FEMA: Part of $260 million owed by PREPA to Cobra is ineligible for reimbursement
Cobra Acquisitions performed electrical grid repair work after Hurricane Maria under two contracts.
By THE STAR STAFF
The Puerto Rico Electric Power Authority (PREPA) remains in a dispute with Cobra Acquisitions that has now been extended to the Federal Emergency Management Agency (FEMA) over more than $260 million owed to the former contractor hired to repair the island power grid after it was destroyed in the 2017 hurricane season.
The dispute has reached FEMA, which has declared some of the amounts owed to Cobra as ineligible, which means it will not reimburse PREPA. The information is contained in a Jan. 7 status report to the court in the Title III bankruptcy process to restructure PREPA’s $10 billion debt.
PREPA had asked that payments owed to Cobra be paralyzed pending the outcome of a criminal process on corruption charges against Cobra’s former president and a federal official. Donald Keith Ellison, the former president of Cobra Acquisitions, and former FEMA official Ahsha Tribble were sentenced last year to six months in jail each for their role in a corruption scheme related to the awarding of contracts to repair the island’s electrical infrastructure following Hurricane Maria in September 2017. After the criminal court ruling, Cobra asked the federal court to lift the bankruptcy stay so that the claims against PREPA could be litigated. PREPA wants the stay to be left in place until July 31, after the utility’s plan of adjustment confirmation hearing.
Cobra performed work under two contracts. PREPA has already paid Cobra $21.4 million that FEMA ultimately found was ineligible for reimbursement after initially disbursing it to the power utility.
Besides the money for its work, Cobra is claiming PREPA owes it $77 million in tax reimbursement payments. PREPA had agreed to reimburse Cobra’s tax payments but only up to a certain amount as it is trying to determine how much is truly owed. Cobra is also seeking $61.5 million in interest payments, which PREPA is disputing in part because FEMA has said the amounts are not billable.
Under a second contract, FEMA says some $73.7 million owed to Cobra is ineligible for reimbursement. PREPA and Cobra are also in disagreement over some $83 million in interest Cobra is claiming.
The Financial Oversight and Management Board, which represents PREPA in the bankruptcy, wants the continuation of the stay on all litigation to settle disputes with FEMA over reimbursements to Cobra and to be able to focus on the debt adjustment plan for the power utility.
Cobra wants the stay to be lifted and for the judge to hear the dispute at the Feb. 2 omnibus hearing. Cobra says it has not been paid since 2019 and noted that further delays will continue to accrue interest for PREPA.
“A continued stay will only encourage continued intransigence not negotiations and result in the continued accrual of a substantial amount of interest [some $3.5 million per month] and attorneys’ fees …” Cobra said.