The Port of Galveston’s agreement with a consulting company employed to hire temporary workers and interns is raising questions about whether the port skirted purchasing and hiring rules.
In documents released publicly Thursday by the Galveston City Auditor’s Office, some officials even broached the question about whether the port’s hiring of Octagon LLC broke state procurement laws. In a written response to those questions, the port’s own attorney refuted those suggestions.
The new details about Octagon LLC were revealed in a report written by City Auditor Glen Bulgherini. Bulgherini submitted the report to the Galveston City Council through the council’s agenda ahead of the council’s meeting planned for July 23. Bulgherini’s report doesn’t make any determinations on the legality of hiring Octagon but includes letters written by the Galveston City Attorney’s office and Port Attorney Tony Brown, which present differing assessments of the legal case against the port.
The city attorney’s letter said it is “unknown” if the Port of Galveston broke any laws and that more information about the situation was needed. Brown’s letter said a port review of the issue did not turn up any attempts to intentionally violate bidding laws.
Bulgherini has asked the council to accept recommendations to create better contract monitoring systems but said in his report that it was not his duty to make legal conclusions about the port’s actions.
Bulgherini’s office did not return a request for comment Friday. Octagon did not return a message left at its listed phone number.
The audit into the port and Octagon LLC traces back to September 2018, when the company was hired to perform some organizational work for the port. At the time, the port was in the midst of its first year with its new director, Rodger Rees, in charge and was going through a series of organizational changes.
Octagon is a small consulting business, established in June 2018, with a mailing address in Galveston and registered office in League City. The company is registered to Andy Soles, a League City resident, according to Brown.
On Sept. 16, Octagon was awarded a $37,900 contract to conduct a job audit and develop an organizational chart for the port. On Sept. 25, Octagon was awarded an $11,900 contract to review and update the port’s employee handbook. Combined, the contracts were valued at $49,800.
Later — Bulgherini’s audit does not say when — Octagon was hired to provide the port with temporary employees and to manage the port’s 2019 internship program. The company was paid $44,514 for the temp service work and $26,158 for the internship program, according to the audit.
The port did not put the work for the temp program or the internship program out to bid, according to Bulgherini’s report. The port does not have a written contract with Octagon for those services, Brown said. The port paid the company about $70,700 for the work between when it was hired and Dec. 1, 2019, according to Bulgherini’s report.
The work that was assigned to Octagon has been questioned by Wharves Board Trustee Ted O’Rourke, who has inquired whether port leadership acted improperly in assigning the work to Octagon.
State law requires that public contracts worth more than $50,000 be subject to a sealed bidding process. The law also prohibits public entities from splitting similar purchases or contracts into smaller amounts of less than $50,000 to avoid bidding laws.
Although Bulgherini’s report explains these rules, it doesn’t say explicitly that the rules were broken.
Instead, the audit says that if the city and port had better contract monitoring in place, more questions would have been raised about the issue when the company was being hired.
If a better system was in place, “a thorough examination of the buying patterns of these types of services could have timely raised any relevant issues,” Bulgherini wrote.
AN EMPLOYEE CONNECTION
Brown’s nine-page letter in response to Bulgherini’s findings provides more insight into how Octagon and the port were first connected and points to one employee specifically.
Annette Goldberg, a former human resources employee who was hired in September 2018, “initiated discussions” with Octagon before the company was hired. Goldberg knew Soles from when she worked for the city of Houston, Brown said. After the port hired Octagon for the initial job audit and organizational review, Goldberg “engaged” the company for the temporary hire work and the internship program, Brown wrote.
Brown did not know if Goldberg solicited informal bids for temp work or internship services, he wrote. The port’s purchasing policies tell employees to seek informal bids for purchases and contacts of more than $3,000. But he added that didn’t have a policy on how those bids should be formatted or recorded.
“This policy is not law,” Brown said. Breaking that policy might mean an employee might face discipline but not criminal liability, he wrote. Brown’s letter does not say if Goldberg was disciplined by port management. Goldberg resigned from her position on March 6, 2020, according to Brown’s letter.
“Ms. Goldberg voluntarily resigned from her position with the port earlier this year,” Brown wrote. “We are not aware of any surviving note, memoranda or other documents Ms. Goldberg may have created or possessed documenting the process for the two contracts or the temporary services work performed by Octagon.”
Reached by phone on Friday, Goldberg denied she had a role in deciding how to hire and pay Octagon. While she acknowledged that she did know Soles and worked with him in the past, she said it was Rees and Port Director of Business Administration Laura Camcioglu who made the ultimate decisions about who was hired and paid.
“I don’t know about the purchasing side of anything,” Goldberg said. “Should Laura have gone out? I don’t know. I’m an HR expert; I’m not a purchasing expert.”
But Goldberg said Octagon delivered good temporary employees to the port and helped manage interns to work for the port, including some people who were later brought on as full-time employees.
Goldberg said while she vouched for the company, she did not sign any contracts with the company or have the ability to pay it.
“At the end of the day, I don’t run that department,” she said.
Goldberg is now the city administrator in Arcola, a city of 1,600 people in Fort Bend County. She said she was not contacted by Brown or anyone else about the audit or other inquiries into Octagon’s work for the port. If she had been contacted, she said she would have little to say about the way the port paid for services.
“If I wanted to be known as a purchasing expert, I would have put that on my resume,” Goldberg said.
Bulgherini’s report and the memos written by the attorneys don’t provide a clear answer about whether port employees violated any laws in hiring the consulting company. Bulgherini said it was not his job to make that determination.
“Please note that the State of Texas prohibits the unauthorized practice of law and, therefore, the City Auditor’s Office has not and shall not express a legal opinion or legal conclusion concerning whether the transactions of the Port of Galveston comply with state law,” Bulgherini wrote.
Instead, he referred the city council to Brown’s letter and an unsigned letter written by the Galveston City Attorney’s office.
The city attorney letter noted the short period of time that the contracts were awarded and said the type of work Octagon was hired to do was “linked in both nature and type” and both focused on staffing needs of the port. The company was paid around $120,000 total, well more than the $50,000 bidding requirement proscribed by law if it had been treated as a single contact, the city attorney’s letter said.
The city attorney memo concluded that it was “unknown” whether the port violated Texas law and said more information was necessary to know if payments made to Octagon were part of a “scheme” to make split payment to Octagon to avoid bidding laws.
“It is imperative the port provide all existing documents relating to procurement and/or payments of Octagon and any services they have performed for the port, in order to determine the legality of the port’s actions,” the letter states.
Brown in the letter called the city attorney’s reasoning “arbitrary” and wrote that the jobs the company was hired to do were “by no mean identical.”
“We are not aware of any recognized authorities in the human resources field stating that these activities are so interrelated that they would normally be part of a common process,” Brown said. “The city attorney’s office does not identify any such authorities.”
Brown wrote that the port, as of June 18, had not been able to identify any attempts to “intentionally and knowingly” violate bidding statutes but acknowledged that Goldberg may not have understood the port’s policies for hiring contractors.
The port is not “aware of the extent of her actual knowledge as to bidding requirements generally,” he wrote.
As of June 18, the port had entered into contracts with several different staffing services, Brown said. Those hires were made through the normal processes, including conventional bidding, according to Brown’s letter.
It is unclear what next steps will be used to determine if something untoward happened at the port. Many officials reached Friday said they had not reviewed Bulgherini’s report or the attached letters.
In an email statement, sent in response to a phone message, Rees said the report concluded the audit of the Octagon matter.
“Port Attorney Tony Brown has done an excellent job of summarizing the situation,” Rees said “We are looking forward to other joint projects with the city in the future.”
Wharves Board of Trustees Chairman Albert Shannon said he was familiar with Brown’s letter but not other documents related to the matter. Asked if something went wrong when the port hired Octagon, Shannon said he had no comment.
“It would appear that there are gray issues here,” Shannon said. “We’re going to have to be a lot more cautious with contracts we enter into, especially those that exceed a certain threshold.”
Shannon said he was not aware of any further investigations into Octagon or the port.
Galveston Mayor Pro Tem Craig Brown, who is also a Wharves Board Trustee and the city’s acting mayor, declined comment, saying he had not reviewed the documents in the city council’s packet as of Friday afternoon.
The city council is scheduled to meet on July 23. The audit is scheduled to be discussed for 15 minutes during the council’s workshop agenda Thursday morning.