When Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act, more popularly known as PROMESA, the law created an oversight board with one simple, albeit important mandate: combat the Puerto Rican government-debt crisis by restructuring the struggling island’s debt and expediting procedures for approving critical infrastructure projects.
In the wake of recent revelations that various public agencies on the island hold $6.9 billion in secret bank accounts, it begs the question, who is in charge and how did they allow such an egregious scandal to go unnoticed for so long?
{mosads}Natalie Jaresko, former minister of Finance of Ukraine from 2014 to 2016 and current executive director of the $60 million PROMESA oversight board, is that curious appointment. She is currently tasked with getting Puerto Rico’s fiscal house in order and holding the Puerto Rican Electric Power Authority (PREPA) accountable. Yet, she has no experience in municipal bonds or bankruptcy. Jaresko should have been disqualified from the beginning.
Jaresko previously ran the $150 million Western NIS Enterprise Fund (WNISEF). WNISEF is an American investment fund under the U.S. Agency for International Development (USAID). While at WNISEF, Jaresko collected $1.7 million in bonuses in 2013 despite only drawing a salary of $150,000.
WNISEF itself suffered losses under her oversight and Jaresko distributed benefits and compensation in significant excess of her and her colleagues’ salaries. The 2004 tax filing shows Jaresko earned more than double her $150,000 salary ($383,259) and charged the fund $67,415 in expenses.
PREPA itself has also been involved in one scandal after another. In one arrangement with former Venezuelan President Hugo Chavez the electric utility knowingly purchased sludge grade oil from the authoritarian regime and resold it to its customers for prime oil prices. PREPA was said to have kicked back the profits from the price difference to complicit local politicians.
In addition to the Venezuelan controversy, PREPA has been involved in several other investigations and class action lawsuits including:
- PREPA along with Petrobas and Shell Trading (U.S.) Company, Inspectorate America Corporation, Bureau Veritas Holding, Core Laboratories, Alchem Laboratory and Altol Environmental Services were named in a class-action lawsuit filed by the residents and businesses in Puerto Rico for falsifying fuel lab results
- PREPA illegally borrowed $4 billion in a seeming Ponzi scheme that “benefitted the financial community” but left PREPA insolvent
- A PREPA internal audit, which documentedthe scheme was heavily edited to hide the illegal activities of the Fuel Office, including lavish parties
In November, Puerto Rican Gov. Ricardo Rosello appeared before Congress to make a request of the American taxpayers for $94 billion. Rosello intended to use $77 billion towards the Puerto Rican debt and $17 billion to “modernize and protect Puerto Rico’s energy infrastructure.” Soon after his testimony the island’s “secret” bank accounts came to light, which were missed by the oversight board and include almost $600 million at PREPA.
Transparent and checked oversight has the potential to save Americans billions of dollars as we continue to learn of the depths of potential criminality in the business practices of a PREPA that raised $10 billion in public bond sales and private sector financing.
The accelerated private investment needed to rescue and modernize Puerto Rico is contingent on ending a widely known culture that has failed to attract American and global investors, despite a 4 percent corporate tax rate. Energy dependability is also a factor in scaring off businesses. Prior to the landfall of Hurricane Irma 300,000 PREPA customers were already suffering from a projected long-term loss of power.
If Puerto Rico is to be bailed out with American tax dollars, it’s important that President Trump replace Natalie Jaresko or that she resign from the Puerto Rico Oversight Board. Puerto Rico needs true reform and that will not come under the leadership of an administrator who has little interest in cleaning up the island nor the experience in how to do it.
This piece has been updated.
Julio Rivera is small business consultant and a Puerto Rican political activist.