PREPA, Petrobras, Shell Trading Accused of $1 Billion Plus Oil Fraud Scheme

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The Puerto Rico Electric Power Authority (PREPA) together with Petrobas and Shell Trading (US) Company are charged with a class action lawsuit filed by the residents and businesses in the U.S. territory.

Several fuel laboratories including Inspectorate America Corporation; Bureau Veritas Holding, Core Laboratories, Alchem Laboratory, Altol Environmental Services and others were also named in the lawsuit for falsifying fuel lab results.

The defendants in the class actions lawsuit are part of the Fuel Oil Cartel Enterprise, which conspired to defraud electricity consumers in Puerto Rico.

PREPA is one of the largest government-owned utility companies in the United States. It is the sole distributor of electricity in Puerto Rico. The company served approximately 1.5 million customers in 2012.

Allegations against PREPA

The complainants accused PREPA, Petrobas and Shell Trading of committing an extensive fuel oil fraud scheme. According to them, the electricity distributor colluded with its fuel suppliers to raise energy prices in exchange of kickbacks and commissions.

Attorneys at Hagens Berman said the fraud led to more than $1 billion in overcharged payments for electricity by users in Puerto Rico since 2012.

Based on the lawsuit filed, the complainants alleged that PREPA fraudulently agreed to accept millions of barrels of fuel that failed to meet the specifications under its agreements with its fuePREPl oil suppliers.

The complainants alleged that PREPA accepted the fuel oil even if it failed to meet the requirement because it was receiving kickbacks and commissions from the fuel oil suppliers, which falsified laboratory results.

According to them, the defendants committed a pattern of racketeering by participating in the affairs of the Fuel Oil Cartel Enterprise.

The lawsuit was filed in the U.S. District Court for the District of Puerto Rico on February 24, 2015.

Former employees tried to prevent the scheme at PREPA

According to the lawyers at Hagens Berman, some of the employees of the conspirators in the scheme tried to prevent their activities. The former employees described the scheme to defraud costumers as far-reaching.

According to them, the conspirators emailed falsified lab results before the tests of fuel samples are complete, provide lavish parties for PREPA’s Fuel Oil Office, PREPA’s internal audit, which documented the scheme was heavily edited to hide their illegal activities.

Luis Garcia Passalacqua, president of the governing board of PREPA condemned the Fuel Office for trying to intervene and stop the publication of the internal audit. He called the Fuel Office as a disaster. Despite the criticism, the internal audit was “gutted and materially altered” to hide the fraud.

Complainants seek damages

The complainants are seeking to recover out-of-pocket losses, compensatory and punitive damages under the Racketeer Influenced Corrupt Organizations (RICO) Act. They are also seeking for the disgorgement of profits under the common law of unjust enrichment.


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