Puerto Rico News Digest For May 29, 2018

THE VIOLENCE CONTINUES: MAN SHOT TO DEATH IN CAROLINA

As reported by El Vocero, a man was found shot to death early Tuesday morning on 73rd Street in the Villa Carolina neighborhood of the municipality of Carolina. The victim -- who remains unidentified -- was described as being dark-skinned, about 5 feet, nine inches tall and weighing approximately 140 pounds. He was dressed in a black shirt, red and white pants and black athletic shoes. An anonymous 911 call alerted police to the sound of gunshots in the area shortly after midnight. Police are investigating.

ROSSELLO AND BOARD DEFEND LABOR CHANGES

From El Nuevo Dia:

"Governor Ricardo Rosselló Nevares rejected yesterday that the repeal of the Unjust Dismissal Act (Law 80-1976) would leave the island´s working class in a vulnerable position, especially women and senior employees, because there are other labor laws to protect them..."

PREPA BUDGET FACES FIVE YEARS OF SHORTFALLS

From Caribbean Business:

"The Institute for Energy Economics and Financial Analysis (IEEFA) said Friday that the approved fiscal-recovery plan for the Puerto Rico Electric Power Authority (Prepa) faces billions in financial risks that will hinder the transformation of the grid..."

PUERTO RICO RETAIL SALES GROW 6.7% FOR JANUARY

From News Is My Business:

"Puerto Rico’s retail sales for the month of January 2018 totaled $2.8 billion, representing a 6.7 percent growth when compared to the same period in 2017, when total sales were $2.6 billion..."

Puerto Rico News Digest For July 7, 2017

DOMESTIC VIOLENCE KILLS WOMAN

An as of yet unidentified 19-year-old woman was murdered by her boyfriend shortly after 6:30 this morning at the Juana Matos public housing project in Cataño. The victim had filed reports of domestic violence against her in the past, with the most recent one happening only yesterday. The 30-year-old male perpetrator attempted to commit suicide after shooting the woman, but was unsuccessful and was taken to hospital after being arrested by police. The killer had a record of previous domestic violence incidents.

PREPA RATE HIKE GETS POSTPONED

From Caribbean Business:

"The Puerto Rico Energy Commission (PREC) has granted the Puerto Rico Electric Power Authority’s (Prepa) request to postpone until Oct. 1 a permanent rate hike that was slated to go into effect this month..."

MEDICAL POT DISPENSARY OPENS IN GUAYNABO

From News Is My Business:

"...Clínica Verde inaugurated Thursday a clinic at the Borinquen Towers on Roosevelt Ave. in Guaynabo. The 4,000 square-foot property entailed an investment of more than $1.5 million, and will provide a variety of six different cannabis-related products..."

PR FACES OFF AGAINST ANGOLA IN WORLD BASKETBALL

From AllAfrica:

"The Angolan under19 men's basketball team, third in group D in the first stage of the world championship in Cairo are playing this Friday at 1 p.m Puerto Rico, for the consolation phase from the 9th and 16th place..."

GUTIERREZ BLASTS RIVERA SCHATZ OVER LGBT SLUR

From Windy City Times:

"Rep. Luis V. Gutiérrez ( D-IL ) responded to Thomas Rivera Schatz, Puerto Rican Senate President, who used the masculine pronoun "señor" repeatedly to describe Ana Matosantos, the only female member of Puerto Rico's Financial Oversight and Management Board..."

If Puerto Rico Thinks Bankruptcy is a Better Solution, They Have a Rude Awakening Coming!

   Commentary

   Richard Lawless

One should look no further than the Puerto Rico Electric Power Authority’s (PREPA) pending bankruptcy.

All credible financial analysts agree that PREPA only needs slightly more than a 10% reduction in debt service to continue paying its bills and operating as expected.  Over a three-year period, the utility negotiated with their bond holders for a 15% reduction in debt.  This consensual agreement gave the utility almost 50% more than it needed to get back on track. 

If the bankruptcy judges execute the hearings without personal or political bias, PREPA will get only what it needs to operate safely.  That number should reflect about a 10% reduction in debt, far less than was offered to the utility in their consensual negotiations with their bond holders.

For PREPA to receive a more favorable outcome in court they will have to shape an argument based on the following factors:

1.     PREPA has allegedly been over charging its customers every year for high quality crude oil while paying and taking delivery of sludge oil.  The difference in cost is hundreds of millions of dollars each year. That money is unaccounted for.   (Business wire 4-16-16, RICO Lawsuit)

2.     PREPA must pay unusually high accounting fees to KPMG to produce misleading financial statements each year. 

(KPMG lead auditor, Puerto Rico Senate Hearing 6-24-15)

3.     PREPA must pay unusually high bond rating fees each year to secure misleading bond ratings for their new bond offerings.  

(Puerto Rico Monitor 4-5-16, FINRA Settlements, on-going SEC Investigations)

4.     PREPA must pay unusually high sales fees to the major Wall Street Banks for them to knowingly market troubled bonds as safe investments.

(Reuters 6-28-17)

5.     PREPA budgets hundreds of millions of dollars each year for equipment maintenance and the money disappears while the repairs are rarely done. 

(SEC Whistleblower Financial Audit 1-18-16)

6.     The Puerto Rico Fiscal Control Board although mandated through legislation to approve consensual agreements with Puerto Rico’s Creditors, the Board has elected to ignore the legislation costing PREPA many millions in future litigation.

(Puerto Rico Fiscal Control Board 6-27-17)

7.     PREPA has numerous law suits, FBI and SEC investigations going on now, costing PREPA tens of millions in legal and consulting expenses.

(AlixPartners $28 million, etc.…)

8.     PREPA has massive unfunded pension obligations, although the pension contributions are budgeted every year they rarely contribute what was promised.

The PREPA attorneys and accountants will have to shape an argument that if they are to maintain their current level of mismanagement and malfeasance, more money must be taken from the innocent bondholders.

In an honest legal system, PREPA is unlikely to prevail.

Richard Lawless is a former senior banker who has specialized in evaluating and granting debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego and Bachelor’s Degree from Pepperdine University. He sits on several Corporate Boards and actively writes for several finance publications.

Puerto Rico News Digest For October 4, 2016

WEATHER SYSTEM COULD BECOME STORM

F
















From The National Hurricane Center:

"Showers and thunderstorms continue in association with a low pressure area 
located about 500 miles northeast of Puerto Rico. Satellite wind data indicate 
that the low is producing winds to gale force, and the system could become su-
fficiently well organized to result in the formation of a tropical storm later today.  
The low is expected to move generally northwestward at 10 to 15 mph over the 
next few days, and upper-level winds are forecast to become less conducive for 
development. Formation chance through 48 hours...high...80 percent. Formation 
chance through 5 days...high...80 percent..."

BOARD SETS DEADLINE FOR TURNAROUND PLAN

From The San Juan Daily Star:

"Puerto Rico’s newly created federal oversight board on Friday set an Oct.14
deadline for the island’s governor to draft a fiscal turnaround plan, as protesters
at its first public meeting compared the board to “slavery” and said it was “pilla-
ging Puerto Rico.” The board asked Gov. Alejandro García Padilla to present a
plan laying out his vision for stabilizing Puerto Rico, which is grappling with $70
billion in debt, a 45 percent poverty rate and a decade-long recession..."

DONAHUE TO TESTIFY ABOUT BLACKOUT

From Caribbean Business:

"The Senate Committee on Energy and Water Resources has summoned the ch-
ief restructuring officer of the Puerto Rico Electric Power Authority (Prepa), Li-
sa Donahue, to appear Tuesday as part of the hearings that began last week to in-
vestigate the possible reasons that led to the collapse the electrical system on Sep-
tember 21 and the delay in the restoration of electrical service. The president of the
committee, Popular Democratic Party Sen. Ramón Luis Nieves, said that Donahue
should give details before the Senate panel about the work done by her firm, Alix
Partners, since it was hired by Prepa in September 2014 to restructure the utility’s
debt and transform the operations of the public corporation..."

CUSTOMS SEIZES $1.5M IN COUNTERFEIT GOODS

From News Is My Business:


"U.S. Customs and Border Protection San Juan Field Operations announced today
that 206 seizures where made of counterfeit products, valued at $1.5 million, wh-
ich were illegally imported into Puerto Rico via international mail. A wide range
of counterfeited products was seized during the enforcement effort, called “Oper-
ation Silver Snake 2,” to include: consumer products, apparel, footwear, textiles,
pharmaceuticals, and more, the agency said. Various international mail packages
inspected by CBP officers at the San Juan International Mail Branch revealed pro-
ducts that infringedintellectual property rights. The majority of the seized products
originated in China, the agency said..."

Puerto Rico News For September 22, 2016

LIGHTS OUT FOR PUERTO RICO

PLANT FIRE LEAVES ALL OF PR WITHOUT POWER

A fire of unknown origin broke out yesterday afternoon at the Central Ag-

uirre power plant in the southern town of Salinas, causing a massive failu-

re which left the entire island of Puerto Rico -- along with Vieques and Cu-

lebra -- without electrical service. The power failure also left over a quarter

of a million households without running water. Police were deployed acr-

oss the island to direct traffic at select interesections, with two officers,one 

in Guaynabo and one in Caguas, being hit by cars. Both received non-life-

threatening injuries.

Hotels all over the San Juan metro area and beyond were packed, as many

island residents opted for staying in air conditioned hotel rooms rather than

suffer the lack of power in their homes. Lines to check in at the Convention

Center Sheraton were reportedly over an hour long. 

Classes were suspended for today at all public schools, the University of

Puerto Rico, and at most private schools and universities. Non-essential

government employees were instructed to show up for work on Thursday

at 12 noon. While power has been reestablished for about 130,000 users a-

cross Puerto Rico as of this writing, over one million households are still
without electricity this morning. Ports, ferries and airports were operating
normally yesterday and this morning. No out of the ordinary flight delays
have occurred or are expected.

Yesterday's failure resulted in the largest blackout in Puerto Rico since 

1980.

----


For updates throughout the day, check out our Twitter feed:
https://twitter.com/ThePRMonitor

The Real Cause of Puerto Rico’s Financial Collapse Wasn’t The Economy!

Commentary

Richard Lawless











On September 27, at the Waldorf Astoria Hotel in New York, Commercial Solar
Power, one of the many victims of the Puerto Rico financial collapse, will host
a press conference detailing its findings.

Sources close to the investigations suggest that there was rampant and repeated
massive government theft of public funds going on for over a decade. The theft
of public money, along with widespread Wall Street fraud associated with the is-
land’s bond issues, resulted in $39 billion in bondholder losses.

Although all the specifics may not be known until September 27, the following
has been shared with us.

The Puerto Rico Power Authority (PREPA), one of the world’s largest govern-
ment owned utilities, has been burning lowest grade No. 6 fuel oil for over a de-
cade.  The authority has been billing its citizens for the higher grade No. 2 oil.
The payments for this oil have been wired offshore and then kicked back to gov-
ernment officials’ family members. The difference in cost between No. 2 and No.
6 oil is approximately 58 percent.  In some years the overpayments exceeded $1.6
billion.

Our source also states that the ongoing EPA testing results could only occur with
the utility burning low grade sludge oil and that the equipment needed to burn No.
6 fuel oil is different than the equipment needed for the burning of higher grade No.
2 fuel.  A quick walk through of PREPA’s plants showed that PREPA was indeed
using equipment for fuel No. 6, which requires preheating.

[Note: Number 6 fuel oil is a high-viscosity residual oil requiring preheating to
220–260 °F (104–127 °C). Residual means the material remaining after the more
valuable cuts of crude oil have boiled off. The residue may contain various unde-
sirable impurities including two percent water and one-half percent mineral soil…
literally the bottom of the barrel.]

Additionally, a review of the agencies financial statements shows hundreds of mi-
llions of dollars in public funds missing from the equipment purchase and mainte-
nance accounts each year.

PREPA alone is responsible for almost $2 billion a year in missing or stolen public
funds.

An inter-agency review of Puerto Rico’s other agencies reflected similar activity.
It is estimated that as much as $3 billion a year in public funds are unaccounted
for in Puerto Rico.

Reviews of the various agencies’ financial statements indicate those agencies were
all technically bankrupt as early as 2007.  Normally, bankrupt entities would not be
able to secure any credit rating, let along investment grade ratings.  Without invest-
ment grade ratings the agencies could not issue bonds to raise more capital.

The typical fee for a credit rating is 1-2 percent but, by paying the rating agencies
as much as 9 percent, the Puerto Rico municipal agencies were able to secure good
credit ratings.

These fraudulent credit ratings allowed Puerto Rico to issue new debt ultimately
resulting in the financial collapse and a loss to the original bondholders of $39 bi-
llion.

I have been told that all members of both the Congress and the Senate knew this
when they voted to revoke all legal rights for the victims, the bondholders.

It is reasonable to expect, when a full disclosure is finally made, that Wall Street
and Washington will have some explaining to do.


Mr. Lawless is a career Banker and CEO of Commercial Solar Power, Inc.  Mr. Lawless has been 
working with the SEC, the FBI, The U.S. Attorney’s Office and the Treasury Department to un-
cover the reasons for Puerto Rico’s $70-billion-dollar bond default.  Mr. Lawless has held Senior 
and Executive positions with Wells Fargo Bank, Home Savings and Washington Mutual Bank 
specializing in the issuance of debt instruments.  Mr. Lawless holds a BA from Pepperdine Uni-
versity and a Master’s Degree from the University of San Diego.


The opinions expressed in the preceding commentary are exclusively those of the author and
do not necessarily reflect those of The Puerto Rico Monitor, its contributors or advertisers.

Puerto Rico News Digest For August 16, 2016

PUERTO RICO ZIKA CASES SEE BIG JUMP

From The San Juan Daily Star:

"Health Secretary Ana Ríus announced Friday that for the epidemiological week
number 30 some 1,914 new cases of Zika were confirmed in the island, for a total
of 10,690 accumulated cases since the virus first arrived in Puerto Rico. The new
data includes 134 pregnant women for a total of 1,035. In addition, two more peo-
ple have been hospitalized for a total of 90 and there are three new cases of Guilla-
in-Barré syndrome for a total of 30 confirmed cases in laboratories. “We have in
our hands the necessary tools to avoid being infected with the Zika virus,” Ríus
said in a written statement. “Even if we don’t feel sick, we need to protect our-
selves..."

MURDERS IN AGUAS BUENAS & LAS PIEDRAS

As reported by El Nuevo Dia, a man between 20 and 25 years of age was murde-
red on road PR-173 in Aguas Buenas. The killing was reported at around 2:50 AM
this morning, and police found the body 15 minutes later. The man, of approxima-
tely 140 pounds, with black hair and beard, has yet to be identified. A second mur-
der was reported at approximately 5:50 AM on road PR-916 in Las Piedras. A 911
call alerted police to a bleeding person in the area. Police found the body minutes
later.

DONAHUE GETS $6.7M CONTRACT EXTENSION

From Caribbean Business:

"On the heels of what was described as a rather drawn-out meeting punctuated
by several sticking points, the Puerto Rico Electric Authority’s (Prepa) board vo-
ted to extend the contract of AlixPartners, headed by Lisa Donahue, to the tune
of $6.713 million. The contract, which was due to expire Aug. 15, will be exten-
ded through Dec. 15. “The deal is broken down with half the money for restruc-
turing-related work and the other half for operational related improvements,” said
one source with knowledge of negotiations. The restructuring work involves ma-
naging and reporting cash, working out all of the structure for the Special Purch-
ase Vehicle (SPV) and Prepa rate cases, continued implementation of creditor
deals and potential negotiations..."

MEDICAL POT INDUSTRY GROWS IN PR

From News Is My Business:

"...Already, more than two-dozen companies have applied for operational licen-
ses and others are expected to follow suit. One potential job creation opportunity
on the horizon is a high-tech system for “safe and consistent” cannabis cultivat-
ion that a U.S. firm is developing with the idea of possibly carrying out the pro-
duct assembly on the island, according to César Cordero Krüger, CEO of Grow-
blox Sciences Puerto Rico, LLC, a subsidiary of Las Vegas-based Growblox Sci-
ences, Inc., which is spearheading the technology..."

Puerto Rico News Digest For July 20, 2016

MAN CONVICTED FOR CARJACKINGS AND MURDER

From US Attorney's Office:

Today, Carmelo Velázquez-Aponte a.k.a. “Boty,” was found guilty of four
carjackings, carrying a firearm during and in relation to a crime of violence
(carjacking), and possession of a stolen firearm...According to the testimony
on June 18, 2011, the defendant stole the licensed firearm belonging to Rich-
ardson Mieses-Pimental and his vehicle, and then executed him. After that
event, Velázquez-Aponte committed other carjackings. During his attempt to
escape his arrest on June 20, 2011, he also stole a police officer’s gun and shot
a Police officer. The defendant also stole a police cruiser and engaged in two
other shootouts with police officers, until he was arrested. The defendant fired
the stolen weapons at the police officers..."

PREPA CUTS POWER AT HOUSING PROJECTS

From The San Juan Daily Star:

"In keeping with the eff ort to collect unpaid bills, the Public Housing
Administration (AVP by its Spanish acronym) announced Monday that
during the past week electrical service has been suspended to clients in
public housing projects in the regions of Mayagüez, Arecibo, Caguas
and Ponce. The AVP also announced that more than 30,000 public hou-
sing residents are late in paying their electricity bills. The heavily indeb-
ted Puerto Rico Electric Power Authority (PREPA) said nearly 170 cus-
tomers were affected by Monday’s action..."

UPR PROFESSOR SKEPTICAL OF NALED SPRAYING

From Caribbean Business:


"The Centers for Disease Control (CDC) has exaggerated the risk levels
associated with the Zika virus to justify the aerial spraying of the insecti-
cide Naled over Puerto Rico, a University of Puerto Rico (UPR) profes-
sor said Tuesday. Cruz María Nazario, a professor in the Department of
Epidemiology and Biostatistics at the University of Puerto Rico Medical
Sciences campus, accused the CDC of a lack of scientific rigorousness,
following CDC statements that allegedly overstate the risk for pregnant
women with the Zika virus of having babies with microcephaly. “The le-
vel of risk that has been employed to put fear in communities is wrong,”
said the UPR professor during a press conference in which other academ-
ics and politicians discussed the dangers of Naled, a substance that has
been banned for several years in the European Union..."

PIERLUISI: TASK FORCE CHAIR TO BE NAMED

From News Is My Business:

"Puerto Rico’s Resident Commissioner in Washington, Pedro Pierluisi, said
Tuesday that U.S. House Speaker Paul Ryan could name the lawmaker who
will steer the work of the Puerto Rico Congressional Task Force this week.
With that person in place, the Task Force created by the Puerto Rico Oversi-
ght,  Management and Economic Stability Act (PROMESA) will begin wor-
king in a more formal manner, he said. The eight Congressional lawmakers
who will sit on the Task Force — Pierluisi, Rep. Tom MacArthur (R-NJ),
Rep. Sean Duffy (R-WI), Rep. Nydia Velázquez (D-NY), Sen. Marco Rubio
(R-FL), Sen. Orrin Hatch (R-Utah), Sen. Bob Menéndez (D-NJ), and Sen.
Bill Nelson (D-FL) — were announced last week, and have been communi-
cating informally since, Pierluisi added..."

Puerto Rico News Digest For June 30, 2016

PROMESA PASSES SENATE, GOES TO OBAMA

From Caribbean Business:

"Congress delivered relief to debt-stricken Puerto Rico on Wednesday,
sending President Barack Obama a last-minute financial rescue package
to help the U.S. territory of 3.5 million Americans. The Senate passed the
bill on a bipartisan 68-30 vote..."

35 PEOPLE CHARGED WITH DRUG TRAFFICKING

From US Attorney's Office:

"On June 23, 2016, a federal grand jury in the District of Puerto Rico retur-
ned an indictment against 35 defendants charged with conspiracy to distrib-
ute controlled substances, announced Rosa Emilia Rodríguez-Vélez, United
States Attorney for the District of Puerto Rico. The Drug Enforcement Ad-
ministration and the Puerto Rico Police Department (PRPD), Ponce Strike
Force Unit, are in charge of the investigation. The indictment alleges that be-
ginning in 2012, the organization distributed heroin, crack, cocaine, and ma-
rihuana, at the Rafael López Nussa, Ernesto Ramos Antonini and the Dr. Ma-
nuel De La Pila Iglesias Public Housing Projects in Ponce; and the El Pino
Ward in Villalba, Puerto Rico, all for significant financial gain and profit. The
thirty-five defendants acted in different roles in order to further the goals of
their organization, to wit: leaders, drug point owners, enforcers, runners, se-
llers, and facilitators. Ten defendants are facing one charge of possession of
firearms in furtherance of a drug trafficking crime..."

PREPA TO ENACT PROVISIONAL RATE HIKE

From The San Juan Daily Star:

"The Puerto Rico Electric Power Authority government power company will
impose a provisional rate increase of 1.299 cents per kilowatt-hour on clients
in the coming weeks after winning approval from the Puerto Rico Energy Co-
mmission. The rate hike is among several requirements the utility must fulfill
as part of a proposed deal with creditors to restructure nearly $9 billion debt..."

AC HOTEL BREAKS GROUND IN CONDADO

From News Is My Business:

"The groundbreaking ceremony for the first AC Hotel by Marriott in San Juan
took place Wednesday for what will be a $45 million investment by Ashford
1369 Hospitality, LLC, an affiliate of Interlink, which acquired the former Am-
bassador Plaza & Casino property in Condado. The investment includes a com-
prehensive renovation of the property to convert it into the Marriott brand..."

American and British Intelligence Uncover Payoffs to the FBI & U.S. Attorney's Office

Commentary 

Richard Lawless





As the CEO of Commercial Solar Power (CSP), Mr. Lawless ordered a for-
ensic investigation into the $13,200,000 losses the company incurred while
doing business in Puerto Rico.  In an effort to better understand the causes
for such losses, Mr. Lawless and his team uncovered questionable practices
by the Puerto Rico Government and outright fraud by the Credit Rating Ag-
encies, Fitch, Moody’s and S&P.

The very first step in considering an investment of company resources in any
company is to check the credit ratings of the company and make sure they are
financially sound.  In this case, the rating agencies were giving the Puerto Ri-
co Electric Power Authority an “A” rating.  A pretty sound rating for a utility
company.

Given that the credit rating was the companies first step in their due diligen-
ce process, CSP did an audit of the bond offering memorandums that these
good ratings were based on.  The audit uncovered hundreds of millions in mi-
ssing funds and a utility that has been technically bankrupt since 2007. It see-
med inconceivable to the CSP team that all three rating agencies gave a bank-
rupt company an investment grade credit rating.  We delivered the results of
our audit to the Puerto Rico FBI, U.S. Attorney and the Puerto Rico Legisla-
ture.

After receiving no response for many months, I wrote an editorial that appe-
ared in many Puerto Rico Newspapers and Blogs.  Shortly after I wrote the
article I started receiving phone calls. One of the calls was from someone who
implied he was from the CIA and stated that the CIA has been listening into
phone activity between the utility and Hugo Chavez (Venezuela).  The calls
detailed a criminal enterprise that was stealing literally billions in public fun-
ds through bogus oil purchases and fraudulent municipal bond issues. While
listening in to the conversations over a number of years it became clear that
the Puerto Rico FBI Office and the Puerto Rico U.S. Attorney Office were
(and are) accepting payoffs to insure no interference from those agencies. This
story was confirmed to me by British Intelligence and confirmed a third time
by the editors of Caribbean News Now.

Shortly after this disclosure the FBI got back to me.  I was left a voicemail that
suggested the agency was very concerned about my criminal complaint but
could not find criminal grounds to pursue charges.  I was surprised by that res-
ponse so I contacted all persons of interest and discovered no one was ever in-
terviewed by the FBI.  In addition, during this time frame, two private parties
filed RICO charges against the utility that were challenged and upheld by the
courts. Amazing that private parties can file charges claiming that the utility
is an organized criminal enterprise but the DOJ can’t.

To make matters worse for the FBI and the U.S. Attorney, the Puerto Rico Se-
nate issued a 23-page report outlining the theft of billions and the purchase of
knowingly fraudulent credit ratings from Moody’s, Fitch and S&P. These pho-
ny credit ratings have already resulted in billions of losses for those bond hol-
ders. Once again the FBI and U.S. Attorney did nothing.

We have a 23-page confession and financial audits supporting all of the illegal
activity.  No charges, no investigation.

It was brought to my attention that Treasury Secretary Lew while COO for Citi-
bank, and Treasury Counsels, Weiss and Campbell while working for Lazard,
participated in this fraudulent activity by selling these knowingly fraudulent
bonds before joining the Treasury Department. This may help explain the rel-
uctance of the FBI and DOJ to do anything about any of this.

Now it is up to the Press to bring pressure on our legislators to get involved.


Richard Lawless is a former senior banker who has specialized in evaluating and granting 
debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego 
and Bachelor’s Degree from Pepperdine University.  He sits on a number of Corporate Boards
and actively writes for a number of  finance publications. The opinions expressed in the prece-
ding commentary are those of the author alone and do not necessarily reflect those of The Puerto
Rico Monitor, its editors, contributors or advertisers. 

Puerto Rico News Digest For May 27, 2016

PROMESA ADVANCES TO HOUSE FLOOR

From News Is My Business:

"The PROMESA Act (H.R. 5278), the bill aimed to address Puerto Rico’s
debt crisis, passed in the U.S. House Natural Resources Committee Wednes-
day with bipartisan support from lawmakers. The final vote tally was 29 in fa-
vor and 10 opposed. Of the 24 Republicans on the Committee that voted, 14 --
or nearly 60 percent — voted “yes.” Of the 16 Democrats on the Committee that
voted, 15 voted “yes” and one voted “present.”..The measure was approved with
amendments that Pierluisi said will “strengthen the bill or are technical  in nature...”

PREPA RATE INCREASE SPARKS OUTRAGE

From The San Juan Daily Star:

"Puerto Rico’s heavily indebted electric company announced Tuesday that it is
seeking a more than 20 percent increase in the island’s already high power bills,
sparking outrage among many who note the agency faces numerous corruption
allegations. The Puerto Rico Electric Power Authority (PREPA) said the increa-
se would allow it to keep operating and help boost its dwindling liquidity. Offic-
ials said the additional revenue also would let the company restructure its $9 bill-
ion debt load, reduce its dependence on petroleum and renovate obsolete infras-
tructure..."

SENATE OVERRIDES GOVERNOR'S TAX VETOES

From Caribbean Business:

"The Senate on Thursday agreed to override Gov. Alejandro Garcia Padilla’s
veto on the bill that would repeal the hike to the business-to-business (B2B)
tax and the value-added tax (VAT) or IVA in Spanish. The B2B was slated to
go into effect next week. The lawmakers’ decision was made in part because
of a request made by Popular Democratic Party gubernatorial candidate David
Bernier..."

US SWIMMING DUMPS PR OVER ZIKA

From Tribu Magazine:

"Frank Busch, the U.S. national team director, sent out a letter Thursday to all
national team athletes and coaches telling them of the change. The camp will
now be held in Atlanta instead of Puerto Rico in late July. "As part of our prepa-
rations for the Olympic Games this summer, we have been closely monitoring the
current situation with the Zika virus", Busch wrote in his letter, which was obtai-
ned by The Associated Press...The U.S. team is still scheduled to hold a training
camp in San Antonio from July 11-21..."

___________________________________________________________________


The Puerto Rico Monitor will be on break for the Memorial Day holiday until 
Wednesday, June 1st. See you then and have a great weekend.

Puerto Rico News Digest For May 10, 2016

RECESSION TO LAST INTO 2017

From The San Juan Daily Star:

"More red ink is in store for Puerto Rico, according to an island Planning
Board statement issued late last week that projected negative growth in the
gross domestic product (GDP) of minus 1.2 percent for fiscal year (FY) 2016
and a minus 2.0 percent contraction for FY 2017. In FY 2015, at current pri-
ces the local economy measured by the GDP generated $68.52 billion, repre-
senting a growth of 0.1 percent with relation to FY 2014..."

EIGHT-YEAR-OLD GIRL SHOT DEAD IN CIALES

From Fox News Latino:

"A little 8-year-old girl died of a gunshot to her head while another 14 peo-
ple suffered multiple bullet wounds in two unrelated incidents during a vio-
lent weekend in Puerto Rico...The death of the 8-year-old, local authorities
said Monday in different reports, occurred Sunday night, though the circums-
tances of the shooting are as yet unknown...One or more unknown persons
shot at a vehicle carrying the little girl and her parents as they arrived home
in the town of Ciales on the north side of the island...They took their daugh-
ter to a  hospital where she was pronounced dead..."

NO URGENCY FROM CONGRESS ON ZIKA FUNDS

From Caribbean Business:

"Republicans from states at greatest risk, such as Florida, Texas, Louisiana
and Georgia, have been slow to endorse Obama’s more than 2-month-old re-
quest for $1.9 billion to battle the virus, which causes grave birth defects. The
Centers for Disease Control and Prevention currently reports more than 470
cases in the continental U.S., all so far associated with travel to Zika-affected
areas. Polls show that the public isn’t anywhere nearly as scared of Zika as it
was about the Ebola outbreak in...2014. Aides to GOP lawmakers, even those
representing Southern areas most vulnerable to Zika, say they’ve yet to hear
from many anxious constituents..."

PR SENATE HANDS PREPA PROBE TO FBI

From ABC News:

"A special commission looking into fuel purchases by the financially troubled 

electric utility in Puerto Rico has turned over its findings to U.S. federal autho-

rities for further investigation, the majority leader of the island's Senate said 

Monday...The special Senate investigative commission has been looking into 

allegations that the utility overcharged customers by hundreds of millions of 

dollars while amassing about $9 billion in debt in recent years. Utility officials 

appearing before the commission denied wrongdoing..."

Court Upholds RICO Claims In PREPA Conspiracy Lawsuit

Press Release


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 2012.

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
compliant.

“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-
vity.’”

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 prepa@hbsslaw.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.

The Municipal Bond Market Will Bring America To Its Knees, Once Again

Commentary

Richard Lawless


Back in 2007–2008 it was the Commercial Mortgage Backed Securities
(CMBS) and CDO’s that almost caused America’s financial markets to
fail. It cost six million jobs and millions of Americans lost their homes.
The loss of wealth was huge.

The four trillion-dollar municipal bond market is next. The municipal mar-
ket has been on fire for the last decade. Much like the CMBS and CDO
markets in 2007, the Bankers, the Rating Agencies and the Bond Sales
Organizations have been making outrageous amounts of money. Like a
drug, once Wall Street gets used to those profits, almost anything will be
done to maintain them.

I recently wrote about a utility company that was technically bankrupt but
repeatedly issued billions in bonds that couldn’t be repaid. This company
pays forty to sixty million dollars a year to the Rating Agencies and Banks
to issue these bonds. The agencies and banks wanted that money and were
willing to repeatedly commit fraud to get it.

In this case, the Senate held hearings in which the executives of the utility
made it clear that the Banks and Credit Rating Agencies knew that they
were technically bankrupt and could not repay these bonds. A clear admi-
ssion of guilt. The CPA firm that prepared the utilities financials testified
that the Credit Agencies and Banks were aware of their dire financial posi-
tion but granted false ratings and sold the bonds to their investors anyway.
To clarify this corruption further, an audit was prepared that showed clearly
that the company could never repay these bonds and that information was
clearly available in all the bond offering memorandums. Yes, the memoran-
dums that no one seemed to read.

In the case of this utility company, the bond holders (investors), mostly re-
tired Americans, lost $5 billion dollars, so far. More losses are sure to
follow.

This was all reported to the SEC, FBI and U.S. Attorney. The U.S. Attor-
ney's position is that it is unlikely that any person committed a criminal act.
True, I am not kidding, I actually recorded that call. Is it any wonder why
political outsiders are all the rage this election cycle! Maybe we have had
enough of this.

I was so put off by this whole experience that I started looking into bond
offerings across the country.  Guess what?  No surprise here, this practice
is pretty widespread.  Because of the all the money involved our political
leaders have all turned a blind eye to it.

Based on my preliminary analysis, it appears that we will be looking at the
loss of $2.2 trillion dollars in wealth, mostly held today by retied Americans.

You see, this collapse cannot be avoided.  The municipal market is a giant
Ponzi scheme.  Debt is issued as a municipal bond knowing that the munici-
pal agency can’t repay it.  Over the past decade or more these very same
agencies have been refinancing their debt with great regularity.  Paying off
the unpayable old debt with money from new investors (bond buyers).  Once
the refinancing slows or God forbid stops, the whole house of cards collapses.
Bernie Madoff was just a boy scout compared to these guys.

That day is coming soon.  The fraud is so obvious that it was idiot simple for
an old banker like me to find it.  Greed and a political system that is in large
part financed by these very same companies has put off the day of reckoning
for many years.  These municipalities are in such bad shape that even fraudu-
lent credit ratings will not be enough to draw investors.

Be prepared, the American people are going to take tremendous losses. How
much, it’s hard to be sure.  What I can be sure about is that just like the CMBS
and CDO fraud of 2007-2008, our leaders will not prosecute those responsible
because they are owned by these criminals in our broken political system.


Richard Lawless is CEO of Commercial Solar Power in Temecula, CA. The opinions expressed in the 
preceding commentary are solely his own and do not necessarily reflect the views of The Puerto Rico 
Monitor or its advertisers.

Puerto Rico Is Asking Congress To Run Out The Statute of Limitations

Commentary

Richard Lawless


Puerto Rico is asking Congress to run out the statute of limitations on
fraud claims against them, and Congress is listening!

In a story about government corruption and fiscal misstatement our Con-
gress may insert themselves on the side of the defendant to prevent any
legal recourse by the victims.

It’s hard to believe but it is true.  Between 2008 and 2013, Puerto Rico’s
public utility, PREPA issued billions of dollars in municipal bonds know-
ing they could not be repaid.  In a June 2015 series of committee meetings
Puerto Rico Legislators heard testimony from many government represen-
tatives of PREPA and Ernst and Young their accounting firm.  In the testi-
mony the auditors and executives of PREPA admitted that the company was
technically bankrupt when these bonds were issued and repayment was un-
likely. The Legislative Report HR 1049 concluded that what PREPA did may
have constituted a criminal act and the report recommended a copy of these
findings be sent to the SEC and FBI.

These billions in in bonds are primarily owned by retired Americans who de-
pended on their income to support themselves.

For the first time in history, the United States Government is considering rea-
ching out to protect a government owned utility from any civil litigation by
passing a law that temporarily prohibits anyone from suing Puerto Rico to re-
over their damages.  This new law would postpone litigation just long enough
to run out the clock on the statute of limitations for fraud.

Not surprisingly, Treasury Secretary Jack Lew is promoting that Congress pass
this temporary moratorium.  You see Jack Lew was the COO of Citibank from
2006-2008 when many of these bonds were marketed by Citibank.

It appears the fox is in charge of the hen house in Washington.  Please contact
your Congressman and Senators to let them know how you feel about this.



Richard Lawless is CEO of Commercial Solar Power in Temecula, CA. The opinions expressed in the 
preceding commentary are solely his own and do not necessarily reflect the views of The Puerto Rico 
Monitor or its advertisers.

Governor Signs Prepa Revitalization Bill Into Law

Caribbean Business

Eva Lloréns Vélez 


SAN JUAN – Gov. Alejandro Garcia Padilla signed late Tuesday night the
Puerto Rico Electric Power Revitalization Act, paving the way for a major
$9 billion debt restructuring of the public utility’s debt.

The Senate concurred Tuesday with amendments the House made to the bill,
which was rushed to La Fortaleza because under the terms of the restructuring
agreement, creditors could walk away from the deal had it not been enacted by
midnight Tuesday.

The legislation creates a separate corporation, the Prepa Revitalization Corp.,
which will issue new bonds to be exchanged for the Prepa bonds that are curr-
ently on the market...[CONTINUE READING]

Puerto Rico News Digest For February 15, 2016

FATHER POISONS DAUGHTERS, ONE DEAD

A 20-year-old man from Fajardo's Puerto Real housing project has turned
himself in to police after allegedly poisoning his 23-month-old twin daugh-
ters, one of whom died Saturday at Caribbean Medical hospital. Doctors in-
formed police that the deceased infant's body also showed signs of abuse.
The father had been estranged from the family but recently returned. Accor-
ding to the girls' mother, he had become abusive, but she had been afraid of
reporting the incidents. The suspect is being held at Fajardo police headquar-
ters and is expected to be charged today.

MAN DIES DURING SKYDIVING ACCIDENT

From Fox News Latino:

"A 58-year-old Chicago man died Saturday morning in a skydiving accident
that occurred when he apparently had problems controlling his parachute af-
terit opened, authorities said. Police say that Gaby Ferraca died Saturday mor-
ning at the 14th annual skydiving festival at the island's Arecibo regional air-
port. Event organizer Jason Gonzalez said the death was the first associated
with the festival in 15 years. Federal Aviation Administration officials, police
and prosecutors are investigating the accident, according to a police report..."

BUS WORKERS: LAYOFFS TO START MONDAY

From Caribbean Business:

The president of the Metropolitan Bus Authority (AMA by its Spanish acro-
nym) union, Alexis Merced, said the government will be implementing a plan
for partial layoffs starting Monday. Merced, of the United Workers (Tuama)
union, said AMA will be the first public corporation in which the measure will
be carried out. “This government has consistently said there will be no layoffs.
However, starting next Monday, there will be partial layoffs at AMA when ab-
out 50 workers will have their workday reduced to 20 hours a week,” he claimed.
The measure was notified to the workers in a statement by AMA President Héc-
tor Iván Santos, the labor leader said. “According to Santos’ written expressions,
the measure seeks to send home employees who report to work and AMA says
it has no assignments for them that day,” the union spokesman said..."

PREPA RESTRUCTURING BILL PASSES SENATE

From The San Juan Daily Star:

"Gov. Alejandro García Padilla on Thursday lauded the Puerto Rico Senate’s
vote to restructure the Puerto Rico Electric Power Authority (PREPA), saying
the measure guarantees that PREPA will not be privatized and will remain in
the hands of the Puerto Rican people. The Senate passed the measure Wednes-
day night in a 16-10 vote. “This bill guarantees the stabilization of the electri-
city bill to the extent that it permits us to...produce energy efficiently, permits
external investment in the production of energy as is the case with [two existing
private energy companies] Ecoeléctrica and AES,” the governor said in a press
conference at La Fortaleza. “And it also guarantees that [PREPA]  continues to
be ours, that there will be no fi rings of public employees and  that there is a
flow of capital to be able to buy fuel and diversify the source of energy...”

DOJ Says a Confession is Not Good Enough For a Prosecution

Commentary 

Richard Lawless


In June 24, 2015 the government of Puerto Rico issued a 23-page legisla-
tive report that is no less than a detailed confession. The report details how
government officials in Puerto Rico conspired with Wall Street firms to co-
mmit $11 billion dollars in financial fraud.  After reviewing this document
and other evidence for many months, the FBI is claiming that the best prose-
cutors in the DOJ have not yet found criminal grounds to move forward.

Let’s look at the confession:

· “Investors allowed PREPA to issue bonds, then, PREPA borrowed from
private banks to pay the bond’s interests; then, borrowed from the Govern-
mentDevelopment Bank (from herein “GDB”) to pay back the private bank
loans, and the GDB, in turn, issued more bonds to refinance all.”

“This practice could constitute a fraud scheme for which the federal agen-
cies that regulate financial instruments and the Security Exchange Commi-
ssion could take action against and/or pursue civil suits against these
institutions.”

The legislature is describing a Ponzi Scheme.

· “Therefore, the institutional bondholders bought this debt with the know-
ledge and with consent of what was going on financially in the corporation,
which was ailed with technical insolvency or bankruptcy.”

This means the Wall Street firms bought these bonds knowing they were no
good and they in turn resold them to retail investors. Puerto Rico is clearly
saying these firms conspired with them.

· “This goes to show that the financial intermediaries and the institutio-
nal holders, despite being fully aware of PREPA’s fiscal situation, had no
qualms with Unjustly Enriching themselves and with having the conse-
quences of their negligent acts be paid for by the people of Puerto Rico”.

Why did the Wall Street firms participate? According to Puerto Rico “to
unjustly enrich themselves (fee income).

· “in the face of the credit houses, whom, knowing this, and therefore
PREPA’s technical insolvency, allowed this public corporation, and thus
the people of Puerto Rico, to continue running into debt”.

(Credit Houses is a reference to Moody’s, S&P & Fitch Credit Rating 
Services.)

To clarify, the credit houses issued unjustified credit ratings to earn
fee’s according to the report.

· “Said debt was sold at discount, a large quantity of it between .60 to
less than .50 cents to the dollar”

Once the scheme was uncovered, the investors that owned the bonds lost 40
to 50 cents on the dollar.  With $11 billion outstanding that is around
$5 billion in losses.

· “That this Report be forwarded to the Justice Department of the Common-
wealth of Puerto Rico and the United States of America for their correspon-
ding actions;”

“That this Report be forwarded to the United States Securities Exchange
Commission for its corresponding action;”

Legislature is clearly suggesting a criminal act occurred and should be 
investigated.

The report gives many, many more specifics.  Given all this information, the
DOJ believes there may not have been any actual crimes. Umm?



Richard Lawless is CEO of Commercial Solar Power, Inc. in Temecula, CA. The opinions  expressed  in the 

preceding commentary are exclusively his own and do not represent the  opinions of The Puerto Rico Monitor, 

its editors or advertisers.