You have inverted faces on the interior of the mouth. I flipped the polygons and then was able to convert to subd.

To see the inverted faces uncheck two sided lighting in the lighting tab.

I also attached some screen shots. You can see that there is a border edge around where you created the mouth sack. This is usually an indication of flipped polys. By turning off two-sided lighting you can see in one of the images that the interior polys are indeed flipped.

By flipping them I was able to convert to subd.


NOTE:
I was surprised to see that cleanup did not catch this as these poly are non-manifold. But I confirmed that maya cleanup failed to report these properly. GG autodesk.