Michael Duenas, retired chief planner, then executive director at the Guam Housing and Urban Renewal Authority, testified in federal court he spoke to Mark Smith directly about his conflict of interest. At the same time, he gave the jury insight into confusion and miscommunication among and between GHURA and HUD officials regarding Smith. Mr. Duenas was appointed the executive director around the time when Mr. Smith’s conflict-of-interest arose and eventually ended in an avalanche of subpoenas and a federal raid at the GHURA office. Mr. Smith was retained as GHURA’s legal counsel and was allegedly improperly benefitting from GHURA’s Section 8 program as a landlord to Section 8 tenants. The government argued that as legal counsel to GHURA, Mr. Smith had influence over GHURA’s policies and functions of the programs that the authority administered, such as the Section 8 program.
Prosecutor William Doolittle asked Mr. Duenas if Mr. Smith mentioned he was a Section 8 landlord upon being hired as GHURA’s attorney. Mr. Duenas said, “We met with attorney Smith to go over some of our concerns, but I don’t recall that issue being raised.” Mr. Doolittle then asked what concerns Mr. Duenas and Mr. Smith went over. Mr. Duenas said, “We talked about conflict of interest in terms of him providing prior representation to someone who was involved in a legal issue with GHURA.”
Mr. Doolittle questioned if Mr. Smith offered legal advice regarding the Section 8 program. Mr. Duenas said, “Section 8 is one of those programs so highly regulated that what we would go to legal counsel for request would be things like reviewing the administrative plan to make sure we were still consistent with the federal regulations and laws.” When asked what the administrative plan involved, Mr. Duenas said, “It’s a plan that is periodically revised. Basically, this is how GHURA is going to process applications for housing, the process of the inspection of housing units and the renewal of contracts. And basically, the intent is to ensure we’re complying with all the assorted laws and regulations and administrative guidance concerning the Section 8 program to include eligibility, the required documentation, how tenant income would be determined…very comprehensive.” Mr. Doolittle asked if a proposed administrative plan would be subject to review by legal counsel? Mr. Duenas responded, “We always customarily made sure it went through review.” Mr. Doolittle then asked if legal counsel would be offering advice about the Section 8 program, to which Mr. Duenas responded, “He would recommend changes to tighten up language I think.”
The continuing issue of the conflict-of-interest forced Mr. Smith to resign as of May 1, 2013. Mr. Smith’s resignation led to problems at GHURA with having to retain other primary legal counsel. This had a domino effect on the communications between HUD and GHURA from a legal standpoint, according to Duenas. Mr. Doolittle asked Mr. Duenas his opinion regarding the resignation. Mr. Duenas suggested, “I believe he just felt frustrated with the ongoing battle and question of conflict of interest. And I believe at that time also there were still questions of whether he had an interest in the properties that were covered under various lease agreements for various tenants.”
Attorney Mike Phillips, starting his cross examination of Duenas, began with a narrative about Duenas’s first days as GHURA leader. Things began to escalate at the authority, with HUD hot on GHURA’s trail of what seems like a conspiracy and cover-up of Mr. Smith’s conflict-of-interest, according to Mr. Phillips. Mr. Phillips suggested that GHURA was scrambling frantically to reposition themselves in a favorable light. Mr. Duenas said of the situation, “There’s a lot of tension or turmoil within GHURA and correspondences with HUD on a couple of issues.” Mr. Phillips asked if there were problems within the management at GHURA. Mr. Duenas admitted, “Yes.” He also said, “My approach was basically try and diffuse the tension and get everyone focused on resolving problems.”
The problem they were directly faced with was answering to the subpoenas, according to Duenas, attorney Cynthia Ecube was hired as conflicts counsel for GHURA to deal with conflicts regarding the subpoenas. One of the candidates was attorney Anthony Perez. Duenas said of the decision to hire Ms. Ecube rather than Mr. Perez, “I believe there were concerns that attorney Perez may have been involved in some of these issues which would put him into a conflict and so it was thought it was best to have an attorney who had not been involved in any of the issues be employed to deal with the subpoenas in the investigations.” Ms. Ecube’s legal opinion was needed to accompany the waiver request that HUD required for Mark Smith’s conflict-of-interest.
Mr. Phillips inquired about when GHURA submitted the waiver request to HUD for Mark Smith. Mr. Duenas said, “Shortly after Mr. Smith resigned as legal counsel, I sent that information up to HUD and I didn’t hear from them for a while. And then they came back and asked me to go ahead and submit the request for a waiver. And I asked them ‘Isn’t the situation moot since he’s already resigned?’ then they said ‘just complete the process and tie up all the loose ends. Go ahead and submit the request for a waiver.’”
Mr. Phillips asked Mr. Duenas if HUD was starting to get upset because the waiver was still not submitted? Mr. Duenas said, “I don’t know what they were doing. There was a lot of turnover in the Honolulu office. Their legal counsel had resigned, Mike Flores had resigned and unbeknownst to us, they had their own little scandal going and one of their staff being a Section 8 landlord.”
The pattern of conduct among GHURA’s management was then highlighted in Mr. Phillips next line of questioning. Mr. Phillips asked about Mr. Duenas’s criminal case in which he plead guilty. A total of 24 subpoenas were issued to GHURA from July of 2015 to June of 2017. The local prosecutor filed charges with the Superior Court for the violation of various laws concerning the open government law. Mr. Duenas explained, “That was basically that we communicated with the board members on certain items outside of the board meetings.” Mr. Phillips suspected that Mr. Duenas’s testimony was influenced by the charges against him. Mr. Duenas asserted, “No, my agreement was fulfilled, and the conviction was expunged so I’m no longer obligated.” In Mr. Duenas’s defense, he said, “I was basically following precedent at GHURA where sometimes there was no board meeting because there were issues of a quorum. Request would be circulated among the board members to approve something that would be validated at the very next board meeting. It was clear in my mind that I was following procedures in previous years between board and management relations.”
GHURA was investigated by the Departmental Enforcement Center, a unit within the Department of Housing and Urban Development. DEC is responsible for investigating any unusual activity in the programs funded by HUD. Mr. Duenas said, “They were doing a very broad review of GHURA. As I said, they looked at our cash receipts and disbursements, they looked at our procurement activities, they looked at the independent audit report, they looked at the monitoring reports from the HUD field office. They touched on several issues that went back to 2008, 2009. One of the things I do recall was that…they found disbursements for like $6.00, $7.00 for a bottle of water and they felt that was ineligible activity. And I looked at that and I said…these are the things they’re coming up with? Somebody paid too much for it.”
Mr. Phillips asked about GHURA having to pay back any money, including money spent improperly hiring Smith as legal counsel, as directed by HUD. Mr. Duenas recalled, “At that point, we were discussing things with the Honolulu field office, clarify things, find out if there were any avenues for appeal or what exactly were the next steps.” Mr. Phillips suggested that GHURA management was trying to get out of trouble by passing the buck on to Mr. Smith and claiming they had no part in anything illegal.
Mr. Doolittle, in redirect, inquired about the legal opinions by Mr. Smith that were requested in the subpoenas. Mr. Duenas repeated that GHURA staff searched all the files in the office for any legal opinions written up by Mr. Smith. He was not aware of any legal opinions from Mr. Smith. Mr. Doolittle asked about the “avalanche of subpoenas” to which Mr. Duenas explained, “I was referring to the volume of subpoenas that started in July of 2015 and ended in around May or June of 2017. I believe there were a total of 24 subpoenas in addition to a search warrant.” Mr. Doolittle queried if Mr. Duenas was there during the search. He explained, “Yes. They came in just before 4:00 and basically served the search warrant and requested everyone to turn off their computers, began escorting the staff out of the building. It was a Friday, I believe, and they were there I believe through the weekend. And in addition to reviewing the hard copies of what were in there in the accounting office, executive office, and the program staff, they also made a copy of the files in our server.”
Mr. Doolittle then admitted into evidence, two legal opinions written by Mr. Smith, showing that he did in fact, influence GHURA’s Section 8 program. The legal opinions were read aloud by Mr. Duenas. The first two paragraphs of the first legal opinion read:
GHURA’s compliance with Housing and Urban Renewal Development Regulations
“Dear Mr. Topasna,
I am writing this letter stating my position regarding GHURA’s recent decision to pursue adverse actions against a number of employees for violating GHURA personnel rules and regulations. These employees violated a number of GHURA personnel rules and regulations. These employees violated a number of GHURA personnel rules and regulations by discrediting the authority through poor behavior by unauthorized possession of (inaudible) property and basically failing to perform their job responsibilities and duties when managing various GHURA projects. Although the Guam Housing and Urban Renewal Authority is a government of Guam agency it is autonomous, and 100 percent federally funded. The federal funding for GHURA as well as federal projects it implements would be jeopardized and the funding cut off if specific regulations set up by the Housing and Urban Development, HUD, is not strictly adhered to.
The reason I make this point is because the failure of GHURA employees to strictly adhere to the requirements set out by HUD could adversely impact the federal funding and federal programs here on Guam. As described to me the authority annually receives over 60 million dollars in federal money. (Inaudible) employees failure to strictly adhere to these federal program requirements set out, it would surely lead to GHURA’s non-compliance with HUD and result in loss of funds. For example, the Section 8 low-income program brings in over 25 million dollars of federal money into Guam every year. With each employee’s failure to strictly adhere to the Section 8 program such as confirming the number of people living in said units and showing no criminal felons are housed in said units and other requirements set out could lead to GHURA’s non-compliance with HUD. This will result in loss of funding not only to GHURA as a government agency but also the island of Guam through the federal program cancellation.”
Mr. Doolittle clarified with Mr. Duenas if the legal opinion relates to the Section 8 program. Mr. Duenas affirmed, “It includes the Section 8 program. Yes.”
The prosecution asserted that Mr. Smith himself, as a Section 8 landlord, entered into lease agreements with people who had criminal cases against them. He also made sideline deals, one of which was a “favor for favor” with his property manager, Gerino Taliman, according to Taliman’s testimony. The deal entailed maintenance on his property in exchange for clearing Mr. Taliman’s part of the rent he was expected to pay, per their lease agreement.
The second legal opinion authored by Mr. Smith was regarding the Guam procurement laws conflicting with federal law. Mr. Doolittle asked Mr. Duenas to read aloud the first paragraph:
“I am writing this letter to state my position with respect to conflicts which will and have arisen when GHURA adhered to Housing and Urban Development requirements when awarding federally funded projects. Guam procurement law is in conflict and inconsistent with federal law because it creates additional requirements to determine what a responsive and responsible bidder is. Whereas the federal government already has set out these expressed requirements through its bidding process. Thus, Guam law duplicates this process and creates an obstacle for GHURA when following the mandates of federal law.”
According to prior testimony from former GHURA director, Marcel Camacho, Mr. Smith had interfered with the procedures of awarding a potential applicant who submitted a proposal for a Low-Income Housing Tax Credit Program project. Mr. Camacho previously stated, “It’s a long story but I was following the direction of the Board who’s supposed to set the policy. We had reviewed five applications. Three of the applications were rejected because they did not meet one of the criteria in the rules for receiving the award so there remained two applicants. We were going through the process of interviewing the last two and Mr. Smith was assisting in reviewing everything and drafting letters. We had chosen to recommend to the board that one of the applicants receive the award and Mr. Smith actually even wrote a letter to the applicant stating that ‘everything was proceeding favorably for you’ and that letter I think is in the files at GHURA. But on December 26th, I believe, we had a special meeting of the Board of Commissioners at GHURA and I was called in so that they could inform me that they were not going to award the Low-Income Housing Tax Credits to the applicant that we had already sent a letter to. And that the Board made a decision otherwise. I could not understand what was going on. I felt that there was something out of the ordinary and so I left the agency, called my wife, asked her to pick me up. I left the car keys and the company vehicle there and I went home to enjoy my day with my parents who were celebrating their anniversary.” Mr. Camacho also said, “It related more to Mr. Smith not representing the authority in my viewpoint and I think at the time I was told that he wasn’t there to represent the administration. That he was there to represent the Board and we had that conflict so I asked him to step aside, and I asked conflicts counsel to come in and take a look at the situation and see how we should proceed.”
