Residents and businesses of Puerto Rico have filed a class-action lawsuit against Puerto Rico Electric Power Authority (PREPA), employees of PREPA’s Fuel Oil Office, the world’s largest fuel oil suppliers – including Brazilian state-owned Petrobras and Shell Trading (US) Company – and Puerto Rico-based fuel oil laboratories for 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, according to attorneys at Hagens Berman.
The lawsuit, filed on Feb. 24, 2015, in the U.S. District Court for the District of Puerto Rico names 20 defendants for receiving kickbacks and payments for colluding to raise fuel oil prices that were directly passed to users of electricity, by agreeing to use non-complaint fuel oil and falsifying lab tests.
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 fuel oil suppliers, or specifications set by the EPA. PREPA accepted this non-compliant fuel oil in exchange for kickbacks and commissions from the fuel oil suppliers, according to the complaint. PREPA served approximately 1.5 million customers in 2012.
Former employees from PREPA and the oil cartel participants have shared information about the conspiracy to help end this fraud. If you have additional information about the Cartel de Petróleo, you may contact a Hagens Berman attorney by calling 708-628-4949 or by emailing [email protected].
Several former employees of the conspirators tried to prevent the conspiracy internally and have stepped forward to share their knowledge of the scheme. Examples of the far-reaching scheme to defraud include: falsified lab results emailed before testing of fuel oil samples completed, lavish parties held for PREPA’s Fuel Oil Office and an internal audit at PREPA which originally documented the far-ranging scheme was heavily edited to hide the scheme. The audit was shared with PREPA’s Governing Board President Luis Garcia Passalacqua. After the Fuel Oil Office tried to intervene and halt publication of the report, the Governing Board President condemned the Fuel Oil Office as a disaster in an internal email. Despite this, the audit report was gutted and materially altered to hide the scheme to defraud.
Moreover, fuel oil suppliers allegedly sponsored trips to foreign nations to thank PREPA and governmental officials for their participation in the cartel. In 2006, Petrobras sponsored a contract signing ceremony for a PREPA fuel oil contract in Rio de Janeiro, Brazil. The representative who was instrumental in securing and who signed the contract for Petrobras, Paulo Roberto Costa, is a former executive of Petrobras who oversaw its refining operations until 2012. Costa recently revealed that he paid kickbacks to more than 30 Brazilian government leaders for contracts, including three governors, the energy minister and more than 30 legislators; he testified that the illegal kickbacks were in the amount of three percent of the value of the contracts.
The lawsuit alleges that the scheme was perpetrated by the Fuel Oil Cartel Enterprise, defined in the lawsuit as the following three groups: 1) PREPA and other employees and agents of PREPA; the former Administrator of the Fuel Oil Office, William Clark; the current Administrator of the Fuel Oil Office, Edwin Rodriguez; the Assistant Administrator of the Fuel Oil Office, Cesar Torres Marrero; and other governmental employees or agents, who were or are responsible for all of the activities associated with fuel procurement for PREPA; 2) Fuel oil suppliers, including Petrobras America Inc. and, Petroleo Brasileiro S.A.; Shell Trading (US) Company; Carlos R. M?ndez & Associates; Puma Energy Caribe LLC and, Puma Energy International, B.V.; Trafigura A.G. and Trafigura Beheer, B.V.; Petrowest, Inc.; Vitol S.A., Inc. and Vitol, Inc.; and other individuals contracted with PREPA to provide compliant fuel oil, but actually provided cheaper non-compliant fuel oil at more expensive prices in exchange for paying undisclosed commissions or kickbacks to PREPA; 3) Laboratories who falsified laboratory tests that shows the non-compliant fuel oil to be compliant, including Inspectorate America Corporation; Bureau Veritas Holding, Inc.; Core Laboratories N.V. d/b/a Saybolt Laboratory; Altol Chemical Environmental Laboratory Inc. d/b/a Alchem Laboratory; Altol Environmental Services, Inc. d/b/a Altol Enterprises; and others.
The suit seeks to recover out-of-pocket losses, compensatory damages and punitive damages for plaintiffs under the Racketeer Influenced Corrupt Organizations (RICO) Act and for the disgorgement of profits under the common law of unjust enrichment.
