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NEWS: Millions for hotel contracts & no documents of price quotes

By Johnnie Rosario

(Tumon, Guam) The scandalous use of a pricey hotel penthouse by disgraced former chief of staff Anthony Babauta may not be the only reason for his fall. Nor may he be the only person involved in a corruption scandal involving millions of dollars in federal funds.

While residents and businesses are expected to jump through hoops before getting federal cash and unemployment relief from the government of Guam, two of its highest leaders obligated GovGuam to millions in hotel contracts without so much as a price quote.

Charles Esteves, administrator for the Office of Civil Defense, confirmed to Kandit News Friday morning that his agency received no price quotations in the procurement record for contracts negotiated by governor's former chief of staff Anthony Babauta and legal counsel Haig Huynh.

The contracts, for which Gov. Lou Leon Guerrero transferred $7 million from accounts throughout the government into the Civil Defense account, are for the use of the Pacific Star Hotel, the Hotel Santa Fe, Perlas Courte, the Wyndham Gardens Hotel, and the Days Inn Hotel for the quarantine of residents and visitors. The contracts also include laundry service with a sole provider.

Records disclosed by Mr. Esteves in response to a Freedom of Information Act request for documents by Kandit show email correspondence from Mr. Huynh, who also is Ms. Leon Guerrero's son in law, as early as March 18, discussing the procurement of the hotel sites.

Mary Rhodes, the president of the Guam Hotel and Restaurant Association, which helped to facilitate negotiations between the government of Guam and the hotels, confirmed to Kandit that it was Mr. Huynh, not Mr. Babauta, who finalized negotiations with the hotels.

"I helped facilitate the initial meetings and terms with the hotels included in the process, then it was between the hotels and legal counsel to finalize the agreement," Ms. Rhodes said.

And that's a problem.

Mr. Esteves and the documents he provided confirm the procurement of the hotels is through his agency, not the Governor's Office. During the public health emergency and according to a March 20, 2020 designation letter to the Federal Emergency Management Agency by the governor, the only people authorized to obligate or expend federal money for this emergency have been Mr. Babauta and the alternate Governor's Authorized Representative, Guam Homeland Security Advisor Timothy Aguon.

But according to Ms. Rhodes, Mr. Esteves, and the documents disclosed, it was Mr. Huynh - who isn't even an employee of Guam Homeland Security/Office of Civil Defense - who obligated GovGuam and the use of federal funds for the hotels.

Mr. Esteves said that despite the ongoing use of the hotels since mid-March, the hotel contracts have not been fully executed, which directly contradicts a statement Ms. Leon Guerrero made in a news conference Wednesday. When pressed for the three price quotes required by law to be submitted prior to the execution of any contract (which obligates funds), Mr. Esteves said his office was not in possession of any such price quotation documents.

When asked how any contract was routed without his agency's certifying officer certifying the legal use of funds, Mr. Esteves said that no such certification of funds had been signed.

That led Kandit to ask whether any funds had been encumbered, obligated, or spent for the hotels. "No, none," he replied.

An April 17 email from budget director Lester Carlson, however, tells a different story.

"FYI and as discussed with CoS (Babauta) a week or so ago, BBMR and DoA (Department of Administration) made a verbal agreement to advance a 'good faith' payment to hotels and laundry providers. BBMR and DoA were prepared to make more 'good faith' more meaningful payments to hotels and laundry service providers two weeks ago but the funding source was revised. Despite this DoA, with and under consultation with DoA and without consultation with OCD under the guidance of recent E.O.'s, authorized payments to hotels and for 2 payments to the laundry service provider were processed. TO DATE WE HAVE PAID ABOUT $142,000 TO THESE PROVIDERS IN ADVANCE OF EXECUTED CONTRACTS AND CONCURRENCE FROM OCD AND GSA." (emphasis added)

The payments referenced by Mr. Carlson in his email were made at the direction of Mr. Huynh, who on April 6 received an email from Ajay Pothen of the company that owns the Pacific Star Hotel.

"Please see the attached invoice for the quarantine facility as per the GHS/MPL Agreement I previously signed," Mr. Pothen wrote in his email to Mr. Huynh, which Mr. Huynh then forwarded to Edward Birn, the director of the Department of Administration, Mr. Carlson, Mr. Babauta, Mr. Esteves, and to Jon Junior Calvo, the governor's new chief of staff.

Mr. Huynh previously directed the payment of invoices from the laundry provider on April 3.

The government's payment to these hotels and laundry provider without the existence of price quotes and other documents (stay tuned for the second part of this story) in the legally-required procurement record, without the certification of the legal use of funds, and without legally-executed contracts violates the island's procurement laws. The selection of certain hotels without competitive or merit-based bidding violates the law. The selection of certain hotels over others, at a time when the governor ordered the closure of the industry, and the payment to those hotels to keep them solvent and operating over others is a clear violation of the Anti-Trust Law of Guam. The failure of the Department of Administration to disclose all of this paperwork and the copies of checks paid to these hotels following a FOIA request for those documents violates the Freedom of Information Act.

And the paper trail leading to her son-in-law and legal counsel, who had no authority to obligate federal funds, is plainly illegal.

Why was there a rush to obligate federal funds and make cash payments to these hotels without contracts?

In a March 26 email, Mr. Huynh indicates his intimate knowledge of the financial position of the hotels:

"The unfortunate thing is that these vendors were only able to provide us with these accommodations if we agreed to pay as we go. They have cash flow issues and would need to pay their own staff and vendors. So if at all possible, would you help facilitate the payment of invoices (I've sent them to Chuck Esteves already). The contracts will follow as soon as the AG is done with review and all other signatures are captured. I do believe the governor's executive order allows for the fast tracking of these. In fact, it may allow us to forego some things as well (I am not advising that)."

At least one of those hotels - the Pacific Star - is managed by a company with a $32 million mortgage with the Bank of Guam, where Ms. Leon Guerrero recently was its president and CEO, and where her son in law Mr. Huynh was her lawyer.

As for Mr. Babauta's involvement in the botched procurement, in a March 29 email to the government's finance officers, the adjutant general, Civil Defense, hotel coordinator Rebecca Respicio and the governor's new chief of staff, he directed, "Haig will have the conversation with PacStar - Please keep Charles Esteves in the loop on this so that he can track for FEMA and reimbursement purposes."

This is only the beginning of this story.

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