Puerto Rico Governor Ousts Treasurer Amid Reported FBI Probe

(Bloomberg) -- Puerto Rico Governor Ricardo Rossello asked for the immediate resignation of Treasury Secretary Raul Maldonado just hours after the cabinet member disclosed a federal corruption investigation into his own department.

Rossello said at a Monday news conference that he’d never been informed of the “serious irregularities” that Maldonado made public. The governor didn’t divulge details about the allegations, which he said are “grave and could represent serious violations of the law.”

Rossello said that Francisco Pares, assistant secretary of internal revenue and tax policy, would become the acting treasury secretary. Christian Sobrino Vega, chief executive of the Puerto Rico Fiscal Agency and Financial Advisory Authority, will become chief financial officer, a title that Maldonado had held along with his cabinet post.

The moves came after Maldonado told the WKAQ-580 radio station that he was collaborating with the Federal Bureau of Investigation as it looked into influence peddling, destruction of documents and other crimes within his own department. Maldonado suggested in the interview that the blame fell on an “institutional mafia” within his department composed of "officials who have been with the department for many years."

He said he had received death threats and had requested protection from police.

Puerto Rico is in the throes of a record bankruptcy that was only made more complicated by the catastrophic arrival of Hurricane Maria in September 2017. A fiscal oversight board this month installed by the U.S. Congress proposed a deal to restructure some $35 billion of its debt, though it’s not clear the plan will advance as currently conceived. In the restructuring, as with the hurricane recovery, one hurdle for the government is restoring faith after decades of well-documented mismanagement helped put it in its current fiscal hole.

Money Funnel

The Treasury Department has been one of the chief conduits for the estimated $20.6 billion in aid that has flowed to the island since Hurricane Maria.

An investigation into the department is being carried out by a team of certified public accountants who specialize in forensic auditing, Maldonado said. The FBI’s field office in San Juan didn’t immediately return a phone call seeking comment.

Maldonado’s revelations come amid a steady and growing drumbeat of controversy on the island.

Last month, Rossello said he “would not tolerate or be an accomplice to any act of corruption" following the FBI’s arrest of the director of the Senate Office of Government Affairs and two contractors for billing for services that were never completed.

In the aftermath of the Hurricane Maria, the island’s energy authority, Prepa, gave the job of resurrecting the devastated electrical grid via a $300 million no-bid contract to Whitefish Energy, a Montana company with two full-time employees. The contract was eventually canceled and Prepa’s head resigned.

To contact the reporter on this story: Michael Deibert in San Juan at mdeibert@bloomberg.net

To contact the editors responsible for this story: Jonathan Levin at jlevin20@bloomberg.net, Stephen Merelman, William Selway

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