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Fiscal board sues Puerto Rico gov’t to review Covid-19 contracts

By on June 9, 2020

CDC’s laboratory test kit for severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) (Courtesy)

Alleges info withheld on controversial hirings to provide coronavirus testing, medical supplies

SAN JUAN – Puerto Rico’s Financial Oversight & Management Board (FOMB) filed a lawsuit in U.S. District Court on Monday to force the administration of Gov. Wanda Vázquez to hand over all documents related to contracts for the purchase of Covid-19 testing kits and other medical supplies during the pandemic emergency.

FOMB Executive Director Natalie Jaresko said in a statement that the oversight board specifically seeks to obtain the “multimillion-dollar contracts” the commonwealth Health Department and the Emergency Management and Disaster Administration Bureau (NMEAD by its Spanish initials) reached with Apex General Contractors and 313 LLC, among others, “to understand the processes and procedures according to which these contracts were approved and signed, and in this way retake and improve the trust of the people in the government’s procurement process” during the emergency.

The contracts, worth $42 million, were cancelled by the administration in April after reports of irregularities in the negotiation and pricing surfaced. The commonwealth Justice Department and the FBI are looking into the aborted transaction to purchase one million coronavirus test kits.

The lawsuit also seeks documentation related to the government hiring of Puerto Rico Sales & Medical Services and Maitland 175 for the purchase of medical supplies to deal with the novel coronavirus emergency, stating that the information about these contracts that the government had provided to the oversight board raised concerns about the way the procurement process was being conducted.

The lawsuit alleges that the government is violating Section 204 of the federal Puerto Rico Oversight, Management and Economic Stability Act (Promesa), which states that the commonwealth government must provide the fiscal panel with the documentation necessary to ensure compliance with the board-certified fiscal plan.  

The FOMB states in the lawsuit that it has “exhausted all the extrajudicial channels” to obtain the contracts, and requests that U.S. District Judge Laura Taylor Swain, who is overseeing the commonwealth’s debt restructuring process under Promesa, order the government to promptly hand them over to the federally created entity.

Although the board agreed to a temporary relaxing of procurement rules during the emergency period decreed in Gov. Vázquez’s executive order of March 16, the government must still provide the FOMB with “a copy of each contract so that it may be reviewed immediately,” Jaresko said, adding that each contract must have a certification of the political contributions of the contractor “in order to guard against criminal acts.”

“The rules the Government follows for disbursements of money should be clear and transparent at all times, especially during the immense pressure of an emergency,” Jaresko said, noting that the requested contracts have “raised many questions due to their magnitude and the entities involved.”

She added: “Contracts of this magnitude should be just and be beyond all doubt.”

Jaresko said the board spent two months trying to obtain the contracts for the purchase of Covid-19 test kits and other documents related to government procurement, adding that while certain contract information had been provided, the government “ignored” other document requests. She said this has “left doubts” over how the government is conducting its procurement process.

“The speed and urgency with which issues are addressed in the midst of a crisis are vital, but efficiency, certainty and transparency are also crucial,” Jaresko said. “Without transparency there can be no trust, and without trust Puerto Rico will not be able to overcome this fiscal crisis, which again has been exacerbated by another tragic emergency.”

The board seeks to review the “details” of these contracts to understand them and to offer recommendations leading to an improvement in the contracting process, Jaresko said, noting that “this will lead to more efficiency and competitiveness in the markets regarding the use of public funds.” The FOMB expanded its contract review policy after the Whitefish Energy Holdings contract controversy in the aftermath of Hurricane Maria in 2017, she recalled.

Vázquez declined to comment Monday on the lawsuit during the funeral of Bayamón’s deputy mayor, saying she would discuss it “at another time.”

Omar Marrero Díaz, executive director of the Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), said in a press release that the government was evaluating the lawsuit, which he stressed was “an unnecessary waste of public funds by FOMB at a time in which [Puerto Rico] is going through a pandemic that has had a severe economic impact on our island.”

Marrero contended that the board’s action is “provoking a questionable use of public funds for legal costs,” despite the commonwealth government’s cooperation on the matter. He said the board has been provided with “over 1,000 pages and 202 documents” related to the negotiations for the Covid-19 test kits and other equipment and supplies during the state of emergency decreed by the governor.

The official alleged that the board declined to meet with officials from the agencies involved with these contracts to “explain the situation and revise the documents.”

“Despite having produced over 1,000 documents, FOMB alleges that there is still missing information yet to be produced,” he said in a statement. “In that sense, the Health Department has requested an extension from FOMB to identify and/or corroborate the existence of the documents requested by the federal entity given the insistence on handing over documents they already have in their power. Moreover, [NMEAD] certified that it handed over all information concerning the matter. The [Puerto Rico] Office of Management and Budget, for its part, has handed over several documents to FOMB.”

The lawsuit comes a week after the U.S. Supreme Court’s unanimous decision that the congressionally created panel’s members are not federal officers whose appointment would require Senate confirmation. The board and the commonwealth have sparred in federal court over FOMB’s naming of an official to oversee the Puerto Rico Electric Power Authority as well as over budgeting issues.

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