Lawsuit targets alleged Puerto Rico power company corruption

Vegas man sells Harley to go help Puerto Rico
Posted at 3:03 AM, Jul 01, 2019

A federal control board overseeing Puerto Rico's finances filed a lawsuit on Sunday to recover what it called massive fraudulent payments made by the island's power company to fuel suppliers for more than a decade.

The lawsuit was filed against fuel companies Trafigura and Vitol for allegedly supplying low-grade oil as well as three laboratories accused of receiving money for falsifying tests on oil bought by Puerto Rico's Electric Power Authority.

The board said billions of dollars of alleged overpayments from 2002 to 2015 led in part to the power company's insolvency and caused it to slide deeper into debt, noting that fuel oil purchases are its single largest expense.

"Customers and creditors were harmed," said board member David Skeel.

The power company is required by contract and environmental regulation to only buy high-grade fuel oil, the board said.

Power company spokeswoman Edith Seda said no one was immediately available for comment. Trafigura and Vitol did not immediately return messages for comment. The laboratories were identified as Texas-based Inspectorate America Corp. and Puerto Rico-based Saybolt, Altol Chemical Environmental Laboratory Inc. and Carlos R. Méndez & Associates. An employee at Inspectorate America Corp. said no one was immediately available for comment, and no one could be immediately reached at the other three companies.

In an earlier, separate class-action suit that was automatically stayed because Puerto Rico's power company is trying to restructure its debt, plaintiffs accuse the company of accepting kickbacks and passing along the alleged overpayments to customers already facing high power bills amide a deepening recession. The company has denied any wrongdoing in that case.

The board's lawsuit notes that the power company used debt to cover operating revenue shortfalls by 2011, and that it was overburdened with debt by 2014.

Sunday's lawsuit was filed a year after Puerto Rico's governor signed a historic bill to privatize a power company that is more than $9 billion in debt and operating an unstable electric grid devastated nearly two years ago by Hurricane Maria. The government plans to sell its power plants and create public-private partnerships for the transmission and distribution of power.