June 21, 2000,  Above is Minister (Secretary) Moises Starkman who signed the USAID Host Country Contract, (years later the Honduran Government briefed that Minister Starkman is not really a Honduran Minister of State, The President assigned him that rank)



June 21, 2000 Above is President Carlos Flores at the Contract signing ceremony shaking hands with the USAID Employees Joseph Lombardo and John Mcavoy in the Honduran Oval Office, USAID officias approved the USAID Host Country Contract (years later Honduras represented under oath that FHIS wasn't the Host Country after all)

MBS II'S Story

June 21, 2000 Above is President Carlos Flores Signing the USAID Host Country Contract financed by USAID, ( years later the Honduran Government says President Flores didn't sign as President of Honduras in his Oval Office, he signed as FHIS)  



USAID Director who approved the USAID Host Country Contract (years later Honduras briefed that FHIS really isn't part of the Host Country that entered into the USAID Host Country  Contract )

Above is a press release by the Honduran Attorney General reporting how Honduras avoided payment in the USA, he didn't mention that the Republic wasn't held liable for FHIS debts because FHIS is not part of the Republic, I believe he cannot say this in public in Honduras because all Hondurans know this isn't true. Attached is a Legal Opinion issued by the same office finding that FHIS is part of the Government.

In 1998 Hurricane Mitch devastated Honduras. The Republic of Honduras (ROH) declared a national emergency and pleaded with the world to provide emergency relief. The United States Government was one of those that responded. Congress passed a bill to appropriate over $250 million USD of emergency and reconstruction aid to Honduras to thwart the influx of illegal immigrants to the United States, many of which are protected to this day under Temporary Protected Status (TPS) . The United States Agency for International Development (USAID) was the United States Government (USG) agency tasked by Congress to manage the aid. USAID chose the Host Country Contracting (HCC) program to execute the funds.

The Host Country Contract is the preferred method of USAID for funding aid projects to foreign governments. Before funding can be authorized the foreign government must undergo a strict review by USAID and the Department of State (DOS). The policy requires the completing of the Host Country Checklist by USAID and DOS personnel; in addition they must also certify that the Host Country is not prohibited from receiving US funds.  Some of the requirements include: Narcotics Certification FAA Sec. 490; Indebtedness to U.S. Citizens FAA Sec 620; Seizure of U.S. Property 22 USC 237; US loan default; international terrorism… (Attachment 1)

In addition,  USAID is required to certify that the contracting agency has the capability to undertake the procurement actions in accordance with USAID HCC procedures. USAID must issue an affirmative certification that the agency has the administrative capability to solicit, audit, and construct, as well as financial and closeout mechanisms that meet USAID applicable standards and procedures.

In 1998 USAID issued the attached HCC checklist and approved the Fondo Hondureno Inversion Social (FHIS) as HCC capable. (Attachment 2)

1999, USAID and the ROH entered into a bilateral agreement where reconstruction projects would be funded by USAID through the FHIS. The ROH represented to USAID that FHIS projects were eligible for Host Country Contracting funding. The USAID required the ROH to expressly confirm and agree in the bilateral assistance agreement that “FHIS is a unit of the ROH and all actions taken on behalf of the FHIS would be actions taken on behalf of the ROH” (Attachment 3).  In addition USAID required the Minister of Finance (MOF) to issue a formal delegation to the FHIS’ Minister where the MOF delegated his authority to the FHIS Minister to sign contracts on behalf and in representation of the ROH. (Attachment 4)

In 2000, USAID and the ROH issued the PDM-001 Host Country Contract funded by USAID and the ROH. This procurement contract was approved by warranted USAID Contracting Officer Mr. John McAvoy (Attachment 5). He personally signed the warrant for the project because the procurement was in excess of $10 million USD. Mr. McAvoy’s action memorandum approving the contract stated that FHIS was the contracting agency on behalf of the ROH and that FHIS operates under the Presidency. This contract was the first potable water and sewer project issued under the USAID HCC Projects on behalf of the ROH.  MBS II, was the low bidder.

MBS II signed the contract with FHIS and the ROH in the Honduran Oval Office attended by USAID and US Embassy representatives (Attachment 6). The contract was signed by the sitting President of Honduras and a Honduran Minister of State.

USAID also required the ROH to waive all duties and taxes, the Honduran IRS issued a waiver exonerating MBS from all taxes considering it signed a contract with  the Government of Honduras through FHIS, (Attachment 6A).  

At all times the DOS, USAID and the ROH maintained that FHIS was a representative part of the Republic. To make a long story very short the projects were to be constructed in one year, but due to design flaws the projects took over two years and cost three times the budget to construct. In 2002 MBS II finished the projects to everyone’s satisfaction. The US Ambassador and USAID Director personally issued MBS II a Certificate of Appreciation for its significant contribution to the hurricane Mitch reconstruction effort at a special ceremony held in the U.S. Embassy in Tegucigalpa, Honduras. (Attachment 7)

MBS II finished the projects in 2002 and was not paid the millions of dollars due of the contract balance, millions due in Host Country Approved Change Orders, and millions of un approved change orders recommended payment by the United States Army Corp of Engineers (Attachment 7 A)  or the arbitration award issued against FHIS.

The Host Country Contract between MBS II and the ROH required MBS II to arbitrate all disputes with FHIS. After many years of failed negotiations and mediations, MBS II reluctantly arbitrated with FHIS in 2008. FHIS filed a counter claim and vehemently opposed the arbitration of the disputes. The tribunal held twenty-four hearings, heard twenty-nine witnesses, ten expert witnesses, conducted seven site inspections and were presented over 2,165 documents. The arbitration resulted in a forty-seven page articulated arbitration award in MBS II’s favor of over $51 million USD (Attachment 8).

In 2010, MBS II filed a petition to confirm the arbitration award against the ROH in DC Federal District Court. The ROH filed a motion and affidavits (Attachment 9&10) in support to dismiss arguing that FHIS was not part of the Republic, and hence the public was not obligated to pay. The motion to dismiss argued that the FHIS original charter- issued in 1983- stated that FHIS had "juridical personality" and was not part of the Republic. In addition, Honduras argued that the President signed the contract only as Chair of FHIS and not as President; and that the Minister of FHIS was not really a Minister and only held the nominal rank of Minister. 

In 2014, the US Federal District Judge issued an opinion that FHIS was not part of the Republic due to FHIS' original charter which endowed FHIS with Juridical Personality, and therefore the ROH was not required to pay for MBS II’s award issued against FHIS (Attachment 11).

MBS II the ROH and FHIS entered into a USAID Host Country Contract in the Honduran Oval Office signed by the President and a Minister. The ROH  stated in Federal Court that FHIS is not part of the ROH, but to USAID they continue to state that FHIS is part of the government in order to be eligible for US Funds. We have been let down by the DOS.  We were conned and set up by DOS, USAID, the ROH and FHIS. We were strung along, only to find out fourteen years later we didn’t sign a contract with the Host Country and have no ability to collect our duly earned funds. MBS II would never have signed a contract with FHIS in Honduras without guarantees by the DOS, USAID and the ROH that FHIS was part of the ROH.

MBS II fought for over a decade to collect its duly earned funds. MBS II has paid all employees and contractors in full, no outstanding funds are due. Due to complying with the works, all suppliers combined with funding a decade long collection effort, MBS was forced to give up. This effort depleted the company of everything. The company has no money to continue collections, and  essentially lost everything. Every asset of the company was depleted, the company employs no one- now has no value.

 Thanks USAID