Maverick County Public Facility Corporation Legal Woes Threatens Taxpayers
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
The Maverick County Public Facility Corporation’s legal problems and non-compliance with its legal agreements threatens Maverick County taxpayers with potential liability in the tens of millions of dollars. For instance, the Maverick County Public Facility Corporation’s corporate charter, which was formed on June 15, 2007, with the Texas Secretary of State Office, was forfeited on August 28, 2009 and remains forfeited as of the writing of this article on Wednesday, March 11, 2015, according to Texas Secretary of State records.
The Maverick County Public Facility Corporation is the non- profit corporation of the Maverick County Detention Center and an instrumentality of the County of Maverick. In other words, it is an entity of Maverick County.
Although the Maverick County Public Facility Corporation Board of Directors have known of the forfeiture of its corporate charter, the non-profit corporation remains in inactive and forfeited status at the Secretary of State and State Comptrollers’ offices, posing a serious liability risk to Maverick County taxpayers as its Maverick County Detention Center facility is operating with over 400 federal detainees or prisoners from the U.S. Marshal’s Service for the Western District of Texas.
Originally incorporated on June 15, 2007, under the leadership of former Maverick County Judge Jose A. Aranda, Jr. to serve as a public facility corporation of Maverick County for the purpose to construct and operate a prisoner detention center and to issue over $42 Million in Bonds in order to design and construct the 625 Bed Maverick County Detention Center. Its original Board of Directors included County Judge Aranda, County Commissioners Rudy Heredia, Eliaz Maldonado, Cesar Flores, and David R. Saucedo, and County Sheriff Tomas S. Herrera.
Since its original incorporation and subsequent corporate charter forfeiture on August 28, 2009, Maverick County Commissioners Court have failed to maintain the County-owned public facility corporation active and in compliance with Texas Non-Profit Corporation laws.
The original Maverick County Public Facility Corporation Board of Directors had not been changed by Maverick County despite the change of Maverick County Commissioners Court composition.
On April 3, 2014, the Maverick County Commissioners Court held a Maverick County Public Facility Corporation meeting and appointed a new Board of Directors comprised of County Judge David R. Saucedo, County Commissioners Gerardo Morales, Jose Luis Rosales, Asalia Casares, and Roberto Ruiz plus County Sheriff Tom Schmerber and County Human Resources Director Jesus Sanchez. Subsequently, at an April 7, 2014, Maverick County Public Facility Corporation Board of Directors meeting the Board elected County Commissioner Precinct 4 Roberto Ruiz as President, Jesus Sanchez as Vice-President, County Commissioner Precinct 2 Asalia Casares as Secretary, and County Commissioner Precinct 3 Jose Luis Rosales as Treasurer.
Despite being publicly advised on March 24, 2014 by CPA Milo Martinez of Martinez Rosario & Company, LLP of San Antonio, Texas at a public workshop regarding the 2012 Maverick County Audit that the Maverick County Public Facility Corporation corporate charter was in non-compliance with the Secretary of State’s Office, Maverick County Commissioners Court and the later named new Board of Directors failed to file the appropriate documents with the Secretary of State’s Office and the State Comptroller’s Office to reinstate the forfeited corporate charter and reactivate its certificate in good standing.
Not only are Maverick County taxpayers at risk of serious financial liabilities, but so are the Maverick County Public Facility Corporation Board of Directors, including Ruiz, Sanchez, Casares, Rosales, Morales, Saucedo, and Schmerber.
Despite having its non-profit corporate charter forfeited since August 28, 2009, the Maverick County Public Facility Corporation has entered into many legal agreements regarding the operation, management, and detention of federal prisoners at its Maverick County Detention Center as well as with the $42 Million Bondholders and Trustee, the U.S. Marshal’s Service, financial advisors, legal counsel, and other third party contractors-potentially exposing Maverick County taxpayers to significant financial risks or liabilities.
According to Maverick County General Counsel Poncho Nevarez of the Nevarez Law Group at an April 7, 2014 Board meeting, all the County and the new Board needed to do was to file a new registered agent, the list of new Board of Directors, and a state franchise report to regain its forfeited Corporate Charter and reinstate or reactivate its non-profit corporate charter. As of this article, this has not been done according to Secretary of State Corporations records. Thus, the Maverick County Public Facility Corporation corporate charter remains forfeited and inactive, exposing Maverick County taxpayers to potential liability in the event of a judgment or breach of contract or default of a contract agreement.
Currently, the Maverick County Public Facility Corporation is in negotiations with the $42 Million Bondholders and Trustee in either restructuring the principal and interest payments owed on the $42 Million debt and/or the forbearance of these payments and recently terminated its long standing financial advisor, Southwestern Capital Markets, Inc., while retaining a new one in First Southwest Capital of San Antonio, Texas.
On February 2, 2015, the Trustee, UMB Bank, N.A., for the $42 Million Bondholders has notified the Maverick County Public Facility Corporation and Maverick County Judge David R. Saucedo that Maverick County failed to make a scheduled $1,415,000 principal payment of the Bonds on February 1, 2015, but did make the February 1, 2015 interest payment. Consequently, the Trustee had advised the Maverick County Public Facility Corporation and County Judge Saucedo that there are “several events of default have occurred and are continuing under the Indenture, including the Event Default caused by having insufficient funds to make the February 1, 2015 Mandatory Sinking Fund Payment. Under the terms of the Lease,…all Project Revenues have been pledged as security for the Bonds and the County is obligated to cause all Project Revenues to be delivered directly to the Trustee. The County continues to intercept Project Revenues, which constitutes a violation of the County’s obligations under the Lease….The County has then remitted funds that it requisitions back for payment of operating expenses. Under the terms of the Lease, all Project Revenues must be delivered directly to the Trustee and are to be used to pay Rental Payment Deposits first, prior to using such revenues to pay Project operating costs and expenses. Section 12.1 of the Lease provides that failure by the County to make a Rental Payment, Rental Payment Deposit or any other payment required to be paid under the Lease constitutes an Even of Default. The County’s failure to deliver intercepted funds to the Trustee for application towards the Rental Payment Deposit has caused an Event of Default under Section 12.1(a) of the Lease, which also constitutes an Event of Default under Section 7.01(c) of the Indenture.”
The Trustee, UMB Bank, N.A., further advised Maverick County that “the County has not provided the Trustee with various deliverables required under the Lease, including annual audits of the Project’s operations during the 2013 Fiscal Year as required by Section 2.1(1) of the Lease. The failure to timely deliver such remaining overdue items to the Trustee constitutes additional Events of Default under Section 12.1(b) of the Lease, and also under Section 7.01(c) of the Indenture.”
Maverick County Public Facility Corporation and Maverick County ongoing negotiations with the Bondholders and the Trustee are critical that they be successful, otherwise, Maverick County taxpayers may be hit with an extraordinary potential liability.
The Maverick County Public Facility Corporation’s legal woes and non-compliance with its financial contractual agreements may potentially expose Maverick County taxpayers to tens of millions of dollars of liability if the County does not reinstate and activate its corporate charter immediately and fully complies with its legal agreements. Maverick County taxpayers deserve better.
