Harlingen leaders clash over investment report, despite auditor’s clean opinion on finances

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HARLINGEN — Days before an election, city commissioners clashed in a heated finale to a tumultuous year that’s rocked the city.

Earlier this week, Commissioners Richard Uribe and Michael Mezmar sparred over the findings of a financial review in which a McAllen private investigations firm hired for $80,000 found no wrongdoing in the city’s handling of its investments.

Meanwhile, a certified public accounting firm gave the city a clean opinion in its annual comprehensive financial report.

During a meeting, officials responded to Safe Track’s compliance review surrounding Finance Director Robert Rodriguez’s decision to move $5 million into a certificate of deposit for which Texas Regional Bank, which employs two city airport board members, offered a far higher rate of return than other banks contacted.

“The results of the report are clear,” Mayor Chris Boswell said Thursday. “They reviewed emails and found nothing inappropriate in their review of 4,000 emails. They specifically found no conflict of interest between the finance department and (Texas Regional Bank) and they reviewed the airport board members and found no conflict of interest.”

Meanwhile, Commissioner Frank Puente, who was among commissioners calling for the firm’s review, said the report will help officials improve the city’s policy and procedures overseeing investments.

“I was glad to see they found a couple of issues where we can improve our policy and procedures. I’m sure that will save us time and money,” he said during an interview. “I’d like to know how that decision was made. Five million dollars is a lot of money for one person to make a decision on how taxpayer money was to be invested. Was there only one person involved in making this decision and, more specifically, who negotiated with (Rodriguez) at Texas Regional Bank? There should be more oversight — not just one person.”

City’s response to financial review’s recommendations

During Wednesday’s meeting, City Manager Gabriel Gonzalez told commissioners he was preparing a formal response to the private investigations firm regarding its recommendations.

In response to a recommendation, he was conducting a cost analysis to determine the feasibility of hiring a consultant to review the finance department’s CD investments, he said.

Gonzalez said the firm also recommended the city keep a signed copy of its statements of pledged collateral.

“The city didn’t have a copy of it here but when they asked for it, we were able to get it from them — it’s from the Federal Reserve,” he told commissioners.

Uribe questions search for bank rates

Amid heated discussion, Uribe told commissioners he was concerned the firm found Rodriguez had considered moving $30 million into the city’s CD at Texas Regional Bank.

“Even that kind of thought tells me they’re not qualified,” he said, referring to Rodriguez serving as finance director.

Based on the private investigations firm’s report, Uribe also questioned Rodriguez’s work in searching for banks offering rates on CDs in 2020.

“(Rodriguez) went out for proposals in June and (he) got three banks and (he) got their rates but when (he) moved the money in September (he) actually only went to one bank,” Uribe said. “You didn’t even give the other three banks who made the initial offer to put into CDs — you didn’t even give them the opportunity to bid on our money. You just called one bank and the law says you at least got to call one other …. Is it illegal? They’re saying it’s not. Should it happen? Nobody should have (authority) — including this commission — to move that kind of money on a whim because they think it’s a great rate.”

Mezmar blames commissioners for ‘wasting’ $80,000

Meanwhile, Mezmar said the firm’s report found no wrongdoing in the city’s handling of its investments.

“There was no illegal behavior on the part of the city management or the finance department,” he said, claiming Uribe, Puente and Commissioner Frank Morales “wasted away $80,000 of taxpayers’ money that could have gone into paving roads or drainage issues — flood issues.”

“Instead, this was a no-bid contract initiated by commissioners 1, 2 and 4 looking for criminal activity where none exists,” he said.

Then Mezmar accused Uribe and Puente of hiring the private investigations firm to search for criminal wrongdoing amid their campaigns for re-election in Saturday’s contest.

“It sounds like two guys are running for office again and you really wasted $80,000 in street money,” he said.

Puente denied the claim.

“I did not vote for this audit to find any illegalities,” he told Mezmar. “It’s our fiduciary responsibility to make sure that everything is done on the up-and-up. One of the reasons I voted to do this audit was to find ways to improve the current system and to make it a better outcome for the taxpayers, more importantly.”

Clean annual financial audit

During the meeting, Quentin Anderson, a certified public accountant with the auditing firm of Carr, Riggs & Ingram, gave the city a clean opinion during his presentation of its annual comprehensive financial report.

“You didn’t have deficiencies and our opinion was not modified,” he told commissioners, referring to the 400-page audit of the city’s finances. “You complied with the laws and regulations that were associated with the grant awards that you were charged with.”

In response, Mezmar asked, “So our city management and finance department came through with flying colors? We did well?”

“That’s a good way to say it,” Anderson told Mezmar.

Background

In February, Uribe, Puente and Morales voted to hire Safe Track for $80,000 to conduct a compliance review of the city’s investments and its policy.

During a meeting, Uribe questioned Rodriguez’s decision to move $5 million into a CD at Texas Regional Bank, arguing the city wasn’t getting the best return on the money that could have funded drainage projects, adding the Harlingen WaterWorks System had placed $9 million into a CD at the bank.

In response, Rodriguez presented commissioners with a five-year summary of the city’s cash and investments while explaining he moved $5 million into the CD at Texas Regional Bank because the bank offered a rate of 0.46 percent, far higher than other banks he contacted in 2020.

Meanwhile, Frost National Bank offered a rate of 0.0001, TexPool offered 0.147, BBVA Compass offered 0.20, Lone Star National Bank offered 0.3 percent and the U.S. Treasury offered 0.12 percent, he said.

Amid discussions, Morales said he wanted to review any connection between the city and Texas Regional Bank, which employs two airport board members.

While Uribe said Hilltop Securities, the national financial advisory firm that’s served the city for years, had limited its latest review of the city’s investment policy, Boswell said the company found the policy, which commissioners had approved in April 2021, in compliance with state law.

During the meeting, Boswell and Mezmar argued Safe Track didn’t have the experience or staff of certified public accountants and attorneys to conduct a financial review.

While Commissioner Rene Perez stood behind the majority’s call for a compliance review of the investment policy, he joined Mezmar in voting against Safe Track, suggesting commissioners give the job to the international accounting firm of Ernst & Young, also arguing the private investigations firm didn’t have the expertise and staff to perform the review.