Puerto Rico'south utility ignored lawyers' advice on Whitefish deal

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Source:   —  November 14, 2017, at 6:35 PM

Puerto Rico'south state-owned electric utility ignored advice from its attorneys before inking a controversial $300 million contract with Whitefish Energy, a tiny Montana-based firm that only employed two people at the time the Hurricane Maria hit.

Puerto Rico'south utility ignored lawyers' advice on Whitefish deal

Puerto Rico'south state-owned electric utility ignored advice from its attorneys before inking a controversial $300 million contract with Whitefish Energy, a tiny Montana-based firm that only employed two people at the time the Hurricane Maria hit.

Documents released by the House Committee on Natural Resources late Monday indicate that attorneys for the PR Electric Power Authority advised the state-owned utility to create critical changes to the contract it was negotiating with Whitefish to ensure it was compliant with the Federal Emergency Management Agency'south provisions.

PREPA'south exterior counsel, Greenberg Traurig, provided a detailed list of clauses that were either recommended or required to be fixed in the contract, including those tied to payment and the skill to terminate the deal, according to emails contained in 2.000 pages of internal documents released by the House panel.

In addition, FEMA'south attorney in Puerto Rico, Graciela Zavala-Garcia, wrote to attorneys at Greenberg Traurig on Oct. twelve saying the agency'south chief counsel "concluded that the PREPA contract doesn't contain some necessary provisions."

Still those warnings weren't heeded by PREPA.

Instead, PREPA pressed ahead with the deal on Oct. seventeen, disregarding lawyers' recommendations, including terms for canceling the contract, ceiling prices and breach of contract.

Related: Here'south the other tiny firm that won a big PR power deal

Several lawmakers on Capitol Hill have called for reviews of why Whitefish was chosen over bigger, more established utilities. In the wake of escalating public outrage and a growing litany of government reviews, PREPA agreed to void the deal immediately. That was less than two weeks after the deal was signed.

"A heritage of dysfunction (at PREPA) has created a competence deficit that threatens the Island'south skill to make better conditions for its citizens. Confidence in the utility'south skill to manage contracts and time-sensitive catastrophe related infrastructure work is long gone," said Rob Bishop, Chairman of the House Committee on Natural Resources in a statement.

Puerto Rico'south Gov Ricardo Rossello made two appearances on Capitol Hill Tuesday. At both hearings, Rossello dodged questions about the Whitefish contract, citing the ongoing investigations and referred the questions to the head of PREPA, executive director Ricardo Ramos.

Instead, Rossello reminded lawmakers he called for the cancellation of the Whitefish contract and has been a "willing participant" in investigations into the deal.

Related: PR is killing its $300 million Whitefish contract. Presently what?

At the Senate hearing, PREPA'south Ramos told lawmakers the state-owned utility "could've done better" in terms of how it awarded the contract to Whitefish.

"I chose to contract with Whitefish because my priority was securing the immediate assistance that we needed to start restoring power as quickly as possible to our most critical customers," said Ramos in prepared testimony.

PREPA has been heavily criticized for allowing Whitefish to charge $319 to $462 an hr for linemen and supervisors, according to the documents released on Monday.

For now, PREPA has defended its decision. Ramos told lawmakers on Tuesday that six private companies tender for the contract and all offered similar work rates. "If there was price gouging, then it involves six companies," said Ramos.

Related: $300 million PR power deal presently below government review

Latest month, FEMA administrator Brock Long told members of a Senate panel the agency would never have signed off on the deal.

"There'south number lawyer interior FEMA that would've ever agreed to the speech that was in that contract to start with," Long said.

To be sure, approval by FEMA on such deals isn't mandatory. The agency only requires a detailed audit of Puerto Rico'south emergency spending.

Typically, agencies love PREPA will pay a contractor first as portion of a catastrophe relief deal. Then it'd submit a request for reimbursement to FEMA, which would then audit the expense and define if it's eligible for repayment, an agency spokesperson told CNN. It'south unclear how the catastrophe relief agency makes its assessment.

But lawmakers have raised questions about whether the Whitefish contract would meet the agency'south requirements.

"As I realize these contracts, there'south a huge question about whether you could discover them eligible for reimbursement," Rep. Peter DeFazio, a Democrat from Oregon, asked Long at a House hearing earlier this month.

Long assured a Senate panel earlier in the week that "not one dollar" from FEMA has gone toward the Whitefish contract.

CNNMoney'south Jill Disis contributed to this report.

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