Thursday, April 7, 2016
Court Upholds RICO Claims In PREPA Conspiracy Lawsuit
SAN JUAN, Puerto Rico – A U.S. District Judge overseeing a class-
action lawsuit against Puerto Rico Electric Power Authority (PREPA)
and the world’s largest fuel oil suppliers for perpetuating an extensive
fuel oil fraud upheld claims that defendants violated the Racketeer In-
fluenced and Corrupt Organizations Act (RICO) and denied motions
to dismiss the suit, according to Hagens Berman.
The order from Judge Jay A. Garcia-Gregory on Apr. 5, 2016 denied
motions to dismiss from the majority of the suit’s 20 defendants, allow-
ing RICO claims to continue against PREPA, Shell Oil, Petrobras, Al-
chem and various other laboratories and fuel oil suppliers.
“This order is a major victory for the nearly 1.5 million PREPA custo-
mers who were defrauded through this complex and deeply entrenched
scheme,” said Steve Berman, managing partner of Hagens Berman. “Re-
sidents and businesses were overcharged to the tune of $1 billion by the-
se corrupt, greedy organizations, and we are pleased that the court agrees
that they should be held to answer for their actions.”
In the original suit, filed Feb. 24, 2015 in the U.S. District Court for the
District of Puerto Rico, Puerto Rico residents and businesses accused PR-
EPA and 20 total defendants of perpetuating an extensive fuel oil fraud,
resulting in users of electricity in Puerto Rico being overcharged by more
than $1 billion dollars for electricity since 2002. The suit states the defen-
dants received kickbacks and payments for colluding to raise fuel oil pri-
ces that were directly passed to users of electricity, by agreeing to use non-
compliant fuel oil and falsifying lab tests.
The order from Judge Garcia-Gregory stated, “Plaintiffs’ allegations aga-
inst PREPA are extensive,” denying PREPA’s motion to dismiss on gro-
unds that it is a co-conspirator with responsibility for inflating the fuel’s
price. “Plaintiffs have successfully shown this by alleging that the three
groups of participants—the Fuel Oil Supplier Participants, the PREPA
Participants, and the Laboratory Participants—all coordinated together
for the common purpose of falsifying laboratory results to pass off Non-
compliant Fuel Oil as Compliant Fuel Oil.”
Attorneys allege that PREPA – one of the largest public power agencies
in the United States – fraudulently agreed to accept millions of barrels of
fuel oil that did not meet specifications of contracts between PREPA and
its oil suppliers, or specifications set by the EPA. PREPA accepted this non-
compliant fuel oil and the laboratories certified the fuel oil as compliant in
exchange for kickbacks and commissions from the fuel oil suppliers, accor-
ding to the complaint. PREPA served approximately 1.5 million customers
In recent developments in the case, plaintiffs alleged that Alchem, a labo-
ratory named in the suit’s laundry list of defendants, switched its testing
methodology to satisfy PREPA on Dec. 31, 2010 and that it used the new
testing methodology to falsify test results for every PREPA sample tested
after this date. Plaintiffs point to contrasting sample pages of Alchem’s log
book dated before the change in testing methodology and after the change,
showing the log book page before the change in testing methodology refle-
cts that every sample tested was rendered non-compliant, whereas the two
log book pages after the change show that every sample tested was deemed
“Based on Plaintiffs’ new allegations, the Court finds that Plaintiffs have
adequately pled that Alchem committed two or more RICO predicates and
thus have alleged Alchem’s participation in a ‘pattern of racketeering acti-
Former employees from PREPA and the oil cartel participants have shared
information about the conspiracy to help end this fraud. If you have additio-
nal information about the Cartel de Petróleo, you may contact a Hagens Ber-
man attorney by calling 708-628-4949 or by emailing email@example.com.
More information about the lawsuit is available at www.hbsslaw.com/prepa.
The suit seeks to recover out-of-pocket losses, compensatory damages and
punitive damages for plaintiffs under the RICO Act and for the disgorge-
ment of profits under the common law of unjust enrichment.
About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices
in 10 cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List
eight times. More about the law firm and its successes can be found at www.hbsslaw.com.
Follow the firm for updates and news at @ClassActionLaw.