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HomeMy WebLinkAbout033875 RES - 02/17/2026Resolution authorizing the public release of an Executive Summary of the Investigation into Homewood Suites Type B Incentive — Procedural and Fraud Review. WHEREAS, on October 7, 2025, the City Council requested an investigation into Homewood Suites Type B Incentive Fraud Allegation referenced in the lawsuit of Ajit David v. City of Corpus Christi et al; and WHEREAS, a Draft Summary Report of the investigation by Daniel Ray and Arnold Luschin of Scott, Ray, Pemberton, & Goll, PLLC has been delivered to the City Council; and WHEREAS, the City Council wants to inform the public of the investigation's high- level findings, analysis, and conclusions while maintaining necessary legal protections for confidential information. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS, THAT: SECTION 1. The City Council hereby authorizes the release of the Executive Summary for the Homewood Suites Type B Incentive — Procedural and Fraud Review, as attached, to the general public. SECTION 2. The City Council hereby authorizes the release of the Appendix J: Governance Reforms, as attached, to the general public. SECTION 3. The City Council does not waive its attorney -client confidentiality for the Draft Summary Report and supporting documents. SECTION 4. This resolution shall become effective immediately upon its passage and approval. ASSET -nd APPROVED on the 1 + day of ATTE 2026. Paulette Guajardo, Ma or Reba Huerta, City Secretary SCANNED Q33elb EXECUTIVE SUMMARY Homewood Suites Type B Incentive — Procedural and Fraud Review Purpose of the Report The City Council directed an independent legal review to determine: 1. Whether the approval of the $2,000,000 Type B incentive for the Homewood Suites project was procured through fraud, forgery, or other criminal conduct; 2. Whether the ordinance authorizing the incentive was procedurally defective under the City Charter or Texas law; and 3. What corrective options, if any, are available to the Council. This executive summary outlines the principal findings and available courses of action. Background The Type B Corporation approved an incentive agreement for the Homewood Suites downtown development following review by CCREDC and subsequent City Council action on first and second readings. After approval, allegations were raised that a PowerPoint slide shown during the project's review process contained a modified screenshot of a FEMA press release relating to flood map finalization dates. The City Auditor later characterized the alteration as potentially constituting "felony forgery." A civil lawsuit followed, and the City Council authorized an internal investigation. The questions before the Council are not political; they are legal: 1. Did the altered slide legally constitute fraud or forgery?; 2. Did the alteration invalidate the ordinance?; 3. Was the two -reading rule violated?; and 4. What corrective action may be taken? Core Findings 1. No Prosecutable Criminal Fraud or Forgery Has Been Established After review of the presentations, deposition testimony, investigative materials, and applicable Texas and federal penal statutes, the PowerPoint slide at issue clearly appears to have been intentionally altered to cover dates that appeared on the government website. However, the evidence does not establish the elements required to sustain a criminal charge of forgery or fraud. Specifically: 1. The slide at issue was not itself an official government document; it was a presentation slide incorporating a screenshot; 2. There is no evidence that City Council relied on the allegedly altered FEMA date when voting on the ordinance; 3. Fraud requires material misrepresentation and detrimental reliance, and the record reflects that the City was aware of the FEMA timing dispute before final approval. Although it is not directly applicable to the question of whether a crime actually occurred, multiple law enforcement authorities have closed their investigations into this matter while declining to issue criminal referrals or prosecute anyone involved. The record may reflect poor judgment in presentation practices, up to and including intentional alteration of one of the slides, but the legal threshold for criminal fraud or forgery is not met. 2. The Two -Reading Rule Was Satisfied The City Charter requires ordinances to be considered at two separate meetings unless adopted as an emergency measure. The ordinance in question: 1. Was introduced and approved on first reading; 2. Was considered and approved on second reading at a later regular meeting; 3. Contained a modified caption at second reading, but the body of the ordinance did not change. Under Texas law, the operative legal substance of an ordinance is contained in its body, not its caption. Amending descriptive language in the caption does not reset the two -reading requirement unless the substantive provisions change. Accordingly, we believe that the ordinance was properly adopted under the City Charter. 3. The Incentive Was Based on Economic Development Criteria, Not FEMA Timing The Type B Corporation is statutorily obligated to evaluate projects based on economic development impact including job creation, capital investment, and tax base enhancement. The FEMA floodplain issue was presented as part of the infrastructure cost justification, but: 1. FEMA compliance is a development requirement, not a condition for Type B eligibility; 2. The project's eligibility rested primarily on economic development metrics; 3. The final Council action clarified that the funding related to public -facing improvements and catalytic impact. Therefore, even if the FEMA timeline presentation was imperfect, it was not legally determinative of the funding decision. 4. Open Meetings Allegations Lack Legal Support The evidence does not demonstrate a violation of the Texas Open Meetings Act that would render the ordinance void. No evidence establishes a quorum deliberating outside a properly noticed meeting, nor evidence of secret decision -making. Political discussion among officials does not equate to a legal Open Meetings violation absent proof of collective deliberation in violation of statute. Legal Risk Analysis of Available Options The Council has three practical options regarding the ordinance at issue: 1. Rescind the Ordinance; 2. Ratify and Affirm the Ordinance; or 3. Take No Action Pending Litigation. Each of those options come with its own unique set of risks and exposures. Overall Conclusion Based on the record reviewed and witnesses interviewed, the evidence does not establish criminal fraud or forgery, the two -reading rule was satisfied, and the ordinance is legally valid. The greatest legal exposure arises from rescinding the agreement after approval. The report includes several other options to address similar situations moving forward, including several potential rule changes related to the two -reading rule and council presentations. Appendix J: Governance Reforms Regardless of whether Council ratifies, rescinds, or takes no action, the record supports adopting process reforms for future incentive requests. These reforms can be framed as improvements to document integrity and decision hygiene, not as findings of wrongdoing. J-1. Document provenance rule Require that any screenshot or excerpt of a third -party government webpage used to justify funding be accompanied by (a) a URL, (b) date/time of capture, (c) a PDF print -to -file of the full page, and (d) a staff verification note confirming the information was checked independently. J-2. Applicant certification tailored to representations Add a sworn certification clause in incentive applications that specifically covers the accuracy of representations about regulatory timing, eligibility predicates, and any claimed 'new' requirements. This reduces ambiguity about whether a claim was merely narrative or a factual assertion. J-3. Staff verification checklist for eligibility and narrative claims Adopt an internal checklist requiring staff to verify: (a) statutory eligibility category; (b) whether the costs claimed are reimbursable; (c) whether the project is committed or already under construction; (d) whether the application relies on external documents; and (e) whether any corrections were made after first public release. J-4. Two -reading continuity memo For any incentive ordinance pulled and later re-agendized, require a short staff memo to Council describing: (a) what changed in the packet since first reading; (b) why it changed; and (c) whether the operative ordinance body changed. This preserves legality while reducing `bait -and - switch' narratives. J-5. Public packet integrity policy Establish a policy that if attachments are removed or swapped in the agenda packet, the agenda coordinator logs the change, and the final packet includes a change log accessible to Council and the public. This directly addresses the type of `attachment removal' email trail that became controversial in this matter. These reforms are compatible with any cure option. They also allow Council to signal to the public that the City learned from the controversy without adopting a prosecutorial posture or conceding liability.