SEC Opens Investigation Into Widespread Financial Manipulation, Theft and Political Corruption at PREPA

Commentary

By Richard Lawless


It all started five years ago when PREPA announced the issuance of 75 new
contracts worth 15 billion dollars. It would upgrade their network with lower
cost, cutting edge, renewable technology. This major announcement would re-
sult in a 20-25% reduction in energy costs, cleaner air, a lower reliance on oil
and energy independence for the island, according to PREPA.

Five years later, none of those facilities were constructed.

As time passed the holders of these 75 new contracts started to wonder why
PREPA was not moving forward on the projects.  It made no sense, these pro-
jects were good for Puerto Rico and PREPA.  The utility did not have to make
any outlays of cash to get this new technology and the electricity would be 20-
25% less than their current oil based production.

Here is where the law firm of Hegan’s Berman comes in (http://www.hbsslaw.
com/cases-and-investigations/cases/PREPA).  Hegan claims to have uncover-
ed a scheme where the executives at PREPA were stealing over $100,000,000
a year in a kickback scheme with their oil suppliers.  It appears, according to
the lawsuit, that this has been going on for over a decade. The lawsuit claims
financial reports were falsified, oil quality reports were falsified and the is-
land's political leadership may have worked to keep it all hidden.  The law-
suit specifies individuals, dates, times, Swiss bank accounts, documents and
whistleblower interviews.

Back to the renewable projects, why did PREPA kill the projects?  It may have
been to protect the ongoing theft of $100,000,000 a year from the oil purcha-
se accounts, if the claims in the Hagen lawsuit are to be believed.  You see, if
lower cost renewables come in to play, the oil purchases would drop and PRE
PA could not keep up the $100,000,000 a year scheme.

The big losers being the bondholders, PREPA recently defaulted claiming their
energy costs were too high, almost comical knowing what might have actually
taken place.  The other big loser is the PRESS, at best lazy and at worse, incom-
petent. The renewable developers have been screaming about this for years. Ha-
gan’s lawsuit outlines enough specifics to make their claims seem credible. If it
is true, PREPA engaged in one of the biggest thefts of tax payer money in his-
tory.

Hagen maintains a website where you can find the legal complaint and contact
them. Hegan Berman at 708-628-4949 or by e-mail at PREPA@hbsslaw.com.

The SEC Boston is leading a preliminary investigation into this. It will be in-
teresting to see if the renewable energy developers and Hagen Berman were
actually on to something. Stay tuned…


Richard Lawless is CEO of Commercial Solar Power, Inc. in Temecula, CA.
The opinions expressed in the preceding article are exclusively his own.