Former IES finance director pleads guilty to embezzlement conspiracy

Despite receiving warnings from an auditor with the Office of Inspector General, the chief executive officer of International Educational Services Inc., or IES, advised his financial director “not to adjust the salaries to the cap limit” as they were told, according to a plea agreement between federal prosecutors and IES’ finance director.

Juan Jose Gonzalez, the former finance director for IES, pleaded guilty Tuesday morning to two counts of conspiracy to embezzle money meant for the nonprofit and theft concerning programs receiving federal funds.

Gonzalez is facing up to 10 years in prison.

IES was a nonprofit organized under the laws of Texas that operated chiefly in the Rio Grande Valley, including Cameron County, that contracted with the federal government under the Unaccompanied Alien Children care and placement program.

The UAC is a federal program that provides placement, housing, food and other services to children under the age of 18 who have no lawful immigration status in the U.S. nor parent or legal guardian available to provide them care and physical custody.

This program is administered by the Office of Refugee Resettlement, also known as ORR, which is a program of the Administration for Children and Families, or ACF, an office within the U.S. Department of Health and Human Services, or HHS.

According to the fact summary sheet within the plea agreement documents, defendants Ruben Gallegos Sr. and Ruben Gallegos Jr. were the chief executive officer and the executive director of IES between the years 2014 and 2017. Gonzalez was the finance director.

“IES received nearly all its funding in the form of federal grant funds,” the document reads. “For each fiscal year (FY) from 2014 through 2018, IES received millions of dollars in federal grant funds.”

In 2016, an audit of IES’ fiscal year 2015 conducted by HHS OIG found that Gallegos Sr., Gallegos Jr. and Gonzalez violated executive compensation limits and committed in less-than-arm’s-length transactions in violation of federal limits.

According to the document, Gonzalez received a salary of $375,177 in 2015 when the salary cap was $181,500. This yearly trend continued with Gonzalez receiving more than the cap.

“In 2017, Gonzalez was paid a salary of $249,716 which exceeded the salary cap of $187,000,” the document said. “All Gonzalez’s salary was paid with federal grant money.”

When questioned by authorities, Gonzalez stated that it was Gallegos Sr.’s idea to increase the executive salaries during an impromptu meeting, adding that he did as he was instructed and increased the salaries for each of the defendants.

Gonzalez also stated that in 2016, two years before IES shut down, he had been advised by an OIG auditor that the nonprofit couldn’t use federal grant money to pay its executives more than the cap.

“On June 30, 2016, Gonzalez sent an email to Ruben Gallegos, Sr. and Ruben Gallegos, Jr. advising them that they were in violation of the salary cap limit and advised them of the salary cap limit for FY-2017,” the document said. “Gonzalez stated that Ruben Gallegos, Sr. told him not to adjust the salaries to the cap limit and that they would continue to draw their salaries regardless of the cap.”

The three defendants were paid salaries far above the federal limits. Gonzalez was paid $641,115 above the federal salary cap limit from 2014 through 2017.

Gonzalez also rented property to IES at rates that exceed federal regulation, according to the court document.

In August 2014, Gonzalez purchased four wooden frame buildings for a total of $24,400 which were combined to make two portable buildings that were then leased to IES in Los Fresnos.

Under federal regulations, Gonzalez would’ve been able to charge IES $3,400 per year for renting each portable. However, Gonzalez rented the building to IES for $2,200 a month each from October 2014 to March 2018.

He also rented one of the portables under the name of an immediate family member, resulting in Gonzalez and his family member receiving $177,808 in rent from IES, which exceeded what was allowed under federal regulations by $148,258.

“From 2014 to 2017, the defendant’s executed similar portable building leases between IES and Gallegos, Sr. and Gallegos, Jr. that caused IES to overpay Ruben Gallegos, Sr. approximately $97,600 and Ruben Gallegos, Jr. $138,066 for the rental of their portable buildings in violation of federal regulations,” the document said.

IES had operated for years before abruptly shutting down and firing all of its employees on March 31, 2018.

During that time, neither the federal government or IES explained why the nonprofit suddenly closed.

It wasn’t until The Brownsville Herald filed a successful Freedom of Information Act request with the ORR’s ACF for communication between the agencies that information began to come to light.

On Aug. 30, 2022, the three men were arrested on the federal indictment, which matched the Herald’s reporting and expanded on more allegations.

The post Former IES finance director pleads guilty to embezzlement conspiracy appeared first on MyRGV.com.