The little rigor and transparency in contract administration of the Electric Power Authority (PREPA) led to the irregular disbursement of $ 2.307 billion, according to an audit report from the Office of the Comptroller of Puerto Rico (OCPR).
The largest disbursement, among those questioned by the Office of the Comptroller, is $ 2.301 billion, deposited in the account of a company that was convicted in 2006 and that, therefore, could not sign contracts with the government of Puerto Rico.
The funds arrived to that company because, by virtue of PREP's procedure to process the transfer of funds, the public corporation has the discretion to authorize the transfer of a supplier’s payment to a third party, which may be a natural or legal person.
This procedure was approved on June 19, 2002, when Hector Rosario was executive director of this public corporation.
According to the OCPR, between December 22, 2011 and September 27, 2013, PREPA consented seven transfers of funds, corresponding to 233 disbursements, in favor of the convicted company. During that period, the public corporation was managed by Otoniel Cruz Carrillo, Joshua A. Colón Ortiz and Juan Alicea Flores.
As is the Office of the Comptroller's custom, the report does not disclose the name of the two suppliers who requested the transfer of their contracts payments to the convicted company. Nor does it mention the name of the convicted company.
However, both in the Puerto Rican Senate and in judicial hearings held between 2016 and 2017 it transcended that the electronic transfers made by PREPA to pay the Petro West company for fuel dispatch were made in the name of Petro West / Trafigura.
Trafigura company was convicted in 2006 in Texas for false customs declarations regarding the entry of goods. The company pleaded guilty and had to pay a criminal fine of $ 8 million and assume a $ 9,937,551 loss.
Law 458-2000 establishes that no government entity, public corporation or municipality can award an auction or contract to any person - natural or juridical - who has been convicted or pleaded guilty for fraud, embezzlement or illegal appropriation of public funds.
Yesterday, PREPA could not tell El Nuevo Día the name of the other supplier, which according to OCPR, requested transfers of funds to Trafigura between 2011 and 2013.
The report details that a supplier was authorized to assign funds to the convicted company for $ 647,606,309 and the other, allowed transfers for $ 1,653,831,925 to that same company.
"The mentioned situation resulted in payments for $ 2,301,438,234 made to a company in violation of Law 458-2000," says the report.
PREPA indicated that its only Bunker C fuel supplier today is Freepoint Commodities company.
In March 2006, José Hernández Colón, PREPA´s treasurer at the time, declared in Senate that it was not unusual to make these transfers of funds to third parties. At that time, he said that the payment to compensate Freepoint for the fuel dispatch was deposited in PR Power Solutions Inc.
Edith Seda, PREPA´s spokeswoman, could not confirm yesterday if the Authority continues that practice of transferring to a third party its contractors’ payments.
Before hiring Freepoint, PREPA had contracts with Petrobras, also involved in an international-scale scandal for acts of corruption.
In judicial process
Currently, Petro West company and its president, José González Amador, are facing a preliminary hearing because the Department of Justice alleges an illegal appropriation of $10.8 million of PREPA funds.
Among the allegations are, appropriation of money claimed to PREPA as payments made for municipal contributions, but that, according to the prosecution, were not issued to the municipalities.
The preliminary hearing continues on Monday, when an official from the municipality of Hormigueros - where Petro West allegedly had tax exemption - is expected to testify.
Penalties for arrears
Meanwhile, the Comptroller's audit also found out that PREPA disbursed $ 3,247,376 to fuel suppliers for the delays in payments, despite the fact that there was no clause in its contracts that established the imposition of interest for delay charges.
In total, between October 2010 and May 2015, the public corporation paid $ 9,634,831 in interests for delay to five fuel suppliers.
"On August 17, 2017, we requested to the treasurer, for review, reports and investigations carried out to pay the aforementioned charges for delay. The official could not supply them," said the document.
The lack of such clause on interest charges due to late hiring violated regulatory provisions and procedures established by the public corporation since the 1990s.
On the other hand, the audit found out that between 2009 and 2017, PREPA made 172 disbursements for $ 2,669,619 to 29 contractors for services provided without having formalized a written contract.
The report explains that, in the absence of a contract, PREPA had no obligation to pay those who provided these benefits.
In written statements, PREPA´s executive director, José Ortiz, reported that he referred the OCPR's statements to the internal auditor and said that they will prevent these situations from happening again.
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