By The Star Staff
The Office of the Special Independent Prosecutor (OFEI by its Spanish initials) announced Tuesday it will file criminal charges against suspended Mayagüez Mayor José Guillermo “Guillito” Rodríguez Rodríguez over a scheme that caused the city to lose millions of dollars.
Charges will also be filed today against Yahaira Valentín Andrades, the city’s director of finance and budget, in San Juan Superior Court. The OFEI began a probe to determine if the mayor was negligent in his duties or embezzled public funds.
The OFEI in March suspended Rodríguez as mayor as part of the probe that also covered Valentín Andrades. The charges have to do with the whereabouts of about $9 million in municipal funds that even resulted in actions by the U.S. Securities and Exchange Commission (SEC), which imposed fines against LPL Financial for its role in allowing an unregistered investment adviser, Eugenio García Jiménez, to misappropriate over $7.1 million from Mayagüez.
García Jiménez and seven other employees were accused in March 2021 of engaging in a scheme to defraud Mayagüez and Mayagüez Economic Development Inc. (MEDI) of funds belonging to the city council by falsely representing that some $7.1 million that had been invested had a significant rate of return.
In 2016, García Jiménez told municipal officials that he could invest some $9 million of the municipality’s funds with no risk to principal and earn the city annual returns of around 10%.
The city intended to use returns from that investment to fund municipal projects, including the construction of a new trauma center. Instead, García Jiménez falsified documents, including bank correspondence and brokerage opening documents, to convince municipal officials to entrust him with the municipality’s funds.
Instead of executing an investment strategy designed to generate the promised returns, García Jiménez purchased U.S. Treasury notes, immediately took out a margin loan pledging the notes as collateral and, over a period of six months, misappropriated $7.1 million by transferring funds to himself, entities he controlled, and his associates.
The scheme took place through MEDI, a public for-profit corporation created with the purpose of promoting the economic development of Mayagüez and the western region of Puerto Rico, generating jobs, supporting infrastructure projects and improving the quality of life of citizens. But García Jiménez and the other defendants, including former Judge Alejandro Irizarry Irizarry, allegedly transferred, distributed and spent the money for their own personal benefit.
The SEC punished LPL Financial for failing to verify when it opened a customer account and processed wire transfers at García Jiménez’s request.
After misappropriating $4.1 million of the city’s funds through an account at “Brokerage Firm 1,” the SEC said, García Jiménez approached LPL in April 2016 to open an investment account.
“During its review before opening the account, LPL failed to comply with its Customer Identification Program procedures and, despite various individuals in different departments questioning the account’s beneficial ownership, source of funds, and reason for transfer from the Brokerage Firm 1, García Jiménez opened an account controlled by him at LPL in June 2016,” the SEC complaint issued in March said. “LPL subsequently processed wire transfers that García [Jiménez] requested. In the less than one month before LPL froze and later liquidated the account, García [Jiménez] was able to misappropriate an additional $3.1 million of City funds.”
Four of the accused individuals reached a plea bargain.
The president of the Popular Democratic Party, Senate President José Luis Dalmau Santiago, suspended Rodríguez as president of the party in Mayagüez.