UPDATE 2-Puerto Rico residents sue power authority, allege fraud
(New throughout, adds details about lawsuit and comment from analyst)
By Edward Krudy
NEW YORK Feb 24 (Reuters) - Local residents and businesses sued Puerto Rico's Electric Power Authority (PREPA) in federal court on Tuesday, alleging fraud in the fuel oil procurement process that plaintiffs said resulted in island residents being overcharged by more than $1 billion.
The lawsuit in U.S. District Court in Puerto Rico accuses PREPA, one of the largest U.S. public utilities, of taking kickbacks to accept millions of barrels of fuel oil from suppliers that did not meet contract requirements or federal environmental standards.
"As a result of this scheme, PREPA overpaid its fuel suppliers for fuel oil and passed through the entire cost of the non-compliant fuel oil to plaintiffs," the lawsuit alleged. The lawsuit covers oil purchases since 2002.
The lawsuit names 20 defendants including several PREPA officials and suppliers including Brazil's Petroleo Brasileiro SA, Dutch commodity trader Trafigura Beheer BV and Shell Trading, the trading arm of the global energy giant Royal Dutch Shell.
PREPA said it had not received a court summons or a copy of the lawsuit and could not comment on it.
The complaint alleges that PREPA and its suppliers colluded with testing laboratories that issued certificates for compliant fuel. It alleges that in one incident in October, 2010, a tank of fuel delivered by Petrobras or Trafigura initially tested as non-compliant, but was ultimately issued a certificate of compliance after a retest following intervention from officials acting for Petrobras and Trafigura.
Petrobras and Shell did not immediately respond to a request for comment. Trafigura said it does not comment on legal matters. Continuación...