June 05, 2007 8:18 PM

McALLEN — The two contractors indicted in connection with an allegedly elaborate bribery scheme involving a handful of PSJA school district officials have been implicated over the past decade in a long string of questionable contract negotiations throughout the Rio Grande Valley.

Well-known Harlingen-based insurance agent Arnulfo “Arnie” Olivarez, 57, and George Hernandez, a 50-year-old private contractor who owns an area roofing company, were both accused in a May 22 federal indictment — made public Tuesday — of allegedly bribing school board members with vacations, concert tickets and prostitutes.

The U.S. District Attorney for the Southern District of Texas says the bribes were in exchange for lucrative contracts to provide the district’s employee health insurance coverage, as well as to build new schools and other district buildings.

The federal indictment also lists seven unnamed contractors who may or may not be indicted in the future in connection with the alleged briberies.

Olivarez operates Insurance Associates of the Valley, the business address of which is listed as 521 S. 77 Sunshine Strip in Harlingen. A call to that office on Tuesday seeking comment from an attorney was not returned.

In 2006, Olivarez, a Rancho Viejo resident, ran for and lost the Texas House District 38 seat in Brownsville, the same seat state Rep. Eddie Lucio III now holds.

Last month, Hernandez was re-elected to his second term on the Donna school board, on which he serves as board president.

While the indictment states that in that role, Hernandez took an oath to “preserve, protect and defend the Constitution and laws of the United States and of the State of Texas,” the actions for which he was arrested are not connected to his position on Donna’s school board.

A woman who answered Hernandez’s home phone number Tuesday said, “We don’t have any comments right now,” and hung up.

 The charges

The indictment states that between 1998 and 2001, Olivarez served as an insurance agent-of-record for the district, recommending to the board which health and life insurance bids to accept.

Then in August 2002, and again in 2003, the board awarded its health insurance contract to a provider and benefits administrator Olivarez represented.

The scope of those contracts and which insurance company received them wasn’t clear Tuesday. But insurance agents can earn thousands of dollars in commission from such contracts.

Olivarez is accused of giving PSJA school board member Raul Navarro $4,000 to pay for a band at a December 2003 reception for a Navarro family member.

The indictment against Olivarez alleges that in 2004 he provided Navarro with a Fourth-of-July weekend trip to South Padre Island.

As for Hernandez, he is accused of serving as a middleman between an unnamed contractor and district officials, distributing a total of $40,000 from the contractor to the district leaders.

Tuesday’s indictment also charges that Hernandez flew with PSJA school board member Rogelio “Roy” Rodriguez, Superintendent Arturo Guajardo and Navarro to Las Vegas in September 2003 for an Oscar De La Hoya boxing match.

It was unclear Tuesday how Hernandez may have benefited from the alleged exchanges.

Not the first time

 This isn’t the first time the names of Olivarez and Hernandez, referred to in the indictment as “Contractor Defendants,” have come up in connection with suspicious public contracts in the Valley.

 A 2003 lawsuit pending from the state charges Hernandez with violating the competitive bidding process in his previous role as building and grounds supervisor for Hidalgo County.

 District Attorney Rene Guerra on Tuesday would only say that Hernandez got the county into a “construction mess” when the new county jail was being built.

 In that case, the first architectural firm county commissioners selected in 1998 to build the new jail was Perspectiva, also known as Lopez & Lopez Architects. The firm was owned by the embattled Joe Lopez, a powerful Valley architect tied to many construction projects in the region and already indicted in connection with the larger contracts scandal that has rocked the PSJA school district for the past couple of years. Lopez was not named in Tuesday’s indictments, however.

 A look at Olivarez finds his hands in the La Joya school district health insurance contract process — which has been hotly disputed.

 Last fall, the district’s school board awarded its employee health insurance contract to AAG despite a claim by Blue Cross Blue Shield, which Olivarez represented, that the AAG bid was $2 million higher than Blue Cross Blue Shield’s bid.