Former Puerto Rico officials charged in corruption probe
By MICHAEL DEIBERT AND MICHELLE KASKE | Bloomberg | Published: July 10, 2019
Two former Puerto Rico officials, along with the head of an accounting firm and three others, were indicted over allegations of theft, money laundering and wire fraud, escalating federal investigations that have been swirling around the bankrupt U.S. territory.
Julia Keleher, who served as the commonwealth's secretary of education from January 2017 until April, and Angela Avila-Marrero, the head of the commonwealth's health insurance administration until last month, were among those charged, the U.S. Justice Department said Wednesday. Fernando Scherrer-Caillet, managing partner of the BDO Puerto Rico accounting firm, and two others were also indicted.
The "defendants engaged in a public corruption conspiracy and benefited at the expense of the Puerto Rican public and students" said Neil Sanchez, special agent in charge of the U.S. Department of Education's Office of Inspector General's Southern Regional Office, at a press conference in San Juan on Wednesday morning.
The steps stem from ongoing investigations of the island's departments of education and health and add to the turmoil gripping Gov. Ricardo Rossello's administration just as it faces a pivotal stage in the government's more than two-year long bankruptcy. Last month, Rossello fired his treasury secretary, Raul Maldonado, after the official disclosed that his department was being investigated for potential corruption.
Currently abroad on a family vacation, Rossello in a statement said he was returning to the island immediately "recognizing the importance and significance of the arrests that have taken place today, as well as their impact on the government."
Rossello is already battling with the island's federal oversight board over Puerto Rico's annual budget and is in the middle of negotiating with bondholders over a plan to cut nearly $18 billion of the central government's debt.
"You clearly have less confidence in the governor or the people in there," said Daniel Solender, who helps manage $24 billion of state and local debt, including Puerto Rico securities, as head of municipal investments at Lord Abbett & Co. "There's clearly some issues in oversight."
Keleher allegedly pressured her department to execute a contract to a company, Colon & Ponce, which the former Education Secretary had a close relationship with. The firm was awarded a $43,500 contract that increased to $95,000, even though it was unqualified under the terms of the request for proposals, according to the Justice Department.
Avila-Marrero is accused of steering contracts totaling $2.5 million to BDO and providing internal information to the company. BDO then subcontracted the work and paid unauthorized commissions, which inflated the cost of the contracts, according to the Justice Department.
A spokesperson for BDO at an outside public relations firm didn't immediately respond to a request for comment.
Rosello said his administration "will not tolerate corruption and anyone who fails that trust must pay with the full weight of law" before going on to call "for collaboration with the agencies of law and order."
Rep. Raul Grijalva, D-Ariz., who chair's the U.S. House Natural Resources Committee, which oversees legislation affecting the island, called on Rossello to make addressing public confidence in government his top priority.
"The Puerto Rican people deserve a government that takes public service seriously, that's transparent and accountable, and that doesn't let this happen in the first place," Grijalva said in a statement following the indictments. "Gov. Rosselló has little time and much to do to restore public faith in his government, and I urge him to take a housecleaning approach as quickly and thoroughly as possible."