DALLAS — A month after his appointment to the University of Texas Board of Regents, James Dannenbaum, head of one of the state’s most prominent engineering firms, says his company is not responsible for two public-finance related scandals on the Texas-Mexico border.
In response to questions from The Bond Buyer about a widespread corruption investigation in El Paso County, Dannenbaum denies that his company did anything improper in contributing to the political campaigns of county officials or in seeking contracts.
In a separate dispute in Brownsville on the southern tip of Texas, Dannenbaum says his company was falsely accused of failing to provide services in the construction of an international bridge to Matamoros, Mexico. The bridge remains in bureaucratic limbo 16 years after local voters approved $21 million of bonds to finance the project as the Cameron County district attorney investigates the use of the funds.
Dannenbaum’s chief critic in the bridge dispute, Brownsville Navigation District commissioner Peter M. Zavaletta, last week sued Dannenbaum Engineering Co. as a private citizen in an effort to overturn a February court settlement on the bridge contract. Under the settlement, DEC was required to complete engineering studies for the project — at a value of about $2.9 million — without returning any of the $15.4 million the company had already received.
The company’s failure since the settlement to complete the engineering work “in a timely and reasonable manner” has resulted in “a fraud upon plaintiff and similarly situated taxpayers and residents of the Brownsville Navigation District,” Zavaletta’s lawsuit states. The suit also notes that Zavaletta and other taxpayers in the district will be paying to retire the bonds through 2023.
Dannenbaum accuses Zavaletta, an attorney and elected board member, of grandstanding in a bid for higher office.
“The whole thing is a cooked-up bunch of lies by Peter Zavaletta, who wants to get his name in the papers,” Dannenbaum said. “Peter Zavaletta thought we were supposed to build the bridge. He thought we were a construction company. He never read our contract; he had no idea what our company did.”
Dannenbaum said his company was called in to rescue the project six years after the bonds were approved.
“They hired another firm that got nowhere, and we were hired to see what we could do with it,” he said.
Zavaletta had not returned telephone calls seeking comment as of yesterday afternoon.
Court records indicate the original contract went to Halliburton subsidiary Brown & Root, which was paid $424,505 before the company was fired and replaced by Dannenbaum Engineering in 1997. DEC had hired Texas state Sen. Eddie Lucio for consulting work, and Lucio introduced the company to the BND board, according to the Brownsville Herald, which reported that DEC was not required to submit a proposal.
Dannenbaum’s original contract for $2 million grew through a series of supplemental contracts to $15.4 million.
To make the project work, Mexico had to agree to finance its half of the bridge. But the road on the Mexican side was unpaved, Dannenbaum said, “and the Mexican government said it had no interest in connecting [the bridge] to a mud road.”
To make the project viable, Dannenbaum said he introduced planners to people in Mexico who could develop paved roads and rail corridors that would link the bridge to a container port on the west coast of Mexico. Dannenbaum believes the project can still be a commercial success.
Of the $15.4 million paid to DEC, about $10 million went to Mexican subcontractors, according to navigation district documents.
About a month after the civil settlement, the BND board asked Cameron County district attorney Armando Villalobos, the U.S. attorney’s office, and the Texas Rangers to investigate the financing. Villalobos’ office says the matter is still under investigation.
Despite the $21 million boondoggle, the navigation district retains an A rating on its GOs with a stable outlook from Standard & Poor’s. Moody’s Investors Service rates the GOs A2. Fitch Ratings does not provide underlying ratings on the district.
“The bottom line is they are paying off debt for a project that was never built,” said Standard & Poor’s analyst Horacio Aldrete-Sanchez. “But in a way, they’re lucky. If these had been revenue bonds, the rating clearly would have come down.”
The district’s junior-lien revenue bonds carry ratings of BBB-plus from Standard & Poor’s and Baa1 from Moody’s.
Dannenbaum said the Brownsville controversy “has had no impact on the bond industry.”
In the El Paso corruption investigation, news reports have linked Dannenbaum Engineering to a court document used in the conviction last June of John Travis Ketner, former chief of staff to County Judge Anthony Cobos, on fraud and bribery charges.
Dannenbaum said his company is not under investigation in the case.
The Ketner document describes an alleged effort by a “bagman” to bribe three county officials in exchange for contracts. The three county officials, listed by codenames, have been identified in press reports as Cobos and county commissioners Luis Sarinana and Miguel Teran. As three-fifths of the commissioners court, they could swing votes to contractors. The document says Cobos was promised a $2,000 campaign contribution and the commissioners were promised $1,000 each.
The bagman was identified in the document as a member of the county’s Thomason Hospital Board. The El Paso Times and other news outlets identified the board member as Arturo Duran.
Duran’s attorney, Luis Aguilar, denies that his client did anything illegal and notes that the bribes alleged in the Ketner document did not result in the awarding of contracts.
In the document, the “bagman” was said to be representing a company identified as “DC,” which some news reports identified as “Dannenbaum Construction.”
However, the company’s registered name is Dannenbaum Engineering Co.
Despite the uncertainty, Dannenbaum readily acknowledges that his company provided campaign contributions in those amounts to the county officials. But he said it was all done in the open — at a campaign fundraiser — with no quid pro quo.
“It was absolutely above board,” Dannenbaum said. “On our part, there was absolutely nothing more to it than giving a public contribution.”
Dannenbaum has said that his company had contact with Duran when Duran was head of the International Water and Boundary Commission as President Bush’s appointee. Dannenbaum said his company needed hydrologic data for engineering studies.
As for the allegations from Ketner, Dannenbaum said: “If you’re a dirty, rotten crook and the feds tell you what to say, it’s not exactly a surprise when you say exactly what you were told to.”
At age 68, Dannenbaum runs the company his father founded in Houston in 1945. The company has done scores of high-profile projects across the state.
A 1962 UT grad, Dannenbaum is an executive committee member of the UT system’s Chancellor’s Council and past member of the Texas Tax Reform Commission. He is also chairman of the Texas Cancer Council, and former finance committee chair of the University of Texas M.D. Anderson Cancer Center Chaplaincy Fund Board.
Gov. Rick Perry named Dannenbaum a UT regent on Oct. 19, along with two other business leaders — oilman Paul Foster of El Paso and real estate executive Printice L. Gary of Dallas.
Since 2001, Dannenbaum has given at least $150,000 to Perry and has been among the largest donors to Harris County Commissioners Court members, contributing more than $190,000, according to the Houston Chronicle. Houston Mayor Bill White and City Council members have received $45,000 since 2005, according to the paper.
Perry spokeswoman Krista Moody said that the governor was aware of Dannenbaum’s entanglements in the civil suit “that’s been dismissed once before.”
As for the El Paso investigation, “the governor is giving no thought to these conspiracy theories,” Moody added. “Mr. Dannenbaum has been a trusted public servant for many years, and the governor believes he will continue to be.”
Moody said that Dannenbaum’s political contributions were not a factor in his appointment.
Dannenbaum said he was “delighted with the opportunity” to serve as a regent. “I’m very passionate about the UT system.”
As for the questions about the El Paso and Brownsville controversies, Dannenbaum says: “I guess it’s just part of being in the public eye. You have to put up with the cheap shots.”
