Puerto Rico’s utility ignored lawyers’ advice on Whitefish deal

Puerto Rico’s state-owned electric utility ignored assistance from its attorneys before inking a controversial $300 million deal with Whitefish Energy, a small Montana-based organization that only employed two people at that time the Hurricane Maria hit.

Papers released by the House Committee on Natural Means late Monday display that lawyers for the Puerto Rico Electric Power Authority advised the state-owned utility to create critical adjustments to the deal it had been negotiating with Whitefish to make sure it had been compliant with the Federal government Emergency Administration Agency’s provisions.

PREPA’s outside counsel, Greenberg Traurig, provided an in depth list of clauses that were either recommended or required to be fixed in the deal, including those linked with payment and the capability to terminate the offer, according to emails contained in 2,000 pages of internal papers released by the House panel.

In addition, FEMA’s legal professional in Puerto Rico, Graciela Zavala-Garcia, wrote to attorneys at Greenberg Traurig on Oct. 12 declaring the agency’s chief counsel “concluded that the PREPA contract will not contain some required provisions.”

Still those warnings were not heeded by PREPA.

Instead, PREPA pressed ahead with the offer on Oct. 17, disregarding lawyers’ recommendations, including terms for canceling the deal, ceiling rates and breach of deal.

Related: Here’s the additional small organization that won a large Puerto Rico power deal

Several lawmakers on Capitol Hill have called for reviews of why Whitefish was chosen more than bigger, competent utilities. In the wake of escalating general public outrage and an evergrowing litany of government evaluations, PREPA decided to void the offer immediately. That was significantly less than two weeks following the deal was signed.

“A legacy of dysfunction (at PREPA) has generated a competence deficit that threatens the Island’s ability to improve conditions for its citizens. Self-assurance in the utility’s ability to manage agreements and time-hypersensitive disaster related infrastructure job is long gone,” stated Rob Bishop, Chairman of the House Committee on Natural Means in a statement.

Puerto Rico’s Governor Ricardo Rossello built two appearances on Capitol Hill Tuesday. At both hearings, Rossello dodged concerns about the Whitefish deal, citing the ongoing investigations and known the questions to the top of PREPA, executive director Ricardo Ramos.

Rather, Rossello reminded lawmakers he called for the cancellation of the Whitefish deal and is a “ready participant” in investigations into the deal.

Related: Puerto Rico is definitely eliminating its $300 million Whitefish contract. Right now what?

At the Senate hearing, PREPA’s Ramos told lawmakers the state-owned utility “could did better” when it comes to how it awarded the contract to Whitefish.

“I chose to deal with Whitefish because my priority was securing the immediate assistance that we needed to get started restoring power as fast as possible to our most critical clients,” said Ramos in prepared testimony.

PREPA has been heavily criticized for allowing Whitefish to demand $319 to $462 an hour for linemen and supervisors, based on the documents released on Monday.

For now, PREPA has defended its decision. Ramos advised lawmakers on Tuesday that six personal firms bid for the deal and all offered identical labor prices. “If there is price gouging, after that it involves six firms,” said Ramos.

Related: $300 million Puerto Rico power deal right now under government review

Previous month, FEMA administrator Brock Long told members of a Senate panel the agency could not have signed off on the deal.

“There’s no lawyer inside FEMA that would’ve ever decided to the vocabulary that was in that contract to get started with,” Long said.

To be sure, approval by FEMA on such bargains isn’t mandatory. The company only requires a thorough audit of Puerto Rico’s emergency spending.

Typically, agencies like PREPA can pay a contractor initially as part of a tragedy relief deal. Then it could submit a obtain reimbursement to FEMA, which would therefore audit the trouble and determine if it’s eligible for repayment, an agency spokesperson advised CNN. It’s unclear how the disaster relief company makes its assessment.

But lawmakers have raised questions about if the Whitefish contract would meet the agency’s requirements.

“As I understand these agreements, there’s a large question about whether you could find them eligible for reimbursement,” Rep. Peter DeFazio, a Democrat from Oregon, asked Long at a residence hearing earlier this month.

Long guaranteed a Senate panel earlier in the week that “not one dollar” from FEMA has truly gone toward the Whitefish contract.

CNNMoney’s Jill Disis contributed to the report.

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