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  • Writer's pictureThe San Juan Daily Star

PREPA stops payments to Cobra because the firm owes taxes to towns

Twelve towns allege they are owed a combined $70.4 million in separate cases for municipal and construction taxes not received from power grid repair contractor Cobra Acquisitions.

By The Star Staff

The Puerto Rico Electric Power Authority (PREPA) says it would withhold payments to Cobra Acquisitions for work to reconstruct the power grid after it was destroyed in the 2017 hurricanes because municipalities have filed lawsuits alleging that Cobra owes them taxes.

The information is contained in a status report filed by PREPA on Tuesday. For years, Cobra has been trying in court to obtain millions of dollars in payments from bankrupt PREPA for work it performed to repair the power grid decimated by the 2017 hurricanes Irma and Maria. Payments to Cobra were delayed after criminal charges were filed against the company’s former president, Donald Ellison, who ultimately pleaded guilty to offering gratuities to a Federal Emergency Management Agency (FEMA) administrator in exchange for a contract. They have also been delayed because all the PREPA officials with the authority to approve the invoices left when LUMA Energy took over PREPA’s transmission and distribution system.

Now, PREPA is saying it will stop payments of approved unpaid invoices because of lawsuits filed by certain municipalities. Twelve towns allege they are owed a combined $70.4 million in separate cases for municipal and construction taxes. One of the municipalities has a judgment requiring PREPA to withhold $9 million from payment to Cobra. Six others have filed similar motions but they are pending. Five towns that are owed money have not filed court petitions yet.

On Dec. 18, 2023, PREPA received an order from the Humacao Superior Court requiring it to withhold $9 million from any payment otherwise due to Cobra. The Humacao order relates to a motion to seize property to ensure satisfaction of a potential judgment against Cobra on a separate motion filed by the Municipality of Maunabo against Cobra stemming from an alleged unpaid debt of municipal and construction excise taxes. Accordingly, last Friday, Jan. 12, PREPA deposited $9 million in a segregated bank account.

PREPA also said that as of Jan. 11 of this year, it is aware of 12 Puerto Rico Superior Court cases filed against Cobra by different municipalities relating to the same claims for municipal and construction excise taxes. As of Jan. 11, the municipalities of Las Piedras, Humacao and Caguas have filed motions in Puerto Rico Superior Court requesting orders requiring PREPA to withhold from Cobra the total amounts, or about $7 million, allegedly owed to each municipality. On Jan. 12, the municipalities of Guayama, Cayey and Yabucoa each filed a similar motion requesting the garnishment of funds otherwise owed to Cobra. These three municipalities invoked having an already perfected lien in their favor in the amounts allegedly owed to them. The municipalities assert they are owed a total of $18 million.

The towns of Gurabo, Salinas, Arroyo, Patillas and Guaynabo have yet to file any motions in Puerto Rico court regarding the garnishment of funds.

“However, considering how the courts have already reacted to the previously mentioned municipalities, it is likely they will also request similar relief …” PREPA said. “Based on the foregoing, PREPA has informed the Oversight Board that it will withhold the release of any further funds otherwise distributable to Cobra.”

Cobra has said it is owed some $300 million in at least two contracts with the utility.

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