How Stupid Is The FBI? You Must Read This!

Commentary 

Richard Lawless

Unfortunately, my company along with tens of thousands of other individuals and corporations was caught off-guard by Puerto Rico’s financial collapse. To make sure that it doesn’t happen to us again, my company launched an investigation into the causes of this tragedy so we wouldn’t become a victim a second time, somewhere else.

Part of the findings uncovered information indicating the Puerto Rico Government theft of hundreds of millions of dollars in public funds each year.  I reported this to the San Juan FBI office and after many months and little cooperation, they determined the activities did not meet criminal standards and would better be handled as a personal civil case.

Shortly after that I received a call from a CIA Agent that said they have been tracking the massive wire transfers out of Puerto Rico for almost a decade. The Agent then went on to say that they have notified the FBI repeatedly and the FBI failed to act on it.  The agent also said that in tape recorded phone conversations it was clear that the San Juan FBI and U.S. District Attorney Offices were participating in this massive theft and their family members were receiving payoffs; Further explaining the lack of prosecution for so many years.  A short time after that, British Intelligence suggested they were aware of much of same.

Two newspaper editors were able to confirm the tip from the CIA and British Intelligence.

On April 6, 2016, the Caribbean News Now Agency printed the article “Personal conflicts obstruct FBI investigation into Puerto Rico fraud” and the New York Observer printed a similar article on 6 27-16. As of today, it is my understanding that the money continues to flow out of Puerto Rico and find its way back to critical DOJ employees.

Reporting this to the San Juan FBI and U.S. Attorney would be silly, since they were the DOJ employees allegedly accepting the payoffs. I forwarded this information to the Washington Headquarters of the FBI hoping they would do something.

After not hearing anything for almost a year, I filed a Freedom of Information Request.  I received the results today. The Washington FBI referred my complaint back to the San Juan FBI so they could investigate themselves!

As of today, it is my understanding that the money continues to flow out of Puerto Rico and find its way back to critical DOJ employees.

Puerto Rico Bond Fraud that set a new standard for Congressional Corruption? 60 Sec Commercial Summarizing some of the crimes

Press Conference recapping testimony to the SEC/FBI and Congressional Oversight Committee – It is mind bending

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. The opinions expressed in the preceding commetary are solely his and do not represent those of The Puerto Rico Monitor.

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.

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.

History Is Repeating Itself and America May Not Survive

Commentary

Richard Lawless











In 2006 a financial crisis of unprecedented magnitude hit America.

Wall Street, with at least complicit support from our legislators, the DOJ and re-
gulatory agencies began to create new financial instruments to sell to the Ameri-
can people.  Unfortunately, these new investments consisted of pools of troubled
mortgages.

What made this all possible was that the three big credit rating agencies handed
out high investment grade credit ratings that allowed the complicit banks to sell
these investments to the general public. It really was that simple.  Today there is
universal agreement that Moody’s, S&P and Fitch provided fraudulent credit ra-
tings.

Could you image what would happen to a real estate appraiser that knowingly
issued home values that were hundreds of thousand higher than the value of the
property and a dishonest borrower that borrowed millions based on these phony
valuations.  The Banks would incur millions in losses and the borrower and app-
raiser would go to jail.

As of 2016, not one employee or executive at the rating agencies were ever
charged.

Our legislature is the recipient of tens of millions per year in political contribu-
tions and paid speeches.  None of that money comes without strings. Our Cong-
ressmen and Senators did what they were paid to do and protected their Wall St-
reet friends.  The DOJ and regulatory agencies are run by these very same legis-
lators and were prevented from prosecuting anyone.

Six trillion dollars in lost wealth, six million homes lost to foreclosure and mill-
ions of jobs lost.

Well, the Credit Rating Agencies are at it again and this time our country does
not have the resources to withstand another major crisis.

It has been a few years now since the start of the wholesale financial collapse of
Puerto Rico.  Sufficient time has passed allowing Individuals, companies, regul-
atory agencies and our legislators the time to understand the root causes of his
crisis.

That’s right, you guessed it!  All of the credit ratings issued on Puerto Rico debt
were either misleading or outright fraudulent.  But it does not end there, a quick
review of bond ratings from Chicago, Connecticut, California and New York re-
flect similar concerns.

The municipal bond market is $4,2 trillion dollars.  Preliminary indications sugg-
est that as much as 60% of these bonds were sold to investors with an inappropri-
ate or misleading credit rating.

Once again our regulatory agencies, the DOJ and our legislators have circled th-
eir wagons around Wall Street.  No matter how many American’s need to be thro-
wn under the bus, our government will not move against their friends.

So far tens of billions have been lost by our senior citizens who purchase these bo-
nds to supplement their modest retirement incomes.  It will not end with Puerto Ri-
co; Puerto Rico is only the beginning.


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.

Dodd-Frank Is About To Be Thoroughly Hillaried

Commentary

Richard Lawless

I can no longer sit quietly and watch this country implode from all of the Wa-
shington corruption.

Today I watched Hillary Clinton's speech, and I was appalled. I watched her 
tell the audience how she would bring Wall Street to heel and hold them acc-
ountable. I listen to her say how she would use Dodd Frank legislation to ma-
nage that process. It is all complete BS.

Hillary is fully aware of the large scale bond fraud uncovered in Puerto Rico.   
A criminal conspiracy so large that it calls into question all $70 billion dollars
of Puerto Rico debt.  Hillary is calling for a complete bailout and supports cu-
rrent legislation to do just that. She does not support prosecution.

The Puerto Rico Senate held investigative hearings in early 2015 to explore the 
financial failure of one of its largest municipal agencies. One government exe-
cutive after another testified under oath that they knew they were technically ba-
nkrupt when they issued these bonds and could not pay they back.  The witness-
es then went on to say that although the credit agencies (Moody’s, Fitch and S&
P) knew they were insolvent, they could secure good credit ratings for the bonds 
for the “right fee”. According to the same testimony, Wall Street’s biggest banks 
knew all this but for the “right sales fees” they would sell these junk bonds as sa-
fe retirement income to their retired investors.

The SEC has already performed four full audits on four bond issues and found 
the audits to be consistent with the Senate testimony.  These agencies were insol-
vent and it could not have been accidently overlooked by the Rating Agencies and 
the Banks.

We have seen this before with the 2007-2008 CMBS (mortgage bonds) crisis. The 
Rating Agencies and the Banks almost prefer to support these failing agencies be-
cause it forces them to refinance debt they can’t pay off as agreed before they have 
to admit it to their bond holders.  This “Ponzi Scheme” forces frequent and costly 
refinancing on a regular basis, generating huge fees for the Rating Agencies and 
Banks. All good, if you can continue to refinance fast enough and bring in new in-
vestors quick enough to pay off the old investors.  As in the case with Puerto Rico 
and other States and Cities, even a small hiccup causes the hold house of cards to 
collapse.

It is pretty clear that the Agencies issuing the bonds, the Rating Agencies issuing 
fraudulent ratings and the Banks selling junk bonds all broke the law and violated 
almost all of the provisions of Dodd-Frank.

All Congressman and Senators were issued this information.  Most did nothing 
but those that did, quickly stepped up to protect their Wall Street contributors. You
see, if this got out, the Rating Agencies and Banks would be held accountable for 
the tens of billions in bond losses.  Politian’s and government employees may be 
charged criminally. 

To date, there has been over $30 billion dollars in bond losses from this scam. The 
average bond holder owns less than $10,000 in bonds and that represents over 20% 
of their total savings. Not hedge funds as the Press and our Political leaders would 
have you believe.  When these bonds collapsed, after the senior citizens lost half 
their money, then the hedge funds came in to buy these bonds at 33-50 cents on the 
dollar with the hope of making money in the future.  The hedge funds are being us-
ed as a distraction to take the discussion away from the original crimes. Most Pu-
erto Rico Bonds are still held by individuals like you and I.

New York residences owned the single biggest piece of this debt at about $4 billion 
dollars, followed closely by Florida, New Jersey, Pennsylvania and Illinois. I don’t 
think any State has loss less than a few hundred million dollars. It is not a Puerto 
Rico Fraud. it is a National Fraud.

This entire thing sickens me and makes me glad that I am no longer part of the Wa-
shington two step.  The two step is a Political Dance that requires most politicians 
to add a political calculation to every vote they make.  There are three simple ques-
tions, how will this vote increase my power base, will it add to my reelection war 
chest and will it improve my personal financial statement.  There is no considerati-
on given to the masses they represent.  It is all about trading American Treasure 
and Tax Payer money for personal gain.

In this case it gets even better.  The Politicians were not happy stealing tens of bi-
llions from America’s middle class senior citizens when there is more to be taken. 
Enter the PROMESA legislation. Legislation that removes all existing legal rights 
from the innocent bond holders.  The legislation actually prevents the bond holders 
from suing. All supported by politicians that know all about this. 

Being around Washington for so long I know what most of these government offi-
cials did before securing their government jobs.

Treasury Secretary Lew and his legal counsels Weiss and Campbell worked for 
Citibank and Lazard, respectfully.  In the period that this fraud started Citibank 
and Lazard were among the first firms to sell these fraudulent bonds.  Now, using 
their position in government, all three of these gentlemen marketed congress for 
a full  bailout of Puerto Rico with Tax Payer Dollars and the innocent bond hold-
er’s money. Not once in all the committee meetings they participated in did they
site this conflict of interest while purposing solutions that benefit all their former 
employers.

Paul Ryan a professed conservative, was not supportive of any bailout or the PRO
MESA legislation.  That is until he met with Secretary Lew.  After the meeting, 
Ryan supported the legislation that violates every core principal that the Republi-
can party stands for.  What happened?  I suspect two things.  Lew reminded him
that he had a bright career and Wall Street would not forget this (contributions for 
his continued career advancement) and immediate funds for his current reelection 
campaign.  I as guessing about the former, but if you look at the contributions that 
flowed into him from Wall Street firms after the meeting, well it was impressive.  
Not surprisingly, most of the contributions came from firms directly involved with 
Puerto Rico.

It is clear that the Democrats has a strategy in place to redirect what’s left of the 
bond holders money to fund the unfunded government (union pensions).  How 
will they do this?  It is simple and the Press is going along with it.  Claim that the 
bonds were issued fraudulently and claim they shouldn’t be paid back to the bond 
holders. Float stories that the bond holders are just greedy hedge funds and not peo-
ple like you and I.  Who likes hedge funds?  Float stories that Puerto Rico is cance-
lling services from lack of money.  Kids are dying in the streets.  You have heard 
all this before.

As a debt expert, I should point out that when a family does not make its mortgage 
payment (bond payment example) that family has more cash at the end of the mon-
th, not less.  Puerto Rico has withheld hundreds of millions in payments and has mo-
re cash than you would imagine. Any cancelling of services is just another strategy 
being employed by less than honorable people.

I should mention in closing that Elizabeth Warren (claims to be anti-Wall Street) 
knew all about this but was the first to propose an amendment to an energy bill 
preventing innocent bond holders from suing.  Just follow the money for Elizabeth.

This is not just a $70 billion-dollar scam (Puerto Rico). It includes Chicago, Conn-
ecticut and many other States.  This is a Political Strategy to make up for years of 
over spending.  When legal taxes are no longer enough, steal the bond holder’s mo-
ney.  Individually the bond holders are not very powerful and they will not underst-
and what their leaders are doing to them.



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 preceding article are solely those of
Mr. Lawless and do not necessarily reflect those of The Puerto Rico Monitor, its editors, contributors
or advertisers.

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. 

The Municipal Bond Market is a Massive Criminal Enterprise: Get Out Now or Pay Later

Commentary

Richard Lawless

Senior Citizens and Savers throughout the fifty states and Puerto Rico have
taken tens of billions in municipal bond losses. It has become clear that the
Rating Agencies have been knowingly and intentionally issuing good credit
ratings for technically bankrupt municipal entities in exchange for healthy
fees.

The Puerto Rico financial collapse was one of the first events to shine on a
light on this widespread activity. The Puerto Rico Government issued a 23-
page report that included sworn testimony from municipal executives that the
Rating Agencies knew they couldn’t repay the debt but for a higher fee, they
would issue good credit ratings. To date, the fraudulent credit ratings have al-
ready generated $30 billion dollars in losses across the fifty states. The Rating
Agencies get wealthy and America’s Seniors and Savers are paying the price.

I contacted the three General Counsels for Moody’s, S&P and Fitch. Fitch de-
nied the allegations and Moody’s and S&P failed to respond. I contacted the
Board of Directors for all three ratings agencies and forwarded the testimony
and financial audits supporting this practice.  No Board Member has respon-
ded. The Agencies engaged in this practice, contributing to the 2007-2008 fin-
ancial meltdown that cost Americans trillions and were never held accountable.
There is good reason for the Rating Agencies confidence that they will once a-
gain walk away scot free.  It is clear that Congress is much more willing to th-
row America’s Seniors under the bus then they are to bite the hand that feeds
them.

Although all 50 States have residents that took material losses, New York was
the highest with over $2,000,000,000 followed by Florida, New Jersey, Penn-
sylvania, Illinois and California. All of States Attorney General’s know about
this activity but none have moved to protect their residents.  They are not alo-
ne, this activity was reported to the FBI, SEC and U.S. Attorney’s office. They
all expressed deep concern and they have all failed to take any meaningful ac-
tion.

Given the indifference by our Political Leaders, Law Enforcement and our Ju-
dicial System, I strongly recommend that Seniors and Savers divest themselves
of all municipal bond investments.  It is only a matter of time for Chicago and
California, and it is clear there will be no protection from the massive losses.



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 pre-
ceding commentary are solely those of the author and do not necessarily reflect those of The
Puerto Rico Monitor, its editors, contributors or advertisers.

Credit Rating Agencies Throw Our Senior Citizens Under the Bus And Congress Pulls Out All Stops to Protect Their Wall Street Friends!

Commentary

Richard Lawless










Once again we are faced with one inevitable truth.  Our legislators protect Wall
Street, not us.

The municipal bond market is approximately $4.2 trillion dollars. Municipal
bonds are a favorite of retired Americans and Senior Citizens for their double
tax free income.  80% of the bonds issued are either directly held by these folks
or held through a mutual fund.

Senior Citizens rely on this income to supplement their social security and pen-
sions.  The average bond holder has a household income of $30,000 or less.

There is clear and compelling evidence of massive municipal bond fraud on the
part of S&P, Moody’s and Fitch.  The Puerto Rico financial collapse spurred a
number of Senatorial Hearings in Puerto Rico.  In these hearings there was di-
rect sworn testimony from municipal agency executives that the rating agencies
knew they were bankrupt but for the right fee would issue a good credit rating
for their bonds.  Subsequent accounting audits of the bond issues verified that
the entities were technically bankrupt when S&P, Fitch and Moody’s issued good
credit ratings to them.  $56 billion of the $70 billion in bond debt issued, is held
by Americans in the fifty states.

In addition to first hand testimony and audits there is abundant evidence of coll-
usion between the rating agencies.  Much like the results of a DNA test; 10,000,
000 to 1 probabilities, the odds that the three rating agencies got the same things
wrong across so many bond issues, leaves no doubt, there was collusion. Make no
mistake, the evidence is overwhelming and this is a massive criminal enterprise in-
volving hundreds of billions of dollars.

All of our Congressman and Senators have been given the testimony and the audits.
The legislatures are aware of the SEC and FBI investigations and are doing every-
thing they can do to obstruct any progress on that front.  There are even CIA recor-
dings that implicate the Puerto Rico FBI and US Attorney offices in this criminal
enterprise.

While most of our Representatives do nothing, a small but powerful group of Con-
gressman and Senators are aggressively throwing us under the bus to protect their
contributors.

A complete and full report was also sent to the House and Senate Oversight Co-
mmittees. I recommend that all Americans call the numbers below and let them
know, “WE ARE MAD AS HELL AND WILL NOT TAKE IT ANY MORE”.


House Committee on Oversight                           Senate Committee on Oversight
2157 Rayburn House Office Building                   340 Dirksen Street (Senate Offices)
Washington, DC 20515                                        Washington, DC 20510

Phone: (202) 225-5074  Fax: (202) 225-3974        (202) 224-4751



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 ma-
nager 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-ban-
king companies some of which have been in the energy sector. Mr. Lawless' opinions are exclu-
sively his own and do not necessarily represent those of Th Puerto Rico Monitor, its contributors 
or advertisers.

Even An Immediate Bailout of Puerto Rico Is Unlikely To Save It!

Commentary

Richard Lawless


For almost a decade it appears that the island of Puerto Rico has been 
issuing municipal bond debt that it knew it could never repay. Municipal 
entities in Puerto Rico like the government owned electric utility have 
been technically bankrupt for many years. This utility and almost every 
other municipal entity on the island have been paying the credit ratings 
agencies and banks tens of millions of dollars a year to secure unjusti-
fied credit ratings The utility by itself spends $40-$60 million dollars 
a year with the ratings agencies and banks to keep the money flowing.

A simple review of the bond offering memorandums, easily available to 
anyone, shows almost all these entities to be in dire financial condition, 
many, if not most, technically bankrupt. Unbelievably, the credit agencies 
were lining up to offer A & BBB ratings for the right fees.  Wall Street’s 
biggest banks did the same thing and then sold these very troubled bonds 
to their unsuspecting investors.

There has been over $5 billion dollars in losses so far to the bond holders 
who bought the utilities bonds, mostly retired Americans of modest means.
No one has been questioned, no one has gone to jail.  

When you look closely at these bond offering memorandums you will not 
only see that the entities never had the money to make the payments on the 
bonds but bond offering after bond offering, the entities claim to be raising 
money for improvements.  The improvements never get done, the money 
disappears and the following year another request for money for the same 
project appears in a new memorandum and once again the money disappears
and on and on.

The bonds rating agencies never mention the improvements never get done 
but the money disappeared. The Agencies claim that the bond payments will
be made in whole or in part from accounts receivable that have not been co-
llected in a decade and in small print say they are unlikely to be collected in 
the future. Again not important I guess.

The Puerto Rico Legislature held committee meetings where executives from 
the utility and the lead auditor from Ernst and Young claim the ratings agencies 
and banks were fully aware the utility was bankrupt when they issued the A & 
BBB ratings.  Umm, everyone wants to seem to ignore this fact.

Everywhere I looked in Puerto Rico I saw the same thing. Junk bonds with a 
very high likelihood of default sold to everyday Americans as low risk retire-
ment income.  While this concerns me greatly, it is not why I am so concerned.  
You see, after I looked at Puerto Rico, I looked at Chicago, Compton, Oakland, 
California and New York.  You guessed it, much of the same. Until these issues 
are addressed, throwing more dollars at Puerto Rico will only postpone the 
inevitable.

When Bernie Madoff started out many people saw the same thing.  Reports 
were made to the SEC and ignored, the FBI and ignored the DOJ and ignored. 
He could have been stopped at $100,000,000 dollars, instead he stole $40 bi-
llion dollars before it all collapsed.  There were whispers and they were igno-
red. I am screaming from the mountain top and I hope you are listening.

Everyone acknowledges that Madoff ran a Ponzi scheme.  The early investors 
were promised things he could not deliver and new investors were sought out 
to pay off the early investors and so on.  Over time its gets bigger and bigger 
and finally the last investors lose everything.

Today there are approximately 60,000 entities that issue municipal bonds. Four 
trillion dollars in bonds are in the market today, owned entirely by Americans, 
mostly retired Americans.  These retired Americans might get $900 a month 
from Social Security, $500 a month from savings and another $600 a month 
from their bonds.  They are barely making it on the $2,000 a month. Take away
the $500 in bonds and they lose their home, can’t pay for medicine or simply 
give up. 

If the municipal market activity was to slow down or temporarily stop, it is 
possible that the American people would see $2-$2.2 trillion dollars in losses. 
 The house of cards built on fraud and deceit would collapse.

How could this happen?  It is easy, in the 2007-2008 CMBS/CDO crash that 
brought America to its knees, 6 million jobs were lost, millions more lost their 
home and trillions in wealth was wiped out.  That too was a Ponzi scheme built 
on false credit ratings. 

One person was charged with a crime, a crime that almost ruined our country.  
If no one is held accountable, why not do it again. So they did!

Our congressmen and Senators go to plush lunches with these folks, they go 
on wonderful fact findings trips to exotic locations, paid for by these folks, 
they get political contributions and for special favors, they get outlandish sp-
eaking fees.  It’s a great deal and they will protect it regardless of how many 
Americans they have to throw under the bus.

Other politicians want to buy votes. It is an election cycle. Have you listened 
to the speeches?  Free community college, no four years of free college, free 
this, free that. Why not?  Just because we have 19 trillion dollars in debt do-
esn’t mean we can’t have 25 trillion in debt. What debt, you guessed it, bond 
debt.  You see when you can’t raise taxes anymore and still keep you job, you 
have to take the money from someone.  Why not issue bonds and default on 
them later!  No one is paying attention, who reads those pesky bond offering
memorandums anyway. If  they are rated AAA or A or BBB, they must be 
good!

Most Americans don’t know that Municipal Bonds are not reviewed or moni-
tored by any agency.  Our tough talking politicians responded to the American 
people by passing a law that requires the agencies issuing these bonds, self-re-
port. I am not kidding, they wrote into law that the issuing agencies, credit a-
gencies and banks will not be monitored unless they write to the SEC and admit 
to doing something wrong themselves.  No really, this is true.  $4 trillion dollars 
and accountable to no one.  Our leaders even passed laws that make it very di-
fficult to sue if  someone like me uncovers it all.  I am sure it had nothing to do 
with those lunches, free vacations, political contributions and paid speeches. 
That would be cynical.

How about the press.  Well you see how they uncovered the CMBS/CDO cri-
sis. No wait a minute, it was American’s like me.  They did report on it when
it could no longer be ignored.  The financial papers get their business from the-
se very same firms, they wine and dine them, vacation with them and count on 
them to advertise in their papers.  When is the last time you can remember that 
the Wall Street Journal, The Financial Times or Bloomberg broke a meaningful 
story? Investigative journalism is dead unless it fits the political bias of a specific 
paper.

This house of cards is starting to collapse.  First Puerto Rico with Chicago next.  
At first the papers will print what their told to, it’s the economy, lack of jobs, the 
weather.  Anything but the truth.  When it becomes more than one or two cities, 
when the numbers are too big to ignore, someone will tell the truth and everyone
will ask how this could have happened?  How could it have gone on for so many 
years?   

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.