San Benito counter sues VARCO to ‘protect’ taxpayers

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SAN BENITO — The city’s Economic Development Corporation is “protecting” taxpayers in a legal battle that’s led the agency to file a $1.8 million counter-suit against a real estate company building San Benito’s first resaca-side commercial development, officials said in a statement.

On Wednesday, officials said the EDC “continues to protect the rights of all San Benito residents who expect its leaders to be accountable,” about three weeks after filing the counter suit against VARCO Real Estate, a Brownsville-based company developing the Resaca Village project off Business 77.

Last month, the EDC filed the counter suit in Cameron County’s 107th state District court after declaring VARCO breached its contract based on failure to comply with agreements setting deadlines in which to complete the four-phase Resaca Village project.

”Since terminating the agreements with VARCO for terms and conditions that were not complied with, VARCO filed a lawsuit and has since refused to surrender the premises and property,” officials said in the statement.

”In response, the San Benito EDC filed a counter suit against VARCO for its failures over multiple years to meet contractual conditions and due to its misleading and deceptive representations,” officials said. “The city is seeking damages that could result in up to three times its actual damages which included loss of sales taxes, ad valorem taxes, employment opportunities and other economic losses. The residents of San Benito would expect nothing less than our diligent pursuit of justice.”

On April 29, VARCO filed a lawsuit against the city, claiming the EDC breached the parties’ contracts surrounding the development of Resaca Village, failing to “honor its obligations” under an agreement extending its construction timeline while claiming its amendments “void” because city commissioners had not approved them.

Then on May 24, the EDC filed its counter suit, referring to the parties’ performance agreement which “stated that the construction and operation of the mix-use plaza would create primary jobs, promote and develop existing, new or expanded business, and promote economic development, job growth and employment opportunities.”

According to the counter suit, the parties original agreement stipulated the project’s $2.15 million first phase, spanning 12,60o square feet including a “boardwalk” be completed by Sept. 30, 2020; the $1.2 million, 10,000 square-foot second phase be completed by Dec. 31, 2020; the $1.2 million, 10,000-square-foot third phase be completed by Dec. 31, 2021; and the $1.2 million, 10,000-square-foot fourth phase be completed by Dec. 31, 2022.

On April 18, the EDC’s board terminated the performance agreement along with a ground lease agreement with an extension option, the counter suit states.

“Despite the termination of these agreements, (VARCO) continues to holdover on the real property and occupies the premises in breach of the lease,” the EDC states.

The counter suit argues VARCO’s failure to comply with the performance agreement’s terms and conditions led the agency to declare the company in breach of contract, claiming “fraudulent, deceptive and misleading representations.”

VARCO “represented that their agreement conferred or involved rights, remedies or obligations which it does not have, or involve, or which are prohibited by law,” the countersuit states.

The EDC argues VARCO “failed to disclose information concerning services that was known at the time of the transaction when such failure to disclose such information was intended to induce (the EDC) into a transaction that it would not have entered had the information been disclosed.”

VARCO, the EDC claims, “represented that work or services have been performed when the work or services were not performed.”

Under the counter suit, the EDC is demanding “title to land and improvements” while requesting the court expel VARCO from the Resaca Village project site.

The counter suit, which requests a jury trial, demands $1.8 million.

On May 21, Justice of the Peace Chuy Garcia denied the city’s request to evict VARCO from the Resaca Village project site.

Amid the legal battle, officials are questioning the source of an investigation into San Benito’s EDC.

For weeks, Dolcefino Consulting, a Houston-based investigative firm, has been investigating allegations of “nepotism and political pressure” while also probing the EDC’s involvement in project’s such as VARCO’s Resaca Village.

“My question to the taxpayers is, ‘Who’s paying him?” City Manager Fred Sandoval, who serves as the EDC’s executive director, said Thursday.

On Tuesday, a Valley Morning Star article reported Sandoval said a member of Dolcefino Consulting told him, “We’ve been hired by VARCO attorneys.”

On Wednesday, Dolcefino emailed Sandoval, asking, “So you were simply repeating what you heard I said to someone else? Or what exactly? Who claims anyone said we worked for VARCO? Name please. Why would you do that? The article said you stood by your statement.”

“You have made false statements against my company in the local newspaper,” Dolcefino wrote. “No one from my firm has ever spoken to you. I certainly didn’t speak to you on my visit because you refused to see me. We do have recordings of two attempted calls by a reporter in our firm. I have attached them for your review. You can see we asked specific questions that you never responded to but did not discuss the confidential informant who first engaged our firm to investigate San Benito public corruption.”

In the email, Dolcefino continued, “We expect you to notify the newspaper and us in writing in the next 24 hours that you were, let’s say, mistaken. False statements made in reckless disregard of the truth are damaging to my company’s credibility and represent a corrupt interference in what is a legitimate investigation of nepotism and political pressure.”

Late Wednesday night, Sandoval emailed Dolcefino, stating, “I was misquoted …. I never said I spoke to you personally.”

On Thursday, Sandoval said he remembers a member of his staff telling him that an attorney representing VARCO hired Dolcefino.

“I remember when they first approached us,” Sandoval said, referring to his staff. “The lady identified herself as working for Dolcefino.”

Last week, Paul Serafy, an attorney representing VARCO, said the company did not hire Dolcefino’s firm.

For weeks, Dolcefino has been requesting the city release public records such as campaign finance reports.

On Tuesday, Dolcefino said an EDC attorney was “blocking” the release of agency board member Jose Morales’ cellphone records.

On Thursday, Michael Pruneda, the EDC’s attorney, denied “blocking” the request, saying he requested the Texas Attorney General’s Office determine whether the agency must release the information.

Because the EDC doesn’t issue agency-owned cellphones to board members, Dolcefino is requesting Morales’ private cellphone records, officials said.

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