Mammoth Energy to PREPA: Release $40.4 million in emergency account for payment of restoration bill
By The Star Staff
Mammoth Energy Services Inc. is calling on the Puerto Rico Electric Power Authority (PREPA) to release the $40.4 million shown by PREPA as available in its emergency account funded by the Federal Emergency Management Agency (FEMA) toward payment for the electrical grid restoration work completed by Mammoth’s wholly owned subsidiary, Cobra Acquisitions LLC (Cobra), more than three years ago in Puerto Rico in the aftermath of hurricanes Irma and Maria.
The request was made in court documents and in a statement.
In a document dated May 11, 2022 entitled “13-week cash flow update,” PREPA indicated that $40.4 million remains available in its emergency account for Cobra’s restoration work. The 13-week cash flow update, including page 9 referencing the $40.4 million in available funds, was published by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) on its website.
As of the date of the news release Tuesday, PREPA owes Cobra in excess of $350 million, including over $123 million in accrued and unpaid interest, for the aforementioned restoration work. The account receivable accrues the contractual interest at the rate of over $3.3 million per month. Mammoth continues to vigorously pursue the collection of the severely delinquent account receivable, the firm said.
“It is inexplicable that PREPA is continuing to breach their contractual obligations, especially when their own financial documents indicate that $40.4 million of cash for work performed by Cobra remains in a PREPA emergency account,” Mammoth CEO Arty Straehla said. “Our work in Puerto Rico has stood the test of time, and yet nearly half a decade later, we are still seeking an explanation from PREPA about their ongoing obfuscation. This trend sends a chilling message to anyone considering doing business in Puerto Rico, particularly during any future natural disasters. Furthermore, as the monthly interest on the debt continues to accrue, the real victims here are the people of Puerto Rico who will ultimately get stuck with the tab. Enough is enough, the apparent funds in the PREPA account have been provided by FEMA for payment to Cobra, and it is long past time for PREPA to pay its bills.”
PREPA is currently in bankruptcy Title III court to restructure some $9 billion in debt and declined to issue part of the funds it owes Cobra after Cobra’s former financial director and certain FEMA officials were accused of a quid pro quo scheme as part of the work for PREPA.
In a court document in PREPA’s bankruptcy process, Cobra said the stay applicable to a request that it be paid before other items as an administrative expense should be lifted because circumstances have changed materially. The court originally imposed the stay in October 2019 and has continued it at regular six-month intervals. Cobra says the stay is highly prejudicial against Cobra, which has unpaid invoices in respect of legitimate, necessary and life-saving work it successfully performed totaling some $350 million (including approximately $123 million in interest, which continues to accrue).
Moreover, the two reasons for the stay can no longer support its continuation, Cobra contends. Those grounds are first, that a criminal indictment against three individuals, including Cobra’s former president, could affect the outcome of the administrative expense motion, and, second, that FEMA’s ongoing analysis of PREPA’s contracts with Cobra and performance of hurricane restoration work could affect Cobra’s entitlements to payment for the work it performed at PREPA’s direction and after multiple rounds of approval by both PREPA and FEMA.
As regarding the criminal matter, on May 18, the District Court presiding over the case approved a plea agreement by Cobra’s former president, Donald Keith Ellison. For purposes of the administrative expense motion, Cobra said, the most relevant part of the plea agreement is the stipulation of facts. In summary, the U.S. Attorney, Ellison and Ahsha Tribble, a former FEMA Region II deputy regional administrator, agreed that Ellison provided to Tribble airfare, accommodations and personal security services having a value of approximately $8,000, and in return Tribble performed official acts between April 2018 and October 2018 in connection with a proposal by Cobra to reconstruct the electrical grid on the island of Vieques in Puerto Rico.
“As the stipulation of facts makes clear, Cobra was ultimately not awarded this contract,” Cobra said. “No other facts relevant to the Contracts at issue under the Administration Expense Motion have resulted from the now resolved Criminal Matter, and the Plea Agreement makes no mention of any conduct related to in any way the Contracts.”
Ellison agreed to plead guilty to violating 18 U.S.C. § 201, which prohibits offering anything of value to a public official in return for an official act. In this instance, the public official was identified as Tribble, who also pleaded guilty. Previously, the third defendant in the criminal matter, Jovanda Patterson, pleaded guilty to one count of 18 acts affecting a personal financial interest. Patterson’s plea wholly related to her conduct as an employee of FEMA, not Cobra, and also has no bearing on the amount owed to Cobra under the contracts, Cobra said.
The second basis for the stay, which is the FEMA analysis, likewise does not support the continuance of the stay, according to Cobra. It now is over two years since the FEMA analysis was expected to be completed and, once again, there is no end in sight, the company said.
“To date, the various reports issued by FEMA, the RAND Corporation and other disinterested third parties almost universally support Cobra’s argument that the services it performed on behalf of PREPA were reasonable, actual and necessary costs,” Cobra said.