Indictment details charges against migrant shelter CEO

Ruben Gallegos Jr., the CEO of International Education Services, or IES, was spending the weekend and Labor Day in federal custody after U.S. Magistrate Judge Ronald G. Morgan Friday ordered he be held without bond.

A federal grand jury Aug. 30 handed down an indictment charging Gallegos on embezzlement and theft charges.

Among the charges and according to a portion of the indictment, Gallegos was paid salaries way over the $183,000 cap limit with his 2017 salary at $435,416.88. The indictment also states others were also paid high salaries, one at $506,0032.22 and another at $377,060.96 – also in violation of the salary caps – but their names are redacted in the document.

Gallegos served as CEO of IES from 2014 to 2018 until the federal government decided it would not renew its funding for the IES shelter. He was taken into custody Thursday after a bench warrant had been issued by Morgan for his arrest, federal court documents reflect.

The IES contracted with the Unaccompanied Alien Children Program and provided temporary shelter care and other related services to unaccompanied alien children, according to the federal indictment. IES received almost all of its funding in the form of federal grants, and for each fiscal year from 2014 through 2018, it received millions of dollars in federal grant funds.

Count one of the indictment charges Gallegos with conspiracy and count two charges him with theft concerning programs receiving federal funds.

According to the Aug. 30, partially unsealed federal indictment, from 2014 through 2018, Gallegos did knowingly conspire with another unnamed person to commit an offense against the United States, to “embezzle, steal, obtain by fraud knowingly convert without authority, and intentionally misapply property that is valued at $5,000 U.S. dollars or more, and is owned by, or is under the care, custody, or control of, an organization that receives more than $10,000 U.S. dollars in federal assistance in any one year period.”

The indictment reads that from 2014 to 2017, Gallegos and another unnamed person caused IES to use federal grant funds to pay themselves salaries that were hundreds of thousands of dollars above the salary cap imposed by federal regulations.

According to the indictment, the cap limit for Gallegos’ salary was at $183,000. In a 2014 meeting, Gallegos told defendants’ he wanted his salary to be increased by about $300,000, authorities said. With the defendants’ approval, IES paid him a salary of about $491,540.04 in violation of the cap limit of $181,500, according to authorities. The indictment states that Gallegos received a $1,000 salary increase in 2015 bringing his salary to $492,001.62. His 2017 salary was $435,416.88, authorities said.

The United States Congress prohibited use of grant funds to pay salaries above a certain rate. In addition, federal regulations further limited spending of grant funds.

The indictment also states that Gallegos, defendants and IES did not comply with federal regulations requiring competitive bidding and did not comply with federal regulations setting rental cost limits in less-than-arms length transactions.

Gallegos, through a related entity, purchased property in San Benito at a cost of $100,000 that was to become the site of the IES San Benito shelter, according to the indictment. In 2014, the defendants submitted a grant application to ORR (Office of Refugee Settlement) requesting funds to operate the shelter, officials said. “Defendants falsely claimed that the shelter was operational and would serve approximately 1,040 children during FY-2015. The IES San Benito Shelter was not operational during FY-2015,” the indictment states.

In addition, Gallegos and others used IES federal grant funds to lease properties from themselves and others, “at rates in excess of the limits imposed by federal regulations,” officials said.

The indictment states that Gallegos and others took steps to hide the scheme, including but not limited to using real estate holding companies to conceal their ownership of properties that they were leasing to IES; failed to report related-party leases in audits; paying inflated salaries and related—party leases as unspecified indirect costs; listing prohibited construction costs as operational costs; and failing to disclose contracts for services with related parties.

The federal government is seeking to seize multiple properties on Maverick Road that are owned by Gallegos, the federal indictment reads. One of the properties on Maverick Road is a small frame house with a large tract of land located next to it.

According to court documents, Gallegos’ case was to be heard before U.S. District Judge Rolando Olvera Jr., however Olvera on Friday recused himself from the case and it has been reassigned to U.S. District Judge Fernando Rodriguez Jr.

If found guilty on Count One of the indictment, Gallegos faces five years in federal prison, and or a $250,000 fine and three years supervised release. If found guilty on Count Two of the indictment, he faces up to 10 years in federal prison, and or a $250,000 fine plus three years supervised release.

Gallegos’ next court appearance is scheduled for Sept. 7 before Magistrate Judge Morgan.


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