What is that saying? Fool me once, shame on you, fool me twice, shame on me. For over a decade the Puerto Rico Electric Power Authority (PREPA) has reached out to the bond market promising up-graded facilities, new cheaper electricity with natural gas, solar and wind. Time and time again, it didn’t happen.
Yes, PREPA took the money — $9 billion dollars in bond and bank debt. The banks didn’t hold them responsible for their lack of action nor did the bondholders, ever.
I went back and looked at S&P, Fitch and Moody’s reports and almost without exception every bond offering over the last decade had “upgrades” as a critical component of the bond offering. Again, none of the reports looked back and said, hey wait a minute, we heard this before and they didn’t do any of that!
The open secret is that politicians and company executives were using PREPA as their personal piggy bank and redirecting $100 million a year or more for their own personal uses. Any upgrade to the facilities would put an end to this scheme. The Hagens Bermen RICO suit filed in February of 2015 claims this has been going on for over a decade and continuing today. That’s $9 billion dollars in bond fraud! They promised upgrades knowing those upgrades would never happen!
With Alix Partners on board will things be different? Let’s look. Alix Partners has played the role of the ultimate insider since 2014 and has taken more than $20 million in public money for their assistance. Over that time, Alix Partners has not reported any of the numerous SEC violations, the falsified oil quality reports, the altered bookkeeping or the alleged theft of $100 million in public funds to anyone. Did the $20 million in fees cause Alix Partners to look the other way?
We contacted the Ad Hoc group of bondholders and shared our concerns about all this. Their response was that any discussion of the corruption at PREPA would only hurt bond values so they see no benefit in dealing with that. The committee will take a look at forcing alternative, lower cost energy sources but only if it does not interfere with a solution.
Are there any honest people involved with this organization? Are there any honest people in the Puerto Rico government? What do you call someone who has been fooled four times?
Unfortunately people are lining up and dropping their trousers for one more ride on the PREPA train. This time I am not buying a ticket for that train ride!