DALLAS – Two local governments on the Texas-Mexico border have suspended contracts with Houston-based Dannenbaum Engineering after an FBI raid seized documents relating to the contractor’s work.
A federal warrant named 17 “target subjects” of the investigation and cited documents sought in the raid, according to local news reports. Among those identified as “target subjects” was James Dannenbaum, president and chief executive of Dannenbaum Engineering and a former University of Texas Regent.
In McAllen, Texas, Hidalgo County Commissioners said that they would cease negotiations with Dannenbaum on a proposed new county courthouse. County commissioners voted unanimously on May 2 to end dealings with Dannenbaum about a week after state and federal law agents raided the firm’s McAllen office.
Dannenbaum, one of Texas’ most prominent public contractors and engineering firms, was previously the front-runner among five firms to serve as the program manager for the construction of the courthouse. The company also was proposing building a section of President Trump’s border wall that would double as a levee on the Rio Grande.
In Laredo, the largest commercial port on the border, the city council voted to halt negotiations on all but one contract with Dannenbaum pending the outcome of the FBI investigation. Dannenbaum is still a contender for a traffic light synchronization study, officials said.
The FBI warrant to search Laredo City Hall targeted records relating to Dannenbaum’s pursuit of engineering projects, including a commercial traffic bypass around the city, extension of another section known as Loop 20, and the traffic signal synchronization study, according to The Laredo Morning Times.
Joel M. Androphy, attorney for Dannenbaum Engineering, said there was no need for the April 26 raids in Houston, Laredo, San Antonio and McAllen because the company was prepared to release all the documents sought by federal authorities.
"I have been communicating with federal authorities for weeks and they never requested any company documents,” Androphy said in a prepared statement. “Instead, the FBI raids appear to have been orchestrated by the government for maximum news coverage in at least four Texas news media markets."
Androphy said he and the company are also seeking an ethics probe of whether “federal employees leaked sensitive investigative information for news coverage that led to clearly false information about the company being published by at least one national news organization.”
“Information was not ‘leaked’ or released proactively," Michelle Lee, spokesperson for the FBI’s San Antonio office, told The Bond Buyer. “Rather, it was carefully and thoughtfully provided in response to specific inquiries, some identifying concerns from the community that the ‘evacuation’ of public buildings, and the presence of the FBI, may indicate a public safety threat.”
While no warrant or other documents have been disclosed in federal courts, the FBI leaves “receipts” at the scene of raids identifying certain parameters of the searches, Lee said.
News reports cited emails, computers, bank records, physical keys and locks, documents relating to domestic and international travel, income tax returns and records of city policies or policies of any other government agency that uses their databases.
Laredo City Council member George Altgelt said his motion to end discussions with Dannenbaum was made “out of an abundance of caution.”
“I think we should make a conscious decision and decide where we want to spend our citizens’ hard-earned dollars,” Altgelt told the council.
Altgelt also introduced a motion to hire outside counsel to help the city manage legal matters related to the FBI investigation. The council approved the motion.
“The fact that the FBI came to our city and basically interrupted our operations — I feel it has to have an impact,” Mayor Pete Saenz told the Laredo Morning Times. “Things are different. Things have changed.”
Acting City Attorney Kristina Hale told the council that taxpayers cannot pay for an outside attorney to represent specific council members. Saenz specified that the outside counsel would be hired to help assess the roles of the city manager, council, the city attorney and staff.
The “target subjects” identified by the local media included Laredo City Manager Jesus “Chuy” Olivares, and Juan “Johnny” Narvaez, a member of the city Planning and Zoning Commission.
The warrant named four current city council members: Roberto Balli, Rodolfo Gonzalez Jr., Alex Perez, and Alberto Torres. Two former council members, Juan Narvaez and Roque Vela Jr., were also named.
State Rep. Richard Pena Raymond, D-Laredo, was also named, along with John Amaya, former director of the Rio Bravo Water Treatment Plant.
Olivares, who has been city manager since 2015, told the Morning Times that the city is prepared to work with the FBI. “We have everything that is available,” he said. “We don’t have anything to hide and we’ll provide everything that we’re asked for — we don’t have any issues with that.”
Councilman Torres, who took office in January, called the investigation “very broad and we don’t know any specifics. They do specify that it is an investigation from Jan. 1, 2013 to the present, so what I’m thinking is that they’re going back to former council members, and I’ve been in office for four months. At the end of the day we continue to do our jobs and business as usual.”
Perez also noted that the FBI probe “is an ongoing investigation, and any further comments at this time would be inappropriate. . . We continue to encourage full cooperation and transparency.”
Narvaez, former councilman who reached his term limit in 2016, said he is willing to be interviewed by the FBI.
“As elected officials we took action on some of those contracts,” he said. “I’m assuming some time in the future they’ll ask me about my vote.”
In a prepared statement, Raymond offered to assist “with any request.”
“I continue to work in the Legislature in Austin and both our offices at the Capitol and district remain open to serve our constituency,” Raymond said.
Vela, a councilman who was defeated in November, noted that “In my four years as a council member, I was obviously very aggressive and brought a lot of projects forward for many different companies and I’m proud of every single one of those and they helped moved Laredo forward — whether transportation or quality of life projects — and I’m still proud of the four years I put in.”
Lee said she could not confirm the status of any investigation or how long it might take. She also could not say whether the raids were part of an ongoing federal border corruption task force.
A month before the raids in Laredo and McAllen, former Eagle Pass City Manager Hector Chavez, Sr., admitted to lying to FBI agents during their investigation into a “pay-to-play” scheme involving Maverick County contracts.
While he was city manager, Chavez owned a company called Chace Management that Chavez claimed worked as a subcontractor for the engineering firm Hejl, Lee and Associates. Court records alleged an engineering firm owner gave Chavez about $20,000 to bribe a Maverick County commissioner in exchange for a $270,000 contract. The FBI said Chavez later made a false statement and falsified records to cover it up.
The Chavez indictment was part of a wider federal investigation of corruption in Starr County on the Rio Grande.