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Oversight board withdraws lawsuit to review Covid-19 contracts

By on July 27, 2020

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Says Puerto Rico gov’t provided ‘sufficient’ documents regarding emergency purchase of tests, medical supplies amid pandemic

SAN JUAN – Puerto Rico’s Financial Oversight and Management Board (FOMB) announced Monday that it was withdrawing its lawsuit in U.S. District Court against the Gov. Wanda Vázquez administration after the government complied with its demand for the handover of requested documents regarding the procurement and negotiation of contracts to purchase Covid-19 testing equipment and other medical supplies during the pandemic state of emergency. 

The oversight board had filed the lawsuit on June 8 to obtain documentation on the multimillion-dollar contracts the Puerto Rico 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. The contracts, worth about $40 million, were cancelled by the administration in April after reports of irregularities in the negotiation and pricing surfaced. 

The lawsuit also demanded 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 information the government had already provided regarding these contracts raised concerns about the way the procurement process was being conducted. 

The lawsuit alleged that the government was 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.   

“Only after filing the complaint did the Government make meaningful progress in producing the requested documentation,” FOMB Executive Director Natalie Jaresko said in a press release issued Monday, noting that the lawsuit “was necessitated by the Government’s failure to provide the requested documents after 6 letters and information requests by the Oversight Board.” 

“Based on its review of the documents now provided, and assurances by the Government to provide and assist with obtaining additional materials, the Oversight Board believes it has sufficient information to evaluate the contracting process and provide recommendations for improving the procurement process,” Jaresko continued, noting that the oversight board “will continue to review how these contracts came about” to improve the commonwealth’s procurement process and, therefore, “the interests of the people of Puerto Rico.” 

“Especially in emergency situations, the procurement process must ensure accountability, transparency, and efficiency,” the FOMB executive director said. 

Nonetheless, Jaresko stressed that the oversight board does not rule out recommencing litigation in this case “should that prove necessary.” 

In his reaction to the lawsuit last month, Omar Marrero Díaz, executive director of the Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), called the legal action “an unnecessary waste of public funds by FOMB,” noting that the government had provided the federally created entity with thousands of pages in documents regarding the aborted purchase of Covid-19 test kits as well as the purchase of other equipment and supplies during the state of emergency decreed by the governor. 

The Puerto Rico House of Representatives’ Health Committee held hearings on the hiring of two local firms, 313 LLC and Apex General Contractors, as intermediaries to purchase nearly $40 million in Covid-19 test kits from overseas companies. After a local bank stopped a commonwealth Treasury Department transfer of funds to an Australian company to pay for the test kits upon identifying an irregularity in the transaction, Gov. Vázquez cancelled the contracts on April 16. 

Nonetheless, the House committee proceeded with the investigation into the origin of the contracts, which were finalized outside the bidding process due to the Covid-19 emergency declaration by the governor. Late last month, the committee issued a report concluding that there were “irregularities, negligence and violations to laws and established regulations” regarding the issuing of the contracts, and recommended a series of criminal referrals to local and federal law-enforcement agencies of key administration officials as well as members of the governor’s Covid-19 medical task force.   

“Based on what the Oversight Board has learned thus far, it is clear there is much that can and should be done to improve the Government’s procurement practices generally and especially during emergencies,” Jaresko said in Monday’s press release. “The Oversight Board will make the result of its review of the contracts and the Government’s procurement process public when it is completed.” 

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