Oversight board issues RFP to probe accounting firm BDO Puerto Rico
Seeks to determine whether ‘integrity of services was affected by alleged fraud’
SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced Thursday that it issued a request for proposals (RFP) for conducting a “financial examination of audit, accounting and other services” performed by BDO Puerto Rico since 2016.
BDO Puerto Rico held more than 95 contracts, “subject to over 100 amendments,” with the island’s government and its instrumentalities during that period, the board said.
The purpose of the investigation, the board said, is to “determine whether the integrity of any of the services provided by BDO was affected by alleged fraudulent activities of the firm’s former managing partner,” who was recently charged by federal authorities.
The chair of the U.S. House Committee on Natural Resources, Raúl Grijalva (D-Ariz.) and Rep. Nydia Velázquez (D-N.Y.) sent a previously unreported letter to Natalie Jaresko, the executive director of the Puerto Rico Financial Oversight and Management Board (FOMB), on Aug. 2, urging the panel to investigate BDO Puerto Rico. The letter is in relation to BDO Puerto Rico managing partner Fernando Scherrer having been indicted for wire fraud, conspiracy and money laundering.
In addition to providing financial services for the Puerto Rico government—including the departments of Health, Education and Treasury—BDO Puerto Rico provides monthly financial reports for the Puerto Rico Electric Power Agency (Prepa), which is undergoing a bankruptcy-like process in a venue known as a Title III court under the terms of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa).
Grijalva and Velázquez wrote that BDO Puerto Rico’s services to the public power corporation “are critical to the accurate representation of PREPA’s financial position, which underlies the representations made to the FOMB, bidders in PREPA’s privatization process, as well as representations to the Title III court regarding PREPA’s bankruptcy and debt restructuring.” The Title III deliberations they note, “are currently at a highly sensitive stage,” underscoring the urgency of a thorough investigation of BDO Puerto Rico’s work on PREPA’s behalf.
In addition to Scherrer, an ongoing FBI probe of corruption in Puerto Rican government contracting has already resulted in the arrests of Alberto Velázquez-Piñol, a BDO contractor; former Education Secretary Julia Keleher; former Puerto Rico Health Insurance Administration head Ángela Ávila; and education contractors Glenda Ponce and Mayra Ponce.
Referencing the recent report that BDO Puerto Rico “may be shredding documents” following their request for an investigation into the firm’s audits and work, Grijalva said: “The Puerto Rican people are tired of corruption, tired of being taken advantage of, and tired of wrongdoing going unpunished. If BDO Puerto Rico is shredding documents, it doesn’t matter at this point if it’s part of a routine schedule. It must stop now. This is a very precarious moment for the credibility of the island’s government and major institutions. The priority now has to be transparency and integrity.”
The fiscal board clarified Thursday that the focus of the investigation is financial; thus, “legal actions or remedies are not within the scope of the investigation and are the responsibility of law enforcement” authorities.
“Complete visibility, and accountability for public funds are essential for good governance. The people of Puerto Rico have a right to know that services were provided in accordance with contracts,” the board’s executive director, Natalie Jaresko, said in the announcing press release. “If the services required to be provided by BDO Puerto Rico and its affiliates were compromised, the people deserve to know. All legal determinations will be left to the appropriate authorities.”
Submissions for the RFP are due Aug. 22. The board expects to have a final investigation report within 90 days after selecting an investigative firm and said its findings will be made public after the investigation concludes.
“The timing of the investigation will depend mainly on the degree of cooperation of the government and its instrumentalities, which will determine whether the Oversight Board would be required to resort to legal actions to obtain the necessary information,” Jaresko added. “The Oversight Board will exercise the full extent of its authorities to perform this investigation.”
The board uploaded the following documents to its website:
- FOMB – Letter – US Congress – Reps Grijalva and Velazquez re BDO – 20190807
- FOMB – RFP – Financial Investigation BDO – 20190807
- FOMB – Letter – BDO – Investigation – 20190807