Government gouged? GTA procurement investigation begins

A local businessman is alleged to have duped the Guam Telephone Authority of millions of dollars for goods and services that were delivered and in many cases marked up as much as 1 337%.

Doris Flores Brooks public auditor released an Aug. 10 audit report on the Guam Telephone Authority. The report identified a “middle man” the authority paid more than $7.4 million for materials and services.

Maria G. “Mae” Duarate supply management administrator said that the matter was under local investigation but would not say if it was a federal investigation — by the U.S. Attorney’s office.

Through the use of the Freedom of Information Act known as the Sunshine Act the Journal made a request to view the procurement documents. They revealed the vendor who acted as the auditor’s described “middle man” is the chief executive officer of Genesis Consortium Group.

Danny Leon Guerrero is chief executive officer of Genesis and his signature appears on hundreds of documents as a GTA vendor.

According to Journal sources Leon Guerrero’s house in Toto was raided by officials “in the latter part of last year.” He was not in the house at the time.

A senior GTA employee questioned the awards and in a price comparison showed a cheaper alternative was available.

The auditor’s report said “GTA purchased inventories from a ‘middle man’ vendor instead of a direct distributor. This procurement was done on a “sole source” basis which resulted in GTA paying for inventories that were $2.4 million more than the actual market value of the inventories purchased: a price that was 1337% higher than the market price ” the auditor said.

Because the authority’s inventory must be valued at the lowest cost the value of the inventory was entered at market value — realizing a loss of $2.4 million.

Guam Telephone Authority paid over $7.4 million to Leon Guerrero; $643 000 in fiscal 2003; $3.3 million in fiscal 2002; and $3.5 million in fiscal 2001. All but $128 000 was paid under the procurement authority of Vincent M. Arriola former general manager of the authority in the Gutierrez administration.

There are several boxes under lock and key at the Guam Telephone Authority Procurement office containing hundreds of documents pertaining to purchases from a vendor that Brooks only identified as Vendor No. 90165.

That vendor was Leon Guerrero.

But a senior member of the staff at the agency disagreed with the awards to Genesis.

A.P. “Fred” Benavente administration manager at the time and since retired wrote to Arriola in 1998 about the purchase of payphone equipment through the sole-source procurement process to Genesis.

Benavente refused to process purchase orders awarded to Genesis and sent the general manager a price comparison.

He wrote to Arriola “GTE Supply submitted price quotations for the same items at thousands of dollars less than Genesis yet Genesis was awarded the order. It leads me to wonder if there is a conspiracy within my own department — or within GTA — to allow this gross oversight to pass through until I stopped it ” Benavente wrote.

The auditor’s report cited this same purchase. “As of Sept. 30 2003 the authority had pay-station inventories costing $2 597 429 on its general ledger which consists of payphone units enclosures pedestals and spare parts. However based on costs in excess of market value the value of these inventories totaled only $191 479.”

Guam Telephone Authority sole source supporting documents read “Genesis is deemed sole source vendor for purchase of Elcotel Eclipse as the authority maintains and houses Elcotel pay-stations island wide and must procure Elcotel Eclipse to ensure compatibility. Genesis is the sole distributor for Elcotel products on Guam.”

Benavente continued in his memo to Arriola “Even if Genesis is declared a sole source for these items GTA should not pay the exorbitant prices requested by Genesis. I think we have a responsibility to ensure that the best interest of the rate payers and GTA is protected especially during these days of declining revenues.”

He concluded “I will not take part in issuing any of these purchase order to Genesis. However you are the procurement authority for GTA and may take any action you wish without my input.”

Benavente sent Arriola a complete comparative price breakdown (See chart). Arriola’s signature appeared on purchase orders surrounding the questioned purchase and another purchase order stemming from emergency purchases following Typhoon Chata’an.

Gov. Carl T.C. Gutierrez issued Executive Order 2002-15 on July 5 2002 authorizing emergency procurement procedures under a declared emergency.

It is not illegal for a vendor to set his own price — however high that may be for sole sourced items within reason except in a declared state of emergency.

Leon Guerrero became so enraged by Benavente’s questioning of the pay-station deal that he threatened litigation. In a Nov. 19 1998 letter to Arriola Leon Guerrero said he was seeking personal and civil litigation against Benavente for “illegal willful deliberations and bad faith conducts.”

Leon Guerrero said in December 1997 Benavente had asked him for a generator after Supertyphoon Paka to use at his home He said he refused to give it to Benavente thereby causing Benavente to question his deals.

Genesis purchase orders were again questioned for “emergency sole source” procurement for Gell Cell batteries for switch stations at Piti and Orote as well as for another for the Tumon Host station. The total of these procurements is $950 000. These were bought under a declared emergency following Typhoon Chata ‘an when portions of the GTA system failed.

Duarate said she could not say if there were any improprieties in these purchases stating only that she would have also questioned them but she was not in a position to do so. She said the attorney general was looking into the matter and thought federal authorities might also be investigating. She said “it was not illegal for a vendor to make money on a sale.”

Douglas B. Moylan attorney general said while he believes miss-spending of rate payers money is a serious offense his office had more pressing problems facing it and would tackle the issue if and when they had the time and the manpower resources.

“We have been reduced to prioritizing. The ability to contract with lawyers and the current budget bill that was passed — we are seeing that as hurting our ability to serve the public especially in cases such as this ” Moylan said. “What we have here is a violation of public trust and a loss of money by the government but our hands are tied.”

Leon Guerrero would only say that he did nothing wrong and that as a businessman and long time authority vendor he stands by his products.

Arriola was contacted but did not return calls. MBJ

Payphone equipment cost comparison

Source: Guam Telephone Authority

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