There's More to the ARRA Controversy

July 31, 2011

Arrogance, defiance, and defensiveness are the standards of the Fitial Administration. Governor Fitial was defiant, unapologetic and defensive when his gun-toting driver was arrested for dealing drugs from the governor's vehicle. Governor Fitial and Attorney General Buckingham were defiant, unapologetic and defensive when the governor arranged for his masseuse to be taken from jail to give him a midnight massage. Governor Fitial, AG Buckingham and the cabinet members were defiant, unapologetic and defensive after it was exposed that they used their positions and power to campaign for Covenant candidate Joe Camacho during government hours and using government resources.

Now we see that Governor Fitial, Attorney General Buckingham and Integrated Professional Solution's (IPS) principal owners Michael Ada and Jose Padilla are defiant, unapologetic and defensive about the unethical deals revolving around the ARRA contract.  Laws were violated when Governor Fitial, with approval from AG Buckingham, awarded the ARRA contract to former Commerce Secretary Michael Ada and Jose Padilla's IPS even before the company had a business license.

The Players
Governor Fitial obviously considers former Commerce Secretary Michael Ada a loyal and important subject. Prior to Ada being awarded the ARRA contract, the two were traveling companions on many CNMI-paid trips: August 2010 to California, May 2010 to a California conference, March 2010 to Washington DC, February 2010 to Washington, DC, and July 2009 to the Micronesian Chiefs' Summit in Majuro.  Ada also travelled to Washington, DC as Insurance Commissioner in September 2010.

Michael Ada shared something in common with AG Edward Buckingham  also. Both were among present or past Fitial appointees or high level government employees who sponsored ethically-challenged campaign events for Covenant Party candidate Joe Camacho in his bid for Washington Delegate. In fact, Ada's campaign event was sponsored on October 22, 2010, just days after he was awarded the $392,406 ARRA contract.

According to the timeline explained in the DOI IG report, in August 2010 Ada informed Fitial he was resigning as Commerce Secretary (maybe on that CNMI-funded junket). Fitial instructed Ada to create a contract to administer the ARRA funds, which Ada did while still Commerce Secretary. On October 8, 2010 Ada resigned. On October 12th the ISP contract was approved, on October 13th ISP was awarded the ARRA contract even before the company Integrated Professional Solutions was licensed.  Buckingham approved it even though he knew it violated CNMI ethics laws. At that time Fitial also approved an advance payment to Ada in the amount of $78,418, or about 1/5 of the total contact amount.

Ethical questions were also raised in Fitial and Ada's persistent backing of scandal-ridden and now closed Ladera International School of Saipan (LISS). As Commerce Secretary Ada publicly supported Saipan's loosely regulated edu-tourism business.

Michael Ada's IPS partner, Jose Padilla previously received an ARRA contract and ethics questions are raised here also. Jose Padilla is a former executive at Red Rock LLC.  Red Rock was awarded an $50,000 ARRA contract by Ada.  Padilla also was awarded a contract for energy saving lights at the library, the CHC, and legislative buildings. The partnership between Ada and Padilla also adds to the mix of alleged violations including violations of the Government Ethics Act of 1992.  Did Red Rock have a license before it was awarded the contract? Was the contract completed before Padilla joined Ada at IPS?

Like many of us, Congressman Gregorio (Kilili) Sablan questioned the ARRA contract immediately after it was announced. In an October 19, 2010 he notified Vice-President Joe Biden concerning the legality of the ARRA contract.

Letter from Congressman Gregorio Kilili Sablan to Vice President Biden:

Also on October 19, 2010 an attack on Congressman Sablan was launched in the form of a letter to the editor written by IPS partner Jose Padilla. In the letter Padilla defends ARRA spending and attacks Congressman Sablan claiming that the delegate took credit for work that others actually did.

The most interesting element of the letter to the editor is a comment that the author, Jose Padilla wrote in the Marianas Variety, which proves that while he was a principle partner of IPS, which was awarded the ARRA contract, he was also the owner of Red Rock, a company apparently formed to secure ARRA funding and under contract with ARRA.  He wrote:

0#4 Jose Padilla October 21, 2009 10:10AMI do not have anything to hide, certainly not like unsubstantiated claims and lies made under aliases. Its the reason you and everyone know what Red Rock is doing. Fact, the work we're accomplishing reaches beyond the CNMI and beyond the government. We also have not won every proposal we have submitted, but we're trying. Here's another fact, the truth hurts, and this letter was a simple manifestation of that. Another fact is that an RFP for PM's was posted and multiple responses were submitted. There's more than one good business you slam here with your slander. The slanderous comments are lethargic and provide insight as to why you may believe an RFP was not posted. Putting in time and effort can go a long way. Last fact, the Guam Pacific Daily News, posted an article you should read about the CNMI's approach to ARRA funds, DOE: Guam Can Learn from the CNMI. I implore you to break through the archaic silo mentality and into the light so we may begin working together.

How can a person be the recipient of an ARRA contract (Red Rock) and at the same time be overseeing ARRA funds as a partner of IPS? Conflict much?

AG Edward Buckingham has shamelessly defended Governor Fitial and his repeated questionable actions which routinely violate ethics laws. In this latest ARRA scandal the AG has stood firm to back the violators. He may even be considered among the violators by approving the contract that violated ethics and procurement laws. As the head legal advisor for the CNMI government he has failed miserably. He continually makes excuses for violating laws whether they are election laws or ethics and procurement laws.

In the case of the ARRA contract, Buckingham reasoned that the interests of the CNMI were more important than following laws. The AG repeated this shocking statement to both the Saipan Tribune and Marianas Variety and in an arrogant  KSPN2 news interview. As I asked previously, based on the AG's reasoning what is to prevent others from using the AG's argument to break the law to meet what they interpret to be more important interests? Robbing to pay bills or have enough to eat, or speeding to be on time for an important meeting would be acceptable violations of laws using the AG's reasoning. Seriously, should an Attorney General be allowed to make exceptions to laws?  Shouldn't laws should be followed by everyone without exception? As head legal advisor for the CNMI A.G. Buckingham violated the public trust and most likely violated laws by his failure to uphold the  CNMI ethics and procurement laws.

An October 2010 press release from the Governor's Office that is published on the governor's website, makes carefully worded excuses for violating law to hire Ada:

The claim that only Ada could carry out these duties is pretty lame considering it is obvious that Ada could have stayed in the position of Commerce Secretary to fulfill these duties, but apparently decided that setting up a private business to oversee the funds would be personally more profitable.  Furthermore, since the contract was not even advertised no other person or company who may have been qualified and eligible to apply for the ARRA contract was given the opportunity to apply. The issuance of this contract was just another obvious unethical Fitial deal, similar to some unethical deals that he worked out with Abramoff and others previously.

All ARRA funded projects should be listed and updated on a state or territory's website, as mandated by the American Recovery and Reinvestment Act of 2009, U.S. P.L. 111-5.  President Obama promised the American people transparency in all stimulus-related transactions. Transparency is lacking with the flow of the CNMI ARRA funds.

As pointed out in an April 2011 oversight report prepared by the Department of the Interior's Inspector General (DOI IG) and the Office of the Public Auditor (OPA), the CNMI's ARRA website lacks updating and required facts about contracts awarded with ARRA funds.  The ARRA Website contains  no comprehensive listing of CNMI's ARRA-funded projects that includes specific dates that contracts were awarded and ended, principal owners of the companies (it lists company contact names only), and complete project descriptions. Other specifics such as the amount of the total contract funds that were allocated to the company's or agency head's salary, and how much was allocated to the projects' actual supplies and labor to accomplish the job are not revealed.

Deficiencies in the CNMI ARRA program that the investigation report listed have not yet been corrected, including that the CNMI ARRA website "should be kept current and complete for better transparency." The report stated:
For improved transparency and accountability, the CNMI should prepare data in a uniform format that is easy to update and can be used by the public to access all relevant grant information. Appropriate categories of information include grant amount, project name, contractor name, images, jobs created and expenditures as of the previous quarter that pertain to a specific grant. The timeliness, accuracy, and uniformity at the local level is crucial, as the federal website is updated quarterly using information obtained from the CNMI website. Thus any inaccuracies will likely be duplicated.
How is the contract legal?
CNMI Code of Ethics, Section 8473 states that CNMI contracts must reference this act and any found to violate it become void.:
Any permit, license, ruling determination, or other official action of a Commonwealth
governmental entity applied for or in any other manner sought, obtained or undertaken in violation of any of the provisions of this chapter shall be invalid and without any force or effect whatsoever.
Like any CNMI law, the ethics laws are useless unless they are enforced. Read the ethics law:

See these previous posts for background information:
More Problems with IPS and the ARRA Contract, July 27, 2011
Fitial, Ada and Buckingham Go National in Contract-Gate, July 27, 2011
Appearance of Federal Crime in ARRA Contract Scheme, July 25, 2011
Crossing the Line, July 24, 2011
More CNMI Corruption From the Ethically Challenged Fitial Administration, July 21, 2011
CNMI Abuses, October 26, 2010
Office of the Public Auditor Dropping the Ball? October 22, 2010
Contract Concerns Continue, October 21, 2010
OIA: "We don't want people messing with our money." October 19, 2010
Just as Suspected, October 18, 2010
Ada Steps Down as Commerce Secretary and Lands Contract From Governor, October 16, 2010

Read the DOI Report on the Investigation:


Anonymous said...

There are many potentially questionable aspects concerning the contracts related to this matter, but the timing of the business license is not one of them.

Bidders or proposers of work for and sales to the CNMI government are not required to have a CNMI business license at the time they make their submissions, but as a final condition of a contract becoming effective or pre-condition to actually engaging in business in the Commonwealth.

This is so that the CNMI government can benefit from greater availability of product and service providers, such as through entities already in business outside the Commonwealth, or new businesses starting up.

Let's stick to the real issues, and not get hung up on sideshows.

Anonymous said...

Noni 7:41AM (aka. Mr "Move it along, folks. Nothing to see here. Nothing to see.")

The fact that the business was not formed or licensed prior to them securing a SOLE SOURCED contract is very much a part of the issue. In order to justify sole sourcing the company itself plays an enormous role. You go ahead and keep trying to deflect people's attention from the truth. I believe Wendy is doing a much better job holding their attention and exposing this injustice!

Anonymous said...

Looks like you may have touch a nerve or hit on something big with Padilla. He just took down his Facebook page.

Anonymous said...

Wanna see pissed off American Taxpayers? Take a look at Sablan's non voting seat in Congress price tag! Flying back and forth first class, expensive meals, posh hotels, etc. Bring it.

Wendy Doromal said...

Anonymous 1:34

I am an American taxpayer. (Residents of the CNMI are not.) I am very happy to spend my tax dollars on Congressman Sablan (or the elected delegate) traveling to and from the CNMI as long as he/she is doing so to meet with constituents. Congressman Sablan is doing that. I disagree with H.R. 1466 (REALLY DISAGREE), but generally think Congressman Sablan is doing a good job. What evidence is there that he flies first class, eats expensive meals and stays in posh hotels? Doesn't he have a house there?

Wendy Doromal said...

Anonymous 7:41
I agree with 9:56. It's a real issue. To form a business just to get a sole source contract is unheard of. What issuing committee or person wouldn't be consider the length of time a company has been in business and their record of previous jobs when considering granting a sole source contract? Maybe some CNMI laws need to be changed and maybe the ARRA regulations should be looked at too. This is absolutely unethical.

Anonymous 12:24
I made screen captures/PDFs of the Red Rock facebook pages and the websites. Let me look at them again. I think the concern is the timeline exposed on them.

Anonymous said...

On many RFP's,(Request for proposals) world wide and in many other Fed. and State Govt. invitations there are minimum requirements put on bidders. Many times there is a 2-5 yr minimum company experience in the particular construction area of the proposed project. Also, many times a required specific length of time licensed and doing business in the place of the proposed contract.(this is also required by bonding companies on Construction projects)
Ex. in the past the NMI has required for a company submitting and RFP to be licensed and doing business in the NMI for a minimum of 5 or 10 yrs covering the experience (power generation) in regards to that what was being solicited. As has happened in regards to CUC takeover. (which RFP's have never been accepted)
Other RFP have been open to NMI contractors only etc. Other to US Cit.only.
In the case of the NMI it usually has been with smoke and mirrors in an attempt to get one of the connected or elected families awarded the Govt. bid or a certain company operating in the NMI the award as the company had promised a payoff to a certain elected that got that stipulation put into the invitation for the RFP.
It seems with this Administration, they have so much disregards and feelings of immunity against prosecution in regards to illegal activities that they show blatant disregards for local and Fed law.
Hopefully as they get bolder one will finally pass over the line and all will take a big fall.
Remember the old saying ? "If given enough rope......."?

Anonymous said...

The Feds state no federal laws violated. The CNMI Procurement system has so many laws due to exactly what IPS has done. After 25 years or so of a minority of politically connected sleazy contractors feeding at the government trough this is the result. You would be stunned at the number of new CNMI construction companies formed on Jan 1, 2006. Also, I would bet the number of sole sourced contracts issued under the Fitial government out number any other past administration.

Anonymous said...

The feds did not say no federal laws were violated, they just said we don't see enough evidence to prove beyond reasonable doubt that a federal CRIMINAL law was violated. I'm surprised nobody has filed an ethics complaint against the AG with the CNMI bar, or maybe they have and the process is closed. Anyone know how that works?

Anonymous said...

Noni 11:28,

Fraud committed with the handling of ARRA funds is CRIMINAL!

Quit with the feeble attempts downplay the level of fraud that was involved in this whole fiasco.

Anonymous said...

Maintaining The Integrity Of The Profession
Rule 8.4 Misconduct

It is professional misconduct for a lawyer to:

(a) violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;

(b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects;

(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(d) engage in conduct that is prejudicial to the administration of justice;

(e) state or imply an ability to influence improperly a government agency or official or to achieve results by means that violate the Rules of Professional Conduct or other law; or

(f) knowingly assist a judge or judicial officer in conduct that is a violation of applicable rules of judicial conduct or other law.