Research suggests that Puerto Rico’s anti-corruption laws promote government services outsourcing fraud

Anti-corruption laws introduced in Puerto Rico after Hurricane Maria created a new economic sector – a lucrative anti-corruption market based on the outsourcing of public procurement to private sector corporations.

A new study suggests that despite multi-million-dollar investments in platforms, websites, training materials and consultancy services ostensibly aimed at promoting compliance with anti-corruption laws, fraud and corruption have flourished as speculation is the main driving force of the new market.

According to the study’s author, Jose Atiles, a professor of sociology at the University of Illinois at Urbana-Champaign, the flawed anti-corruption policies introduced in Puerto Rico were just a façade intended to legalize state-corporate crime. Instead of rooting out corruption, these policies perpetuated the existing system of capital accumulation by extracting wealth that filled the coffers of corporations and local elites.

“Under the guise of fighting corruption, the government of Puerto Rico has spent more than $787 million on public procurement since 2018 for anti-corruption and fraud prevention, consulting services and technology development,” Atiles said.

“What we have seen in Puerto Rico is the introduction of a series of anti-corruption policies that have created new opportunities to contract with the government, as well as the creation of a series of corporations to serve the government through these laws. This infrastructure operates under a colonial regime of consent that tolerates state-corporate crime, allowing it to persist without legal control.”

Atiles has examined the history of corruption and financial insecurity in Puerto Rico in a series of studies, most recently in an article published in the journal The Journal of White Collar and Corporate Crime.

Many factors have contributed to the emergence of the anti-corruption marketplace, including Puerto Rico’s symbiotic government-corporate relationship, the invented legal and political history associated with U.S. colonialism, and inequalities in the federal government’s allocation of resources to Puerto Rico, Atiles said.

As a result, Puerto Rico experienced multi-layered crises – decades of economic struggles and a spike in public corruption cases that began in 2006. When Hurricane Maria hit in 2017, causing billions of dollars in damage and a humanitarian crisis, the U.S. government kept up the pressure The study says Puerto Rico officials should fix their economy and address corruption to qualify for disaster relief funds.

“Although discourses on Puerto Rico – including those by former President Donald Trump – have described it as the most corrupt jurisdiction in the U.S. and the world, much of the corruption in Puerto Rico occurred in the federal system, not the local one. ,” he said.

“And the Financial Management and Oversight Board created by the Puerto Rico Federal Governance and Stability Act of 2016 has played a really important role in limiting the state’s resources and creating opportunities for corporations to provide services that would normally be provided by the state.”

PROMESA was intended to help Puerto Rico access capital markets and restructure and reduce unsustainable debt and pension liabilities, according to its website.

However, Atiles said a series of austerity measures implemented by policymakers have increased the risk of corruption in Puerto Rico. These measures reduced public spending by limiting the recruitment and retention of government workers. In turn, these workforce reductions have led to the outsourcing of essential functions such as legal work, accounting and educational services to private sector companies.

After Hurricane Maria, Puerto Rican officials also implemented the Anti-Corruption Code for New Puerto Rico; regulations that, according to Atiles, have played “a key role in the legal construction of the anti-corruption market through the commodification and outsourcing of anti-corruption interventions.”

The 2018 Code, also called ACT 2, created opportunities for marketing companies, local corporations and law firms to make profits, helping to implement the new law through the creation of digital technologies and enhanced surveillance and anti-fraud measures.

As a result, government procurement and contracting have grown across much of Puerto Rico’s economy, accounting for more than $4.4 billion, or 20% of Puerto Rico’s fiscal year 2021 budget, Atiles wrote.

ACT 2 was one of a series of policies – including implementing regulations and other emergency measures – introduced between 2018 and 2023. But these policies lacked compliance with local and federal regulations, which limited access to economic resources for those most in need, Atiles said.

While corporations and local elites reaped the profits, media campaigns, official speeches and other forms of communication legitimized the Puerto Rican government and cultivated public perceptions of efficiency and fairness, the study found.

ACT 2 authorized the creation of a Public Register of Persons Convicted of Corruption, a database intended to promote transparency and assist the government in controlling crime. The creation and maintenance of the registry was contracted to Puerto Rican corporation SNAC LLC, which was awarded 14 contracts between 2020 and 2023 for a total amount of more than $851,700, Atiles said.

But Atiles’ study suggests that Puerto Rico’s Department of Justice, authorized under Act 2 to create and administer the database, “deliberately concealed the registry from the public, obstructed access to information, and failed to invest in its development.” After the 2021 lawsuit, the information finally became publicly available.

“This is a key feature of the anti-corruption marketplace — information that should have been public information protected under Puerto Rico’s transparency jurisprudence has been transformed into proprietary corporate information,” Atiles said. “Not only has management of the registry been outsourced, but the process of accessing and collecting data now depends largely on a private corporation.”

Similarly, during the COVID-19 pandemic, Puerto Rico’s Department of Labor and Human Resources contracted an outside company to develop a website that was used by individuals applying for unemployment benefits.

The website, riddled with technology problems, prevented users from determining whether their requests had been processed or approved, and the associated call center was understaffed to manage call volume, leading to an investigation by the Puerto Rico Department of Justice and the Office of Inspector Generale, Atiles said

Three reports based on that investigation found that while the website was intended to reduce fraud, “technological inefficiencies and failures built into the platform” and a lack of oversight of the project encouraged corruption, bribery and fraud, Atiles said. Candidates’ personal data was also disclosed.

“Once again, individuals are caught between anti-fraud policies and corporate speculation, leaving the local state unable to provide basic services,” Atiles wrote.