Puerto Rico Fiscal Oversight Board Sues Fuel Suppliers

(Bloomberg) -- The Congressionally-mandated board that oversees finances for Puerto Rico has sued several companies it alleges took fraudulent payments and compensation from the state power utility.

The Financial Oversight and Management Board for Puerto Rico charged on Sunday that, between 2012 and 2015, the commodities trading and logistic company Trafigura and the energy and commodities company Vitol supplied the Puerto Rico Electric Power Authority “with oil that did not meet the applicable contractual or regulatory specifications, but nonetheless received payment” at the price of the higher quality fuel oil.

The board is also suing three laboratories -- Carlos R. Mendez & Associates, Inspectorate America Corp. and Altol -- alleging they received payments for falsifying tests of the quality of the oil supplied to PREPA. The cases were filed in the U.S. District Court for Puerto Rico.

“These payments contributed to PREPA's insolvency by increasing the cost of its operations and causing PREPA to slide deeper into debt," the statement read.

None of the companies were immediately available for comment.

The utility has been battered by a spiraling debt and by 2017's Hurricane Maria, which knocked out power across the island for months. Controversy surrounded PREPA's $300 million no-bid contract for resurrecting the devastated electrical grid to Whitefish Energy, a Montana company with two full-time employees. The contract was eventually canceled, and PREPA's head resigned.

Last month, the board and PREPA reached a restructuring agreement: bondholders invested in the struggling utility would receive 67.5 cents for every dollar for new Tranche A bonds and 10 cents on the dollar for new Tranche B bonds.

To contact the reporter on this story: Michael Deibert in San Juan at mdeibert@bloomberg.net

To contact the editors responsible for this story: Matthew Bristow at mbristow5@bloomberg.net, Ian Fisher, Matthew G. Miller

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