Speaker Arnold I. Palacios and his wife are the original lessors and proprietors of A&M Corporation which is engaged in subleasing public lands.
In a statement to the media, Palacios, R-Saipan, said their firm won the bid when the water task force announced its need for an in-house storage space and he disputed the claims of Taotao Tano’s Greg Cruz that the new sublease agreement was inflated to $233,280 for the 10-month extension.
Palacios said he and his wife have developed and maintained the commercial property in question over the years, subleased them to mostly private interests, and “paid our rental and tax obligations to the government consistently, in full, and on time.”
Palacios is the running mate of Republican gubernatorial candidate Rep. Heinz S. Hofschneider.
Cruz, an independent senatorial candidate, supports the gubernatorial candidacy of former Sen. Ramon S. Deleon Guerrero.
“In 2005, in response to a request for quotes for a warehouse storage facility that was issued by the CNMI water task force, we submitted a quote, and were awarded the contract. That lease agreement has been renewed on an annual basis at the request of the water task force for the same amount every month of $4,320,” Palacios said.
“The lease agreement provides the water task force with 9,600 square feet of indoor storage space, outside storage, as well as full utility coverage and property maintenance at our own expense. Utility, maintenance, and other overhead costs have risen considerably for us since 2005, but the terms of the lease agreement have remained the same,” he added.
In his letter to Assistant U.S. Attorney Eric S. O’Malley, Cruz said the annual leasehold amount for A&M’s storage space was $51,840 annually or $4,320 a month.
But he claimed that there was a change order to inflate the amount to $233,280 for a 10-month extension.
Cruz said federal funds are used for the lease payments.
“We believe the funding source for this change order#05 contract no.355-0S was derived from the actual $5.2 million water task force grant originally signed in 2005. Such [discrepancies] in figures concerning the change order is highly questionable,” Cruz wrote to O’Malley.
“We urge your office to consider an investigation into this serious matter for it involves federal funds,” he added.
But Palacios said there is nothing irregular about the sublease deal with the water task force.
He said he welcomes the probe and that all records relevant to the lease agreement are open for public review.
“I am also happy to provide these documents to anyone who would like to review them. In addition to the public records mentioned above, my wife and I have maintained records pertaining to our operations going back to nearly 20 years. I invite anyone who would like to review those documents to contact us. I welcome the opportunity to address any concerns and answer any questions about our business,” the speaker said.
Palacios’ firm entered into a commercial land lease agreement with the Department of Public Lands about two decades ago.
Annual rental payments to DPL were set at 8 percent of fair market value per year payable in quarterly installments for a period of 25 years beginning in 1990.
