Tuesday, January 5, 2016
Audit Uncovers Massive Municipal Bond Fraud In Puerto Rico
A recent audit shows that the Puerto Rico Electric Power Authority, a
large government owned utility, used phantom income to materially
overstate the utility's income. This intentional misstatement was used
repeatedly to issue billions of the dollars in municipal bonds that the
utility nor the government could pay for.
Innocent investors are set to lose hundreds of millions of dollars because
of this fraud. Puerto Rico is pushing for access to Bankruptcy. Bankrup-
tcy would allow the island to force those unwitting investors to take even
more significant losses.
The SEC and FINRA have been made aware of this fraud and have opened
investigations. The implications of this massive municipal bond fraud are
significant. It would suggest complicity with the rating agencies, bond issu-
ers and bond sellers, cutting a wide swath across Wall Street, shaking inves-
tor confidence to its core.
Given the administration’s position to provide bankruptcy protection for
Puerto Rico and by extension, Chicago. It is unlikely that the DOJ will be
allowed to pursue this. Fortunately, FINRA and the SEC are outside the
reach of the administration's political control.
Click here to read the forensic accounting report.
Mr. Lawless has twenty-five years of experience in performing forensic accounting reviews.
Mr. Lawless received his Bachelor of Science Degree from Pepperdine University and a
Master’s in Business Administration with a focus on finance from the University of San
Diego. Richard has had a long banking career as a commercial lender and has served as a
senior and executive manager for major banking institutions. In these roles Mr. Lawless was
responsible for billions of dollars in assets. Mr. Lawless has also served as Chairman and
CEO for a number of non-banking companies some of which have been in the energy sector.
The opinions expressed in the preceding commentary are exclusively those of
the author and do not necessarily represent those of the Puerto Rico Monitor.