Texas construction contractor takes federal plea deal

A Texas engineering firm that has worked on millions of dollars of bond-funded projects will pay a $1.6 million fine and reorganize under a federal plea deal involving illegal campaign contributions, officials announced Friday.

Houston-based Dannenbaum Engineering Corporation and its longtime chief executive James Dannenbaum, a former University of Texas regent, violated federal election law by making donations in their employees' names to three congressional candidates, according to federal officials.

Port of Houston Authority built a 1,332-foot long wharf extension to its Bayport Container Terminal. Photo from 2009

James Dannenbaum has expressed regret and promised to make amends, a spokesman said. He resigned from the firm earlier this month after admitting to coordinating the illegal contributions, according to published reports.

Under a new chief executive, the firm accepted a three-year deferred prosecution agreement on Friday, agreeing to restructure its board, halt “all politically related payments to its employees” and end “any and all relationships with corrupt and questionable third parties.”

The firm has been tied up in litigation for years over a so-called “Bridge to Nowhere” that was never built in Brownsville but was financed with $21 million of general obligation bonds.

Dannenbaum was a major contributor to U.S. Senators John Cornyn and Ted Cruz as well as Gov. Greg Abbott, and Attorney General Ken Paxton. In addition to Republicans, Dannenbaum gave funds to Democratic office-holders on the boarder and Houston Mayor Sylvester Turner, according to the Texas Tribune.

“DEC engaged in a criminal scheme that undermined the fairness and transparency of our nation’s campaign finance laws in a misguided effort to increase its own power and prestige,” said U.S. assistant attorney general Brian A. Benczkowski of the Justice Department’s Criminal Division in a prepared statement. “Today’s resolution demonstrates the department’s resolve to aggressively pursue those who seek to corrupt our democratic process.”

From 2015 through 2017, the company made $323,300 in illegal conduit contributions through various employees and their family members to federal candidates and their committees, prosecutors said.

DEC corporate funds were used to advance or reimburse employee monies for these contributions, they said, and DEC did not reveal to any of the federal candidates that the corporation was the true source of the contributions.

“The object of the scheme was for DEC, its CEO James Dannenbaum, and a former employee to gain access to and potentially influence various candidates for federal office, including candidates for the presidency as well as the Senate and House of Representatives,” the government said.

Dannenbaum, 80, son of the company’s founder Joseph Dannenbaum, was been charged in a separate criminal information and resigned under the plea deal.

The company's new chief executive, Michel Maksoud, said the firm agreed to hire a compliance officer, install a whistle-blower reporting system and train employees about the rules for making political donations.

“This ensures the company can continue to provide the same high quality engineering services it has provided to the people of Texas for over 70 years,” Maksoud said in a prepared statement.

The investigation made headlines in 2017 when the FBI raided offices of raids at the company’s corporate offices in Houston, San Antonio, McAllen and Laredo. Webb County’s and the city of Laredo’s offices were also shut down by raids.

Last year, Jaime Alberto Canales, 52, a former Webb County commissioner, pleaded guilty in Houston federal court to accepting bribes for a city-county road project. Former Laredo City Councilman John “Johnny” Amaya, 71, pleaded guilty to steering the project.

According to court records, James Dannenbaum sent corporate money to his own bank account to reimburse himself for political contributions. The donations in February 2017 and went to two candidates for the U.S. House of Representatives and one candidate for the U.S. Senate.

As of November 2019, Brian A. Benczkowski was the Assistant Attorney General for the Criminal Division of the U.S. Department of Justice.

The company’s principal and director of the South Texas office Louis H. Jones Jr., committed suicide on Oct. 22, 2018 after a deposition in which he said he was under investigation by the FBI.

DEC did not reveal to any of the federal candidates that the corporation was the true source of the contributions, according to prosecutors.

“The object of the scheme was for DEC, its CEO James Dannenbaum, and a former employee to gain access to and potentially influence various candidates for federal office, including candidates for the presidency as well as the Senate and House of Representatives,” a statement from prosecutors said.

“The department reached this resolution based on a number of factors, including DEC’s cooperation with the investigation, the internal investigation conducted and the significant remedial measures taken,” the statement added.

A spokesman for Cornyn, who is running for re-election next year, said “the campaign was not aware of what Mr. Dannenbaum was doing and we will fully cooperate with the U.S. Attorney’s office.”

James Dannenbaum was appointed in 2007 to a six-year term on the University of Texas System Board of Regents by then Gov. Rick Perry, currently U.S. Secretary of Energy.

Among the projects Dannenbaum has worked on are President Trump’s border wall on the Texas-Mexico border, leveraging federal funds in Hidalgo County. Federal raids in 2017 in McAllen were related to contracts associated with the construction of the $230 million project. A 2018 federal lawsuit alleges that Dannenbaum engaged in racketeering with Hidalgo County drainage district Director Godfrey Garza.

According to the lawsuit, Garza directed Dannenbaum and other contracting firms, to hire a company run by his children. The company, Valley Data Services, received a no-show job contract worth at least $1.6 million.

A 2017 report by The Texas Tribune and ProPublica revealed that Homeland Security funded more than $174 million for the project with inadequate protection for taxpayer dollars.

The Hidalgo County levee-fence, proposed more than 10 years ago, gained renewed attention amid Trump’s push for a $25 billion wall between the U.S. and Mexico.

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Infrastructure Texas
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