Puerto Rican Union President Sentenced for $15 Million Theft

If labor corruption in Puerto Rico doesn’t happen often, it certainly happens on a grand scale. In the summer of 2005, four officials of UTM 1740, an affiliate of the International Longshoremen’s Association, along with six businessmen and three companies, were indicted in U.S. District Court on nearly two dozen counts of embezzlement, money-laundering and maintaining false records. They were accused of converting some $10 million in funds, mainly from the union’s health care plan, to their own use, plus underreporting another $1.5 million in dues collections. Most of the principals pled guilty. But all the while, another union on the island was engaging in an even bigger scam. Leaders of Union Independiente Autentica (UIA), with about 4,000 water and sewer workers, had embezzled more than $15 million over a nearly seven-year period. On December 6, it was sentencing time for the union’s leader and his cronies.

UIA represents employees of the Puerto Rico Aqueduct and Sewer Authority, or PRASA – at least when it’s not misrepresenting them. Back on October 19, 2005, federal prosecutors announced that a grand jury had indicted 11 persons who had just been arrested for stealing from the union health fund. From the start of 1998 until December 2004, the indictment read, the defendants conspired to divert $15,282,931 in premiums, property and monies of the fund, Autoridad de Acueductos y Alcantarillados, into separate bank accounts for their personal use. The mastermind was UIA President Hector Rene Lugo, who resigned soon after his indictment. His 10 cohorts – most, if not all, members of the union’s executive committee – were Andres Colon, Elba Pastrana, Felipe Lozada, Juan Vega, Juan Hernandez, Luis Delbrey, Jesus Ortiz, Francisco Irrizary, Jorge Acevedo and Enrique Prestamo.

Rene Lugo, eventually convicted by a jury, learned his fate before U.S. District Judge Jose Fuste: 17 years in prison, plus $2 million in restitution and a $20,000 fine. Seven members of his executive committee also received sentences, though less severe. The arrests came after a year-long joint investigation by the IRS and the FBI, and about two weeks after the re-election of Rene and his committee. He denied he had funneled or stolen any funds. “I never took a cent from the workers,” Rene told Judge Fuste. Given the weight of evidence, such a statement appears difficult to accept. Acevedo testified that Rene had intimidated committee members to participate in the scheme.

There is a certain irony in this saga. Back in April 2002, Rene Lugo had expressed bitter opposition to the Commonwealth of Puerto Rico’s decision to contract management services of the financially-troubled PRASA to a private-sector firm, United Water of Ondeo. Lugo, along with Miguel Marrero, an official of another union, the Independent Brotherhood of Professional Employees of PRASA, appealed to then-Puerto Rico Governor Sila Calderon not to sign the $400 million-a-year contract. The two claimed privatization would fail to guarantee the well-being of employees and clients once the initial 10-year period expired. The Harrington Park (Bergen County), N.J.-based Ondeo had pledged to balance the utility’s budget, which had been running a $200 million annual deficit. “A government that cannot manage the Puerto Rico Aqueduct and Sewer Authority cannot manage a country,” Rene Lugo declared at the time. “Water is an essential service, and because of that, it should be managed by the government.” In hindsight, his management philosophy seems a good deal more suspect than Ms. Calderon’s. (International Herald-Tribune, 12/7/06; Associated Press, 12/8/06; U.S. Department of Justice, 10/19/05; other sources).