Villagomez, 3 others indicted

Lt. Gov. Timothy Villagomez entered a federal court Monday afternoon in handcuffs to face an indictment on three felony counts of wire fraud, conspiracy and theft of federal funds, the culmination of an extensive five-month investigation by federal authorities.

The indictment, unsealed Monday morning, charges Villagomez, Commerce Secretary James Santos, his wife Joaquina Santos—who is Villagomez’s sister—and former Commonwealth Utilities Corp. executive director Anthony Guerrero with conspiring to bilk the CNMI government out of thousands of dollars through business deals involving needless chemical purchases for CUC.

Villagomez and the Santos couple surrendered themselves into federal custody early Monday morning. In court, Villagomez appeared nervous as he sat waiting for attorneys to debate the conditions of his release. Villagomez and the Santos’ pleaded not guilty to each of the charges against them.

After his court appearance, Villagomez raced past reporters waiting for him outside the courthouse and into a white sports utility vehicle that spirited him away along with his wife.

David Lujan, Villagomez’s attorney, declined to speak about the case. Attorneys for the Santos’ and Guerrero could not be reached for comment at press time.

Guerrero has struck an agreement with federal prosecutors, pleading guilty on Friday to one count of conspiracy, and could testify in the pending trial, said First Assistant U.S. Attorney Jeffery Strand during an afternoon press conference attended by Federal Bureau of Investigation and Internal Revenue Service agents.

In an interview earlier that day, FBI agent Dana McMahon said the investigation into the alleged conspiracy required an exhaustive search of purchase orders and government records obtained with subpoenas, reaching back a full decade.

“Our conspiracy case goes back all the way to 1998,” McMahon said. “Basically, we’ve had to go through all the documents back to then. It was a long process.”

Investigators’ first clue, she added, was a record of the sixth and final transaction in the chemical sales scheme. Yet McMahon was coy on how the circumstances of the transaction aroused suspicion when they were revealed in February.

The FBI plans to investigate other questions concerning CUC in the near future, she added.

“We’re still looking at some other issues with CUC,” McMahon said, “There are some further areas of interest for us.”

At issue in the federal indictment is a series of business deals Villagomez struck with companies controlled by the Santos’ beginning in 1998, when he was CUC’s executive director, to supply the utility service with thousands of gallons of Rydlyme, a cleaning and de-scaling agent. The first deal in the alleged scheme netted James Santos’ ISLA Micronesia Sales more than $286,000 of CUC money over the course of several purchases from 1998 to 2000. The deal circumvented CNMI procurement regulations and violated conflict of interest laws, the indictment says.

ISLA sold more than 8,000 gallons of the chemical to CUC under the deal, federal officials note, yet CUC has since used merely 350 gallons and has either disposed of the rest or kept it in storage, like a 1,485-gallon stockpile it has on Rota.

In August, 2007, Villagomez—who Gov. Benigno Fitial designated to oversee CUC as lieutenant governor—and the Santos’ initiated the same scheme yet again, according to federal authorities, by enlisting the help of Guerrero and an unidentified accomplice to secure a sole source emergency deal to pay Blue Pacific, owned by Joaquina Santos, $120,000 for Rydlyme.

The indictment says Villagomez pressured Guerrero to fast-track the deal and at one point cajoled CUC staff to “pay my sister.” In the sixth and final transaction of the scheme, federal authorities say, Santos ordered more than $30,000 worth of Rydlyme a month prior to CUC’s execution of the contract and the eventual sale, like the previous ones, involved a 400 percent markup over the chemical’s normal cost.

Moreover, the indictment charges the four alleged conspirators with wire fraud, pointing to a wire transaction related to the deal that it says violated federal statutes. The indictment further charges them with the theft of federal funds, which CUC receives through government programs.

The Santos’ and Villagomez won release on a $50,000 bond. The conditions of their release, as noted in court, require them to remain in the CNMI for the duration of the court’s proceedings and bar them from discussing the case for any reason with each other, except to prepare their defense with attorneys.

During the press conference, Strand cautioned that the indictment is “merely an accusation” and urged the news media to respect the defendants’ privacy. Guerrero, he added, could come under severe strain in light of his involvement and cooperation with the case.

“Obviously, in a small community like the Commonwealth, Mr. Guerrero will be subject to significant social and family pressures, as well as economic pressures related to his employment,” Strand said.

Guerrero was released on a $10,000 bond after agreeing to cooperate with the investigation, according to court documents. A jury trial for the defendants is slated for Oct. 6 at 9am.