Legalities of Pharr insurance deal questioned

September 15, 2007 10:40 PM
Ryan Holeywell

PHARR — City officials are working to determine whether a multi-million dollar health insurance contract it approved earlier this summer without soliciting bids or proposals was legal.

 The City Commission approved an insurance contract May 24 for city employees with Blue Cross/Blue Shield of Texas, marking the second time the city had renewed its contract with the insurer.

 But a week after the commission unanimously approved the deal, City Attorney Michael Pruneda sent a memo to the commission questioning the legality of the deal and recommending that the city seek bids or proposals for the contract.

 Under state law, cities must solicit bids or proposals for expenditures exceeding $25,000. While there are certain exemptions to that rule — such as expenditures made during emergencies or purchasing items available from only one source — health insurance does not fall into any of those categories, Pruneda wrote in his memo.

 Despite the memo, City Manager Fred Sandoval sent a letter July 9to Blue Cross/Blue Shield of Texas saying the city would renew its insurance plan.

 Pruneda and Sandoval both told The Monitor Pruneda’s legal opinion was based on the best information available at the time, but the opinion could change since new information has come to light. Pruneda said he is continuing to review the deal and determine whether a renewal clause in the original contract would have permitted the commission to re-approve the contract without seeking bids or proposals.

 “It’s possible it may not be an issue anymore,” Pruneda said. “It could possibly result in it not being anything to worry about.”

 Pruneda said he still does not have all the facts about the deal, but he is close to getting the answers he wants.

 City Commissioner Raul Gonzalez said his vote to approve the contract was based on the condition that the deal would receive a favorable legal review from Pruneda. Gonzalez said he received Pruneda’s original memo and has seen nothing since then that would contradict it, which raises questions in his mind.

 Former finance director Ruben Luna, who was fired from his job earlier this summer, also discussed the insurance contract in a letter he sent to the city appealing to be reinstated. In his letter, he said he tried to get a legal opinion on the matter from the Texas Municipal League, an organization that serves the state’s municipalities. Luna wrote that TML told him over the phone it appeared Pharr needed to advertise for proposals but city officials discouraged him from getting that opinion in writing.

 Both Sandoval and Ricardo Navarro, an attorney handling Luna’s case for the city, declined to comment on Luna’s allegations, citing pending litigation.

 Luna wrote that the city usually advertises for proposals on insurance deals to make the process more competitive, which had resulted in a savings of $300,000 on a previous insurance contract.“Possible violations of state law and suspicion of possible political corruption … are matters that I take very seriously,” Luna wrote in his letter.

 Ryan Holeywell covers PSJA and general assignments for The Monitor. He can be reached at (956) 683-4446.

Editor’s Note: Molly Mulebriar reports that purported insurance commissions in excess of $100,000 may be at stake here. Rumors abound that the city was aghast at learning the amount they were paying in agent commissions and now want to cut the agent out of the deal.  Mulebriar cannot confirm any of this other than an unsolicited phone call she received this afternoon from a formerly very reliable source.

 

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