The Washington Post
August 27, 2000 ; A03

U.S. Corruption Prosecutions Rock Puerto Rico

By John Marino

SAN JUAN, Puerto Rico For two years, federal prosecutors here have secured a stream of public corruption indictments.
Municipal mayors, heads of nonprofit social service agencies, government bureaucrats, contractors and political party officials
have all faced charges in the ongoing probe.

In the most recent round of charges, 18 people--including two prominent mayors--were indicted for allegedly accepting
$800,000 in illegal payoffs from vendors providing a $56 million computer system at a commonwealth agency that collects
taxes for the island's 78 towns.

Then last week, in a trial that acting U.S. Attorney Guillermo Gil himself prosecuted, a jury found two directors of Puerto Rico
Social Action Inc., a nonprofit organization aimed at helping underprivileged children, the homeless and the elderly, guilty of
embezzling $5.4 million in federal funds funneled to the agency through the commonwealth government.

More indictments are expected this year from a few grand juries that continue to investigate what prosecutors say are other
public fraud schemes. The corruption scandals are having a political impact in San Juan and Washington, with local elections set
for November and millions of dollars in federal funds at stake.

"Puerto Rico has never seen so many federal [corruption] cases, and this has to have an impact," said A.W. Maldonado, who
has observed island politics since the early 1960s.

In the latest indictment, among those charged were two New Progressive Party mayors, Bernardo Negron Montalvo of
Villalba and Carlos Jorge Serra of Corozal, as well as Eduardo Burgos Lebron, the former head of the Municipal Revenues
Collection Center, and other agency officials. Most of the other people indicted were vendors benefiting from the contracts.
Negron headed the agency's board of directors in 1995 when the contract was signed.

In announcing indictments, Gil said that some of the $800,000 had made its way to the war chest of the pro-statehood New
Progressive Party (NPP). "It has become a way of doing business in Puerto Rico," Gil told reporters. "It has to stop."

The first major conviction in the probe came last year, when a federal jury found Toa Alta Mayor Angel Rodriguez, a key
organizer in the NPP, guilty of demanding bribes for granting cleanup contracts in the wake of Hurricane Georges, which hit
Puerto Rico in September 1998. Months later, Gil's office won the convictions of three former directors of the defunct San
Juan AIDS Institute, who had been charged with using federal funds meant for AIDS patients for personal items and for
political contributions.

Two other AIDS Institute officials were convicted this year in a separate trial. In all, $2.2 million in federal funds was illegally
diverted by those convicted, prosecutors said.

The AIDS case was rife with allegations that a portion of the embezzled money went toward political donations to the NPP and
the pro-commonwealth Popular Democratic Party (PDP). Former House vice president Jose Granados Navedo, of the NPP,
resigned last year after admitting that he took a $200,000 political donation from an AIDS Institute official, and a PDP
lawmaker was convicted of accepting AIDS Institute money for his reelection campaign.

A continuing investigation of the commonwealth Housing Department has resulted in 11 indictments and nine guilty pleas.
Federal prosecutors have established that corrupt private contractors and government officials embezzled more than $2.5
million in federal funds from the department.

A spinoff investigation resulted in the arrest in June of Freddy Valentin, a former NPP senator, on charges of extortion and
money laundering involving $96,000 in kickbacks for his alleged role in obtaining preferential treatment for two contractors
from two government agencies. Valentin, who has pleaded not guilty, is accused of committing the crimes in 1995 while he was
the head of the Senate Nominations Committee, which approves all government nominations. He did not seek reelection in
1996.

Gov. Pedro Rossello, who testified during the AIDS case that he had never asked anyone for a campaign contribution, has
lashed out at the news media for "fabricating" the corruption issue, claiming that his administration has done more than any other
to combat corruption.

"There are more legal mechanisms now to investigate corruption, so more time is being dedicated to this problem," said
Rossello, a Democrat who is not seeking reelection.

Rossello also complained to Attorney General Janet Reno about Gil's comments--that came in response to a reporter's
question--that the NPP benefited from the kickbacks in the alleged Municipal Revenues Collection Center indictments. Reno
said she would look into the complaint.

Corruption is on the minds of Puerto Ricans. A poll in early June by the Spanish-language daily newspaper El Nuevo Dia found
that 65 percent of respondents thought that corruption was a more serious problem in recent years than in the past, while 29
percent perceived no change.

The scandals may affect the upcoming elections--which include races for governor, the commonwealth's legislature and all 78
mayor's seats--if voters connect a candidate's party with the corruption probes, according to political observers.

None of the gubernatorial candidates--Carlos Pesquera of the NPP, San Juan Mayor Sila Maria Calderon of the PDP and
Ruben Berrios of the Puerto Rican Independence Party--have been accused by authorities of corruption.

"Corruption is the most important issue in the election," Maldonado said. "It's not the local politicians pointing fingers at each
other or even the local press. People are being prosecuted in the federal courts."

Another veteran political observer, Juan Manuel Garcia Passalacqua, who hosts radio call-in shows and writes regular
newspaper columns, said he believes that the allegations against corrupt members of both major parties will cancel each other
out.

"The public sees the two major parties as equally corrupt," Garcia Passalacqua said.

Federal bureaucrats and lawmakers also have taken notice of the scandal. The commonwealth's Housing Department, whose
56,393 units in 328 projects make it the second largest public housing program in the United States, is under investigation in
separate corruption cases by the U.S. attorney, the FBI and the inspector general of the U.S. Department of Housing and
Urban Development. Since the fall of 1998, 13 people have been indicted on charges that include money-laundering,
embezzlement and conspiracy.

Because of the ongoing problems in the commonwealth's department, Sen. Christopher S. Bond (R-Mo.), who chairs the
Senate Appropriations housing subcommittee, is considering holding back federal funds from the agency until federal
lawmakers are assured that the money is being spent properly.