Two top government officials and four prominent businesspeople have been arrested after an investigation into contract fraud in Puerto Rico. Julia Keleher, the former secretary of the department of education and Ángela Ávila-Marrero, who ran the commonwealth’s Health Insurance Administration, were arrested by the FBI on Wednesday, along with four associates. Both women had stepped down from their positions in recent months, as the investigations progressed.
The 32 count indictment includes wire fraud, theft and money laundering. The value of the contracts involved is estimated at 15.5 million dollars.
Keleher was nominated as Secretary in December, 2016, shortly after Hurricane Maria devastated the island, and her appointment was controversial because she had no experience within the island’s education agency. Her advocates promoted her because of her work with the U.S. Department of Education, and Puerto Rico governor Ricardo Rosselló Nevares not only appointed her as the head of the department but, in July 2017, gave her another official role as Project Management Officer to modernize the Department of Education. The degree of power ceded to her, and the trust it suggests, have fueled calls for Nevares to step down following the arrests.
The charges allege that the two department heads worked with a pair of sisters, Glenda and Mayra Ponce, to direct contracts to politically connected bidders, thus defrauding the government by bypassing the official bidding process. Glenda Ponce Mendoza was Keleher’s personal assistant.
The unfair bidding then resulted in what is termed by the indictment as “unauthorized commissions” and what is generally referred to as kickbacks – money paid by the contractors to those who aided them in receiving the preferential bids.
Neither former official is alleged to have had, as yet, direct personal financial gain from the scheme; still, the charges have coupled with concerns about the slow pace of reconstruction (which has often been blamed by local officials on the lack of available funding) to undermine the confidence of many Puerto Rican citizens.
While there has yet to be any widespread corruption found that is associated to Puerto Rican relief efforts, the arrests demonstrate that the FBI has been investigating intentional misuse of funds.