• The Star Staff

Fiscal board wants oil supplier to return nearly $4 billion to PREPA

By The Star Staff

The federal Financial Oversight and Management Board wants a federal judge to order Vitol SA (VSA) to return $3.9 billion in supply-contract payments to the Puerto Rico Electric Power Authority (PREPA) without a court hearing because the oil supplier has not rebutted the utility’s claims that the contracts were rendered null when it concealed a conviction for bribing Iraqi officials.

The latest court document filed last Friday is part of a suit filed by the bankrupt PREPA against VSA that began in the local courts in 2009 and is now in the U.S. District Court.

PREPA sued VSA in the local courts to recover payments it made to VSA and to Vitol Inc. (VIC), which is part of VSA, under six fuel supply contracts that PREPA says were obtained in violation of Act 458 of 2000, the island’s anti-corruption law. The case was sent to the U.S. District Court in 2019.

The oversight board accused VSA of shielding its alter ego from liability in the suit by hiding behind a corporate façade and misrepresenting Puerto Rico’s anti-corruption law, which prohibits the awarding of public contracts to entities found guilty of certain crimes and requires bidders to disclose pending investigations for such crimes.

VSA signed sworn statements stating that it complied with Law 458 when it entered into the fuel supply contracts with PREPA despite knowing as early as 2004 that it was being investigated by the United Nations for paying kickbacks to Iraqi officials in exchange for oil contracts under the UN Oil-for-Food program, the oversight board says.

But VSA has argued that the conviction did not render VIC ineligible to enter into contracts with PREPA, saying VIC was not a subsidiary of VSA when the contracts were awarded.

PREPA argues that rather than a subsidiary, VIC was an alter ego created by VSA to cover it from the repercussions of the conviction. VIC was created by VSA in October 2006 with VSA employees, just months before VSA had to answer to the bribery allegations.

“VIC and VSA were the same juridical person because: the statutory definition of ‘juridical person’ expressly encompasses subsidiaries (and alter egos),” PREPA says.

PREPA is in bankruptcy to restructure some $9 billion in debt.

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