Sunday, July 21, 2019

Former heads of Puerto Rico Education Dept. and Health Insurance Administration arrested along with president of BDO

By on July 10, 2019

At the lectern, Rosa Emilia Rodríguez Vélez, U.S. attorney for the District of Puerto Rico; and, to her left, Douglas Leff, FBI special agent in charge of the San Juan division (CyberNews)

U.S. House Natural Resources Committee chairman calls for governor to step down over alleged $15.5 million contract scheme

SAN JUAN – The former secretary of the Puerto Rico Department of Education (PR DOE), Julia Keleher; the former director of the Health Insurance Administration (ASES by its Spanish acronym), Ángela Ávila; the president of accounting and auditing firm BDO Puerto Rico, Fernando Scherrer, and subcontractor Alberto Velázquez Piñol were arrested by federal officials after a grand jury returned a 32-count indictment.

The indictment also charges Glenda E. Ponce Méndoza, who worked as Keleher’s special assistant despite not being a department employee, and her sister, Mayra Ponce Mendoza, owner of consulting firm Colón & Ponce.

The Justice Department held a press conference in which Rosa Emilia Rodríguez-Vélez, U.S. attorney for the District of Puerto Rico, provided details of the operation carried out by the FBI and the Office of Inspector General of the Department of Health and Human Services (OIG-HHS) earlier Wednesday.

“Both Keleher and Ávila Marrero exploited their privileged positions as heads of agencies in Puerto Rico. Both defrauded the United States government and Puerto Rico in a contract scheme upwards of $15.5 million, $13 million in [the Education] Department and $2.5 million in ASES,” the district attorney said, adding that the conspiracy charges carry a sentence of up to five years, while money laundering and wire fraud charges carry a sentence of up to 20 years.

Rodríguez Vélez went on to explain that the 32 charges cover three schemes, two in the Department of Education and one in ASES, that were carried out from 2017 to 2019. 

Counts 1 to 11 in the indictment cover the contracts that Colón & Ponce received, allegedly because of the close relationship with the then-Education secretary, for whom there was no evidence presented of having benefited financially.

“The purpose of the conspiracy was to steer contracts between the PR DOE and Colón & Ponce, a company owned by Mayra Ponce Mendoza. This was accomplished through a corrupted bidding process pursuant to a Request for Proposal (“RFP”), wherein Colón & Ponce was provided with a competitive advantage over other bidders based in part, on the close relationship between Keleher, Glenda Ponce-Mendoza, and her sister Mayra Ponce-Mendoza,” the Justice Department said in a written summary. 

Furthermore, Rodríguez explained that despite pressure from Keleher to grant the contract to Colón & Ponce, no one in the Education Department’s Office of Federal Affairs had asked for those types of services, and the indictment states that someone, identified as Individual C, from the office of the Education Department Process Official for Fund Adjudication Unit, “concluded that Colón & Ponce was the only company that was not qualified for the contract, and was the worst applicant.” 

Nevertheless, Colón & Ponce received a $43,000 contract that was then increased to $95,000 to pay one of Keleher’s assistants, who was not classified as an Education employee.

As for the remaining two schemes, Rodríguez explained they were similar but instead benefited Velázquez Piñol through a contract with BDO, which was contracted by the Education Department and ASES.

“The conspiracy and scheme to defraud involved federal funds paid by PR DOE to BDO for several contracts totaling over $13 million from January 2017 until April 2019. Despite express prohibitions in said contracts, BDO subcontracted other companies to perform the services, and paid Velázquez through his company, Azur, a 10% commission for the contracts awarded through Velázquez-Piñol’s influence with government officials,” Justice said. 

Keleher, who resigned April 1, was arrested in Washington, D.C., by the FBI, and as with Velázquez Piñol, who was arrested in Greenwich, Connecticut, after turning himself in, the process to bring them back to the island may take about eight days.

Keleher must surrender to the federal authorities in Puerto Rico by July 17, as determined in a Washington court.

The other four arrested were released on bail. Both Ángela Ávila, as well as the contractor sisters Glenda and Mayra Ponce Mendoza were released after paying a $25,000 bail. Scherrer’s bail requires a $2 million deposit, or $1 million in cash and $1 million in assets.

In a statement, BDO Puerto Rico said Scherrer submitted his resignation, which “will allow Mr. Scherrer to focus on his defense, while allowing BDO to concentrate its efforts on providing services” to its clients. It added that it takes the “allegations made by federal authorities very seriously and reiterate our willingness to continue cooperating.”

A day earlier, former Gov. Ricardo Rosselló’s chief adviser Alfonso Orona had been interviewed by OIG-HHS agents. The arrests were made less than 24 hours after Orona testified before a grand jury regarding Velázquez’s relationship with the government.

Rodríguez assured the governor was not part of the ongoing investigation, for which she later replied to questions from the press, saying it involved several municipalities as well as “new accusations” coming.

Orona admitted he was questioned about Velázquez’s activities in the aftermath of Hurricane Maria, to authenticate official documents and provide evidence of the participation of the contractor in the awarding of government health plan contracts.

Velázquez was also in charge of working with the Health Department in the implementation of the first Medicaid Management Information System (MMIS) and served as an external adviser to the Education Department.

In a statement, Gov. Rosselló, who was vacationing in Europe and said he would return earlier than planned, added that his administration “will not tolerate corruption and anyone who betrays the trust [in government] should pay with the full weight of law.”

“Likewise, I reiterate the call for collaboration with the law and order agencies that work on these cases,” he added.  

U.S. Rep. Raúl Grijalva of Arizona (CB file)

Raúl Grijalva (D-Ariz.), the chairman of the U.S. House Natural Resources Committee, which oversees Puerto Rico matters in Congress, said Rosselló must take “immediate steps” to restore his administration’s credibility.

In an interview with the Washington Post, Grijalva called on Rosselló to resign.

“We’ve crossed that crucible now,” Grijalva said. “The restoration of accountability is so key going forward.”

In a statement posted earlier on his official webpage, the congressman wrote: “Announcing a zero-tolerance attitude toward corruption is easy. Taking meaningful steps to prevent and punish it is leadership,” adding, “The Puerto Rican people deserve a government that takes public service seriously, that’s transparent and accountable, and that doesn’t let this happen in the first place. Gov. Rosselló has little time and much to do to restore public faith in his government, and I urge him to take a housecleaning approach as quickly and thoroughly as possible.”