The Municipality of Caguas canceled the contract with Universal Properties Realty Government Services, LLC., after an internal investigation confirmed irregularities in the process of declaring public nuisances and their sale by that company in Caguas, said Mayor William Miranda Torres in an interview with the Center for Investigative Journalism (CPI, in Spanish).
The Municipality notified Universal Properties of the contract termination on May 16, alleging that the company improperly withheld $1,569,173.19. That number includes $128,603.19 in fines and taxes the company collected but did not remit to the Municipality; and another $48,000 that corresponds to the Municipality for the purchase and sale of several properties that Universal Properties carried out on its behalf.
Furthermore, Miranda Torres requested that the Municipality be given $1,392,570 that the buyers have already paid in advance to Universal Properties to buy properties declared public nuisances, but whose expropriation cases have not yet been filed in Court.
Universal Properties legally represents the Municipality of Caguas in property expropriation processes. It is also in charge of the technical work of appraisal and maintenance of the property and its subsequent sale.
The attorney for Universal Properties, Antonio Alvarez Torres, said the company requested reconsideration from the Municipality since the municipal government unilaterally canceled the contract violating the agreements reached between the parties and lacking all the information to make a deliberate decision.
The company asked for another meeting, but it was not granted. The lawyer said that they are waiting, then, for the response to his request for reconsideration in which he denies any illegal action on his part.
Red flags were suddenly raised
Miranda Torres did not want to specify when these alleged irregularities were identified, but the CPI has made requests to the Municipality since March 30 for information on the contracts to manage public nuisances. On April 13, 2023, the CPI requested the list of public nuisances assigned to the companies that provide the identification and sale services of these properties for the town. It also requested the breakdown of the income that the Municipality received from the sale of expropriated properties, copies of all the contracts signed with possible buyers and the progress reports or any other document that the companies submitted to update and detail the services provided.
“Flags began to be raised, so I asked my legal advisor [Mónica Vega] along with the team to start an investigation of all the cases. In that investigation, she learned of mismanagement of funds and other things,” said Miranda Torres, who also appointed lawyer and accountant Alex Rivera Longchamps as the investigating officer in this matter.
“When you review the invoice, the reality is that just looking at it raises a lot of red flags. The way in which the appraisals, the title studies, and the intervention process are settled, and the three contracted companies are notified,” Rivera Longchamps said.
Those invoices that Universal Properties submitted to the Court were included in the files that the Caguas Permits Office had to oversee. Until a few weeks ago, and prior to the appointment of Rivera Longchamps as investigating officer, the director of that office, Jaime Plaza Velázquez, told the CPI that he was pleased with Universal Properties’ work and the other two companies that manage public nuisances in Caguas, the Francis & Gueits law firm and City Renewall LLC.
“We keep track with monthly meetings with each contractor and we are fine-tuning the process,” engineer Plaza Velázquez had said in an interview with the CPI less than eight weeks ago. “We are consistently following up on the companies,” he said then.
In the letter in which it asks the Municipality to reconsider its decision to cancel the contract, Universal Properties alleges that the municipality knew — because it was discussed in monthly follow-up meetings — of practically all the actions that it now points out as deficiencies.
Last Tuesday, during the interview with Mayor Miranda Torres, the director of the Permits Office could not explain how the municipality went from being “satisfied” with Universal Properties to rescinding its services, as well as referring that contract to the Department of Justice and the Puerto Rico Office of the Comptroller.
“There were regular meetings where we discussed our thoughts and requested information about the processes, how they were doing. There are situations that, as the lawyer rightly indicates, are detected once the legal file is seen in detail in the Court and that is when this type of anomaly is detected,” said Plaza Velázquez when the CPI asked him about how he supervised that service.
During his investigation, Rivera Longchamps was also struck by the fact that in one of the cases presented at the Caguas Superior Court, the lawyer for Universal Properties — whom he did not identify — considering a court order to produce documents detailing the invoiced amount, chose to submit a motion to withdraw, without this being the municipality’s will because the town was not even consulted.
Rivera Longchamps explained that, after reviewing the eminent domain court files presented by Universal Properties and noticing the lack of supporting documents or evidence of expenses incurred, a decision was made to investigate all public nuisance management cases in the hands of the three companies.
“The investigation is 100% of the cases, it was my instruction,” said the mayor of Caguas. “We are going to take all the cases, even if there are a thousand cases,” he added.
In referring the findings to the Department of Justice and the Comptroller’s Office, the Municipality points out that during a meeting that the town’s personnel had with Universal Properties executives, the company admitted that “the invoices presented to the Court include expenses that were not actually incurred or, at least, they were incurred for amounts less than those submitted in their invoices.”
Another alleged irregularity referred to by the Municipality is the granting “of at least one deed of sale without the judicial process having been completed through the publication of the edict on the sentence handed down in the expropriation process.”
This is the second referral submitted to Justice and the Comptroller regarding the Universal Properties contracts. The first was submitted by pro-independence lawmakers María de Lourdes Santiago and Denis Márquez.
Twenty-two Popular Democratic Party (PPD, in Spanish) and New Progressive Party (PNP, in Spanish) mayors delegated to Universal Properties Realty Government Services the process of declaring public nuisances in their municipalities, a practice that has resulted in many of the original owners not being paid fair compensation and in lawsuits, a CPI investigation found.
The privatization of the management of public nuisances has given this company control of the entire process, from the declaration of a public nuisance, the property’s appraisal, the notarization of documents, the legal representation of the municipalities before the Court for forced expropriation, to the processing of the property sales.
Following the publication of the CPI investigation, in addition to Caguas, in recent weeks the municipalities of Arroyo and Guayama have also canceled their contracts with Universal Properties. Previously, Loíza, Canóvanas, Ponce, Guayanilla and Arecibo had terminated their agreements with this company.
The Municipality of Caguas confirmed that so far 16 properties have been expropriated and sold to a third party, although it did not specify how many of those cases Universal Properties processed. The Municipality has had no income from the properties that Universal Properties expropriated and sold to a third party.
“I’m now seeing how I continue to make the adjustments so that [the remedy] is fair for those people who have been duped and for me too because [the town’s] money is involved,” said the mayor of Caguas.
The mayor assures that he learned about the problem through the investigation initiated by Rivera Longchamps, which was assigned to him after requests for information from the CPI to the Municipality, press reports and the referral from the pro-independence legislators.
“As part of the request for information, [Universal Properties] is being asked for specific evidence of all of them [purchase and sale contracts]. That includes [the requirement] the presentation of the copy of the deed as it was signed, evidence of the payment received according to the notary certifying the deed and verifying that this is the reality that occurred in the legal transaction, the money in question,” Rivera Longchamps explained.
Public money for private business
The Municipality’s decision to terminate the contract with Universal Properties was influenced by the fact that, in a meeting, the vice president and director of the company’s Legal Division, José Deyá, and attorney Abraham Freyre, allegedly admitted that the payment received from potential buyers of public nuisances was not deposited in a special account, but the private corporation’s account and that the money deposited was used “in Universal Properties’ ordinary course of business,” according to the contract termination document. Also, in some cases, the company has formalized contracts and received money from more than one buyer for the same property.
“[At the meeting] there was no reasonable explanation for those inconsistencies to put it mildly. As a result of that meeting, some requirements were made. They answered the request late and unsatisfactorily. Once there was specific data and nothing speculative, it was presented to the mayor. Based on this, the mayor decided [to cancel the contract and make the referrals],” Rivera Longchamps explained.
In the letter that Universal Properties sent to the mayor, it claims that the Municipality knew that the buyers’ money was deposited in the company’s account and that a portion of those funds was used for the company’s operations. The company argued that it was not necessary to deposit them in a special account because Universal Properties supposedly does not work as a real estate agent, but rather is a go-between the Municipality of Caguas and the buyer.
The company also denies that it has improperly withheld $1.5 million and that it has made sales efforts for the same property with two different buyers. It alleged that what it has done is substitute one buyer for another when the first one pulls back, and that the municipal government knew about the process.
“[Universal Properties] has never refused to remit payment of taxes” or fines or taxes, the letter states, and that it only asked for time to reconcile the accounting books, validate the exact amounts of each item, and carry out the corresponding procedure to certify checks made out to the Municipality.
In the request for reconsideration, the company said it “has never withheld nor intends to withhold for itself public funds that correspond to the Municipality.”
Reviewing other companies that handle public nuisances
The Municipality has also requested information from the Francis & Gueits Law Office and City Renewall LLC. Rivera Longchamps said the Municipality only canceled the contract with Universal Properties because, so far, the Municipality has only been able to verify its deficiencies in the handling of its contract with Caguas.
In the case of Francis & Gueits — which also charges by invoice and not from municipal funds — specific billing information has been requested, which includes the agreements for the services they have been subcontracted. He said he has not yet reviewed the court files of the expropriation cases that were or are handled by this firm to corroborate the accuracy of the processes and billing.
“We want to verify that what they invoice as service charges are indeed under contract. In other words, not only do we want to see who did the title study, appraisal, and cleaning, but we are asking to examine the contracts with those people and the evidence that they actually paid them,” he said.
The contract that Caguas has with City Renewall LLC is different from that of the other two companies because it invoices the Municipality per hour worked up to a maximum of $60,000 per year. The Municipality also reimburses — once the supplier’s invoice has been submitted — the expenses incurred in appraisal, title studies, registry certifications, measurement, filing of cases, summons, experts, and others. The company charges these subcontractor invoices a 15% handling fee up to a maximum of $40,000 per year.
Universal Properties Realty Government Services and Francis & Gueits do not invoice the City directly for their services. The amount of their invoices — about $20,000 — is subtracted from the value of the property to be expropriated and remains as an outstanding debt of the registered owner, but it also charges the person who buys the expropriated property.
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