UPDATE: Deceptive trade practices, fraud alleged in City lawsuit against water plant’s engineers, manufacturers

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Fraud, negligence, breach of contract and violations of the Deceptive Trade Practices Act are among the allegations cited in a 13-page lawsuit that the City of San Benito filed against the engineers and manufactures involved in the design and construction of a problematic water treatment facility.

The civil suit was filed Monday, Aug. 25, and names Evoqua Water Technologies, LLC; U.S. Filter Wastewater Group Inc.; Siemens Corporation; CSA Construction, Inc.; and Cruz-Hogan Consultants, Inc. as the defendants.

The City argues that Orlando Cruz, identified in the suit as a principal owner of Cruz-Hogan, “advised plaintiff of the need to expand plaintiff’s ability to treat water” – this after he began serving as San Benito’s city engineer in 2002. According to the suit, the City then contracted with Cruz-Hogan to provide engineering services for the preliminary design and construction of Water Treatment Plant No. 2 – a $17 million facility prone to malfunctions and currently rendered inoperable.

More recently, Assistant City Manager Hector Jalomo said Plant No. 2’s membrane filters may have malfunctioned and estimated up to $100,000 in repairs. However, concerns that the facility’s membranes were at fault have since been reported, and a study conducted by Lou Portillo and Associates PLLC as well as Coym, Rehmet & Gutierrez Engineering LP stated that the facility “never operated efficiently except in the early months of operation.”

In the suit, the City states that Cruz-Hogan created a pilot study, which was approved through bid specifications, to be conducted on the membranes. Three membrane manufacturers participated in the 90-day study, one of which was U.S. Filter. CSA Construction was selected as the general contractor and Siemens Corporation provided all components of the water filtration system.

In 2004, U.S. Filter was acquired by a Siemens division purchased in 2013 by AEA Investors, L.P. and turned into Evoqua Water Technologies.

Concerning the pilot study, the suit alleges, “…during the second run, a sudden ‘fouling event occurred that the membrane never truly recovered from’ causing the membrane to fail. U.S. Filter and Cruz-Hogan did not adequately investigate the failure or perform a root cause analysis of the failure. Instead, U.S. Filter and Cruz-Hogan proceeded to replace the membrane filter with a brand new filter, and proceeded with the testing schedule.”

The City also argues that Cruz-Hogan and U.S. Filter were contracted to construct Plant No. 2 with a capacity of treating 6 to 10 million gallons of water per day (MGD). But the Portillo study reportedly found that Plant No. 2 produces just 2.4 MGD; 2.8 MGD is achievable “with great effort on the part of City staff.”

Cruz-Hogan, Siemens, U.S. Filter and Evoqua have specifically been accused of negligence while Siemens, U.S. Filter and Evoqua alone face allegations of fraud for allegedly installing different membrane products than those represented in the pilot study and presented to the City for selection.

The four companies are also accused of negligent misrepresentation, breach of warranty and violations of the Deceptive Trade Practices Act.

All defendants face breach of contract allegations.

The City is also seeking the following in damages: actual and direct damages; statutory damages; consequential damages; cost of repair and/or replacement; cost of reconstruction; cost of removal; statutory entitled treble damages where applicable; diminution in value of Plant No. 2; court costs; attorneys’ fees; pre- and post-judgment interest; lost profits; litigation expenses; and punitive, additional, statutory and exemplary damages of the maximum amount allowed by law.

Attempts to reach the defendants’ representatives were unsuccessful as of press time Friday.

City officials, meanwhile, were candid in a statement issued on Friday.

“The City of San Benito’s newest water treatment plant has experienced significant problems that required its closure,” the statement read. “The failure of the new plant to operate as expected has led the City Commission to consult with multiple outside parties, including top industry specialists. We came to the conclusion that there was no choice but to file a lawsuit against the parties responsible for the plant’s deficiencies. Resolution of the issues at little or no cost to the residents remains a top priority for the City Commission.

“The City’s goal in filing a lawsuit is to make sure that the City and its residents get what they were promised by the parties that designed, built, and provided important equipment for the plant. What the City contracted for was a plant that could treat 6 million gallons of water per day with the ability to expand to 10 million gallons in the future. This plant has never come close to that, and its maintenance has been very costly.”

Water Treatment Plant No. 1, which was once deemed antiquated and potentially incapable of continuing to serve a growing San Benito, continues to serve the citizens’ water needs without limitation.

“For the time being, the City has been able to meet current needs by relying on its older water treatment plant,” the City statement concluded.


Permanent link to this article: https://www.sbnewspaper.com/2014/08/30/update-deceptive-trade-practices-fraud-alleged-in-city-lawsuit-against-water-plants-engineers-manufacturers/


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    • Juan on September 4, 2014 at 7:02 pm
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    Criminal charges should come out this mess,heads need to roll.

    • Very Concerned on September 3, 2014 at 9:14 pm
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    Based on what we have seen so far from the newspapers, it appears the City may have suspected some deception but did not have enough credible information to confirm it. Maybe one of the insiders finally dropped the dime on the bad guys?? The $2,000 retainer still troubles me, if they suspected fraud. Under Joe Hernandez regime, no telling what was going on.
    It will interesting to see who the attorneys depose. The people getting deposed better know that their careers will be on the line if they start telling lies. Criminal charges could come out of this mess!

      • Reform San Benito on September 4, 2014 at 9:23 pm
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      Think we witnessed the first shoe dropping with the elimination of Jalomo’s position. The commission should review EVERYone carefully, including the city manager. I also think the citizens should replace J.D. Gonzalez and J.D. Penny for voting along with Joe Hernandez to bring back Cruz-Hogan. These two gents also re-appointed Victor Trevino and Chon Lopez to boards after Mayor Sanchez had them removed from boards so they couldn’t victimize us citizens any longer. Clearly Gonzalez and Penny stand in the way of our city moving forward from corruption. If you’re not part of the solution boys, you’re part of the problem.

      Gonzalez and Penny go in 2015! ENOUGH OF THE CORRUPTION AND SELF-SERVING COMPADRISMO that has been ruining this city too long!!!

        • Political favors on September 5, 2014 at 10:05 am
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        On the agenda last Tuesday was a curious item. There was an item to hire for an unbudgeted position of an additional computer tech. Did the City Manager put the item on the agenda as a genuine need or was it placed on by a couple of City Commissioners wanting to pay back one of their political pals? Any thoughts??

          • Reform San Benito on September 5, 2014 at 7:27 pm
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          If you’re asking if I have an opinion, I ALWAYS have an opinion! lol

          As far as that item, though, I really don’t have enough insight into the reasoning behind it. I know that our IT budget for fiscal year 2013-14 is 533,544, 2.5 times what it was just 2 years ago. If creating a $60,000 per year position would eliminate $100,000 or more from the IT budget, then it makes sense. I’d be in favor of adding 2 people at $120-130K annually if it cuts that figure in half ($265K).

          The problem is not in adding another position, it’s in the mistrust of the motives many have towards our elected officials and administration. When the overwhelming sentiment in our community is cynicism, then we have to change what we are doing. How many times do we put our hands on a hot stove before we learn that it hurts like hell? Once is all it takes for the dumb and stubborn to learn that lesson that most of us learn from common sense. Why do we keep electing and re-electing people based on the sole reason that we’re friends with a family member? We need to do better as citizens before we can expect better results as a community.

    • Karma is a ***** on September 2, 2014 at 12:30 pm
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    I don’t know if or when they became aware of the problem. You will have to ask them.

    I checked the web page and they are meeting tonight!


      • Reform San Benito on September 2, 2014 at 8:19 pm
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      It would seem to me, judging by the city’s official comments, that they knew within the first few months of the water plants operation that the plant could not function to the designed specifications and city’s expectations, as represented by Cruz-Hogan. If the city knew of the plants failures within the first few months of operation in 2007, the city may have waited too long to sue.

      The civil statute of limitations in Texas is two years for most torts (wrongs), and the time starts to run generally at the time the wrong occurred. Based on the comments by city employees, it seems the city knew as far back as 2007 — early 2008, at latest — that the plant could never function as planned. If that’s the case, the city may not be successful in this suit. Simply, the city may have waited too long to take action. The city — taxpayers — may end up eating the $17M because the administration and elected officials failed to take action sooner when aware of the problems.

      But, what do I know; I’m not a lawyer. I’m just hoping against hope, like the rest of my neighbors, that our elected officials have not failed yet again.

        • Very Concerned on September 3, 2014 at 9:20 am
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        Is there a statute of limitations if the City can prove fraud? Not sure.

          • Reform San Benito on September 3, 2014 at 4:55 pm
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          Good question. What do you think the fraud might be? I do have concerns about the reasons this issue wasn’t brought to light sooner. Was it fraud, per se, or just irresponsible management by past administrations and commissions? Were some covering for the engineer?

            • Howard Johnson on September 3, 2014 at 8:05 pm
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            Only in the RGV

        • Juan on September 4, 2014 at 7:12 pm
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        Yeah,you can get the engineers professional license revoked,thus ending his career,as a P.E.,it happens all the time in civilized communities.Then we work on those “elected” officials, more than enough to go around,vatos.

    • Very Concerned on September 2, 2014 at 10:26 am
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    Thanks, Karma for a great rundown. My only problem with this issue is that the City Commission in September 2013 knew of the water plant problems and did nothing; (and so did the City Manager and City Attorney). How on earth did they put the engineer that built something that doesn’t work on a $2,000 per month retainer??
    So why didn’t the City Manager and City Attorney speak up?? That doesn’t make good sense! This smacks of conspiracy and protectionism.

    • Karma is a ***** on September 1, 2014 at 4:14 pm
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    Very interesting that Cruz-Hogan Consultants, Inc. is listed as “defendant” in the civil suit.

    Before proceeding, please read the comments from previous article by the San Benito News “Study shows water plant almost ‘never operated efficiently’” to put my comment in its proper perspective.

    Taking a cue from the comment by Mr. Pepe Roni, I did some further research and inquiries to the city and following are my findings:

    Valley Morning Star article titled “City Seeks bids for engineering projects; reviews proposals” dated September 3, 2013.

    On September 4, 2013, just weeks before the budget was approved for the next fiscal year, former Mayor Joe Hernandez, Commissioners JD Penny and Joe D. Gonzalez “managed” to rehire Cruz-Hogan, Inc. You can read the minutes here if you so desire. In summary, there were three firms interviewed in this order, (1) Coym, Rehmet & Gutierrez, (2) Cruz-Hogan Consultants, Inc., and (3) LNV, Inc..

    Summary of minutes:

    • Public interview of three engineering firms.

    • Mayor Joe Hernandez opened the floor for selection of an engineer.

    • Mayor Pro Tem Antonio Gonzales NOMINATED Victor Gutierrez.

    Commissioner Joe D. Gonzalez NOMINATED Cruz Hogan.

    • Mayor Hernandez asked for any other selections and then “put Cruz Hogan FIRST up for a vote” and asked for a second to the motion (I guess a nomination is considered a motion in this case) by Comm. Joe D. Gonzalez to appoint Cruz Hogan.

    Commissioner Rene Villafranco SECONDED the motion.

    Motion passed with Commissioners JD Gonzales, JD Penny, and Rene Villafranco voting to APPOINT Cruz-Hogan as the city engineer.

    Mayor Joe Hernandez stated to Mayor Pro Tem Antonio Gonzales “Majority overrules, Tony. Selection has been Cruz Hogan”.

    Cruz Hogan was awarded a contract (you can read contract here) with the City of San Benito effective October 1, 2013 that expires on September 2014. It obligates the city to pay $2,000 per month retainer (plus compensation for additional services or for any design of public works projects, if reqeusted by the CITY..) to CRUZ-HOGAN CONSULTANTS, INC. to act as the City Engineer..

    Please remember this comment by “WeThePeople”. It is so appropriate.

    Commissioner Villafranco barely got re-elected this year but Commissioners JD Penny and JD Gonzales are up for re-election next year.

    So “Please VOTE” and vote for the “FUTURE of San Benito” by electing new people and not just the “Recycling of the Past”.

    1. Actually, when there is more than one nominations or motions, motions have to be voted on individually in the ORDER they were made until one passes unanimously.

      I was present at this meeting but I couldn’t object so I just let it go. However, if you read the minutes again, you will notice that the City Attorney, Mr. Morado, was not present at the meeting. Otherwise, I am positive he would not have allowed it to happen.

      This is not the 1st time this City Commission has violated Roberts Rules of Order when the City Attorney is not present; but that is a whole other story.

      One other thing they did was to tell the Engineering firms being interviewed to exit the meeting room and one of the doors was closed while each firm was individually interviewed by the Commission. A public meeting is OPEN to everybody including those being interviewed.

      The city attorney is present only when his presence is requested by the Commission.

        • Uncle Sugar on September 3, 2014 at 10:47 am
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        Yes, Mr Rodriguez…you quote procedures, but look who was running the meeting…someone that could barely spell their own name. Duh.

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