, the MCPFC Board unanimously approved four items under the Consent Agenda, including the approval of a full-time Jailer for the Maverick County Detention Center, the replacement of two full-time Jailer positions for MCDC, the transfer of a Mailroom Clerk to full-time Jailer at MCDC, and the replacement of a full-time Maintenance Technician for the MCDC.
Board President Ruiz opened up agenda item No. 6 regarding “the discussion and possible action on the termination of Financial Advisory Agreement with Southwestern Capital Markets, Inc. effective on February 29, 2015.”
President Ruiz asked if there was a motion to open up the item for discussion and a vote.
Board Member and Sheriff Tom Schmerber made the motion and was seconded by Vice-President Jesus Sanchez.
President Ruiz then pointed out a problem with the Notice of the Public Meeting Agenda posted noting that there was a typographical mistake on agenda item No. 6.
“I’d like to point out a, I guess, on my part a typographical mistake because given the fact that we need to give 30 days notice, I put down here February 29th but this is not next month. This is not a leap year. Consequently, it should read 30 days from now. “ said Ruiz.
The second legal issue is whether the MCPFC Notice of Meeting Agenda was deficient because it incorrectly stated the Financial Advisory Contract with Southwestern Capital Markets, Inc. be terminated effective February 29, 2015 instead of 30 days as required by the contract and February 29th does not exist in the 2015 Calendar because it is not a leap year.
Nonetheless, Board President Ruiz pressed on with the agenda item no. 6 despite its deficiency and deciding that the MCPFC Board could continue with the agenda item.
Board President Ruiz asked General Counsel Mariliza Villalpando Williams of the Nevarez Law Group if the Board could terminate the Financial Advisory Agreement with Southwestern Capital Markets, Inc. so long they gave them 30 days notice despite the typographical error on the agenda.
“Section 4 of the agreement, termination of the agreement, and it says that you have to give at least 30 days written notice to the party if you’re planning to terminate the agreement. So, before an action could be taken to terminate the agreement we have to give 30 days notice to Southwestern Capital Markets, Inc.,” said General Counsel Williams. “What date did you want to put in there?” asked Villalpando.
“30 days from now to be exact. I think we can take action to terminate the contract with Southwestern Capital Markets, Inc. after 30 days,” stated Ruiz.
General Counsel Williams advised the MCPFC Board that the contract would be terminated 30 days after giving written notice to Southwestern Capital Markets, Inc., not 30 days from taking action.
Maverick County Sheriff’s Department Budget Administrator Mario Rodriguez asked the Board if they could have “parallel financial advisors” like the County Commissioners did in the earlier meeting. County Judge and MCPFC Board Member David R. Saucedo answered that “Yes, we can have parallel financial advisors.” “The new financial advisor has agreed to do both duties as County and the Public Facility Corporation,” said Judge Saucedo.
Earlier in a Maverick County Commissioners Court meeting, Commissioners Court also approved to terminate and give 30 days notice of termination to Southwestern Capital Markets, Inc. as the Financial Advisor of Maverick County. During the Commissioners Court meeting, Maverick County Special Legal Counsel for County Auditor issues, Luis R. Vera, Jr. of San Antonio, Texas, advised Commissioners Court that they could proceed to give 30 days written notice of termination to Southwestern Capital Markets, Inc. as the County Financial Advisor and hire a new Financial Advisor and that the County could have “parallel financial advisors’ during the 30 days notice period.
After discussing the fact that the MCPFC can have two financial advisors during the 30 days written notice period as “parallel financial advisors,” the MCPFC Board proceeded to unanimously approve the termination and giving of 30 days written notice of termination of Southwestern Capital Markets, Inc. as the Financial Advisor for MCPFC and the Maverick County Detention Center.
During their tenure as MCPFC Financial Advisor, Roberto G. Rodriguez and Southwestern Capital Markets, Inc. guided the MCPFC through very difficult and successful negotiations with the Bondholders, Investors, and Trustee concerning the over $38 Million debt owed on the Maverick County Detention Center, particularly negotiating a forbearance of several months of payments and repayment plan to allow the Maverick County Sheriff’s Department to take over the management and operation of the Maverick County Detention Center after The GEO Group, Inc. withdrew on November 1, 2013.
MCPFC, however, is not yet out of the woods from its financial obligations as it has to meet certain principal and interest payments to the Bondholders in February 2015 as well as continue meeting its monthly payments.
The termination of Roberto G. Rodriguez and Southwestern Capital Markets, Inc. as Financial Advisor of MCPFC comes at a very precarious and delicate moment in the financial security of the Maverick County Detention Center and MCPFC.
Maverick County Commissioners Court earlier on January 29, 2015, hired First Southwest Capital Markets, Inc. as the new Financial Advisor for Maverick County with the understanding that First Southwest Capital Markets, Inc. agreed to act as Financial Advisor for both Maverick County and the MCPFC for only one fee instead of two fees.
Compounding the MCPFC’s legal problems are outstanding financial advisor fees owed to Roberto G. Rodriguez and Southwestern Capital Markets, Inc. by both Maverick County and MCPFC. There is the possibility that the non-payment of these professional fees may lead to litigation between the parties.
A major legal issue threatening the MCPFC is its failure to re-instate its State of Texas Non-Profit Public Facility Corporation Charter after having it forfeited on August 28, 2009 by the Texas Secretary of State for non-compliance with filing certain required public documents.
Originally, the MCPFC was incorporated on June 16, 2007, as an instrumentality of Maverick County to be able to purchase and lease public facilities such as the Maverick County Detention Center under the leadership of former County Judge Jose A. Aranda, Jr. The original Board of Directors included County Judge Jose A. Aranda, Jr., Commissioner Rudy Heredia, Commissioner Eliaz Maldonado, Commissioner Cesar Flores, Earl Herring, and Sheriff Tomas Herrera as Board members.
The MCPFC Board of Directors was reorganized on April 3, 2014, by Maverick County Commissioners Court after having its corporate charter forfeited. In April 2014, Maverick County Commissioners Court appointed a new Board of Directors for the MCPFC with Commissioner Roberto Ruiz as President, Maverick County Human Resources Director Jesus Sanchez as Vice-President, Commissioner Asalia Casares as Secretary, Commissioner Jose Luis Rosales as a member, Commissioner Gerardo “Jerry” Morales as a member, County Judge David R. Saucedo as a member, and Maverick County Sheriff Tom Schmerber as a member. However, MCPFC has failed to file the necessary public documents with the Texas Secretary of State’s Office and the Texas Comptroller’s Office to reinstate its forfeited corporate charter to transact business in Texas despite being given previous notice by Milo Martinez, Certified Public Accountant, of Martinez Rosario, LLC of San Antonio.
The lack of reinstating its corporate charter may possibly subject the MCPFC and all of its transactions null and void and subject its Board of Directors to possible personal liability for its debts and obligations. The MCPFC needs to file certain public documents with the Secretary of State and State Comptroller’s Office to reinstate its forfeited corporate charter.
Although the MCPFC is facing multiple legal issues, these are legal issues which can be corrected and resolved.
