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Puerto Rican Officials Detail Orlando Man's Role In Scheme
By Iván Román
March 24, 2002
Copyright © 2002 Orlando Sentinel. All Rights Reserved.
SAN JUAN, Puerto Rico -- Jesus Emilio Rivera Class enjoys all the trappings of wealth.
A lakefront house in a gated Orlando community. Five other luxury homes in Puerto Rico. A thriving business. And a shiny new yellow Porsche.
The latest in his car collection, the Porsche is just one of many of his expensive toys. But the gravy train that helped him buy the sports car is stalling as federal authorities lay out his part in a $4.3 million extortion and money-laundering scheme in Puerto Rico.
Rivera Class, investigators charge, landed about $82 million in Puerto Rico government contracts since 1996 in exchange for more than $1.5 million that he gave to corrupt government officials for the work.
The computer whiz landed more contracts than any of the 12 businesspeople indicted in the extortion and money-laundering conspiracy headed by former Puerto Rico Education Secretary Victor Fajardo.
Prosecutors say about $1 million in tainted money from the scheme went to support the New Progressive Party's failed 2000 re-election bid.
As the scandal unfolded, Gov. Sila Calderon canceled Rivera Class' remaining contracts and cut off the money.
But the governor herself was caught flat-footed after discovering that her own campaign manager had taken Rivera Class to meet Fajardo's successor to secure more contracts under Calderon's Popular Democratic Party, which touts its image of "clean government."
Calderon quickly shut him down.
"We've always been worried about how 'political investors' were taking care of business," said former Senate President Charlie Rodriguez, who led campaign-finance reform efforts four years ago. "They'll become Nazis if the Nazis come to power. . . . What matters to him is how to buy enough influence to get that contract."
The scandal laid bare what one analyst called a ring of "organized thievery," with business and government using education improvements as a guise to promote their partnership and line their pockets.
For the first time, it threatens to directly taint a political party here. In terms of buying political access, it was like Enron on steroids.
During the past six years, Rivera Class apparently was able to buy a lot of access. While he will not comment on the scandal and has pleaded not guilty to charges of extortion and money laundering, he emerges as a central figure in a federal investigation that shows how one man forged a very lucrative alliance with the government.
From his working- and middle-class beginnings in the small city of Catano across the bay from Old San Juan, Rivera Class, 51, entered the computer and programming world in the 1970s.
He made his way through the field and became sales manager at the programming and database-services giant GM Group, which he eventually left to branch out on this own.
"He always wanted to have his own business and be his own boss," said Julio Pascual, president of GM Group. "We had no complaints about him. We never would have imagined all this that is coming up now. He was a good salesman."
Rivera Class' star seemed to shine brighter once government money came into the picture. The previous administration, the pro-statehood New Progressive Party, jumped at any chance to reduce big government, sell public assets and contract out whatever services it could. And businesspeople such as Rivera Class quickly stepped in to fill the void.
Besides property and money in offshore accounts in Tortola in the British Virgin Islands, he now owns five exclusive homes in the San Juan metropolitan area -- including one in the tony San Patricio area that authorities say he planned to "sell" to Fajardo for $750,000 in laundered federal funds.
In 1995, he also bought a $300,000 home in Orlando, where several cars appear registered over the years -- including two white Chevy Corvette sport coupes and a purple Chevy Corvette convertible. The 2002 Porsche he drives around now was registered last Halloween.
His alleged participation in the scheme that has tainted NPP politicians surprised many on the island, particularly considering his family's strong connection with the rival Popular Democratic Party.
In decades past, his mother, Bienvenida Class Claudio, was a longtime PDP leader in Catano, where the family bought some homes in the center of town and eventually ended up owning an off-track-betting business. She also was a secretary for former PDP Gov. Rafael Hernandez Colon, who held office for 12 years in the 1970s, 1980s and early 1990s.
Hector Luis Acevedo, an elections-law professor and PDP stalwart, vaguely remembers Rivera Class during the 1980 campaign when he volunteered to set up the computers at PDP headquarters.
"Afterwards, I didn't see him again," said Acevedo, who became the party's elections commissioner and occupied several top positions until he ran for governor in 1996. "He wasn't the head of a company or anything. He could have participated in some event years later, but I don't remember him being around."
A relative who refused to be interviewed for this story said everyone in the family was surprised to hear the news. That includes Class Claudio, who appears in government records as president of ER Pro International -- a company, investigators say, that her son used to funnel $27,500 to pay some NPP bills.
The scheme, detailed in a 35-page federal indictment, features a complex web of shell companies, fake invoices, extortion "quotas," bogus contracts and messengers carrying cash and checks -- all designed to hide, launder and steal government money that paid for NPP expenses or went into ringleaders' pockets.
Fajardo, who has pleaded guilty, kept more than half of the $4.3 million stolen and stashed much of it in a safe in his agency offices, which he carted off to his exclusive Tintillo Hills neighborhood home one evening after the NPP lost the election in November 2000. Investigators describe cash flowing freely with some NPP operatives or just greedy officials using Fajardo's stash as an automated teller for the party or for themselves.
And for years, they kept the cash coming in. Fajardo and his deputy, Jose Omar Cruz Mercado, who is godfather to Fajardo's child, "negotiated" with contractors about extortion payments, sometimes demanding a 10 percent kickback. Fajardo's "right-hand woman," Maritere Perez Huertas, carted the cash, checks and fake invoices among the ringleaders, contractors and NPP officials yet to be publicly identified.
Contractors also were made to pay real NPP bills for things such as sound equipment, stages and lighting used at political rallies, as well as 100,000 Christmas cards former Gov. Pedro Rossello sent out in 1996 to the tune of $29,200, investigators say. The ringleaders created two shell companies to funnel and distribute money from contracts that Fajardo himself would award and deposit from the extorted contractors.
Rivera Class was at the top of that list. How he ended up entering Fajardo's inner circle is unclear. After incorporating ER Pro under his mother's name in 1994, he registered Quality Educational Services Inc. with the Puerto Rico State Department in 1996. According to the indictment, he also co-owns Pro Data Services with indicted contractor Eduardo Fuertes Pasarell, who reportedly is a good friend of Rossello's and appears, along with various relatives, as having made legal campaign donations to the NPP.
Since 1996, Quality and Pro Data received $44 million and $37 million in contracts, respectively. Quality installed computers in classrooms and programs used to teach English, Spanish and math to elementary-school children. Cesar Rey, who now runs the Education Department, said the current $10 million contract's cancellation won't affect the 45,000 parents and 39,000 teachers and principals undergoing training now, and the department itself will continue the work.
After he took over the Education Department and its $2.4 billion budget in January 2001, Rey held up $20 million in payments that Fajardo had approved to Pro Data. His decision followed an audit that discovered Pro Data computer programs designed to teach Spanish were sitting in a warehouse and not installed in the schools' computers.
Teachers are now encouraged to submit proposals directly to the Education Department for money that had been reserved for outside contractors such as Rivera Class during the Rossello years.
"The schools themselves should be given the chance and not someone who doesn't know the challenges faced in that school," said Milagros Hernandez, the department's director of the San Juan region. "More money would go to serving the students."
Too much of the money before, it turns out, went to gifts.
Investigators say contractors tried to please the ringleaders with artwork, expensive flatware, a Chevrolet Corvette, jewelry, trips to New York City and a golf bag with Fajardo's name embroidered on it.
Among all the shady dealings, though, one transaction stands out.
Fajardo and his sister-in-law Maria Ramos were looking for a place to open a new business. In June 2000, Fajardo told investigators, Rivera Class offered to sell him his San Patricio home to be paid for with stolen Education Department money that Rivera Class himself had deposited into an offshore account in Tortola.
According to the indictment, Rivera Class then asked Fajardo's sister-in-law to prepare a false invoice so he could cut a $750,000 check to National Consulting Services, one of the shell companies that Fajardo and Ramos had set up.
When zoning problems prevented them from establishing a business at the site, the money went back to a Puerto Rico account, sending up red flags to investigators who had been tracking it.
At his Jan. 30 bail hearing in San Juan, prosecutors said Rivera Class had several properties and money in Tortola and counseled Fajardo and Cruz Mercado on how to hide U.S. money in offshore accounts there.
Wearing a navy-blue suit and large sunglasses, a grim-faced Rivera Class had no comment as reporters followed him out of the federal courthouse.
Six of the 17 defendants already have pleaded or are planning to plead guilty. Among them are Fajardo and Cruz Mercado, who are still cooperating with authorities to get reduced sentences. Fajardo already has returned $1.2 million in cash and has another $1 million to go.
Perez Huertas, the so-called "right-hand woman" in the scheme, has pleaded not guilty.
Rivera Class cooperating
Rivera Class is out on $250,000 bail connected with the federal case. However, he has been given immunity from Puerto Rican authorities and is cooperating with their investigation.
The island's justice secretary, Anabelle Rodriguez, has taken a lot of criticism for the immunity deal, which she has threatened to withdraw if she finds out that Rivera Class lied about certain aspects of the $750,000 transaction.
Meanwhile, the federal investigation continues, and at least two more rounds of indictments are expected.
"Only one third of what's in there has come to light," Rey said. "It's a tricky, complex web of huge proportions."
Like the Enron bankruptcy scandal, the Fajardo scheme is fueling a push toward reforming campaign finances in a more radical way than Washington's: complete public financing of campaigns. Although that may drive down anxieties about raising campaign funds, some say that by itself won't solve the problem.
Puerto Rico has a huge underground economy, which makes it easier to hide and launder money. Officials are only now beginning to set up a more efficient way to track political contributions and campaign expenses. Few effective IRS-type audits or investigations, coupled with the growing use of offshore accounts, make hiding illegal income a snap.
"This has no precedent in Puerto Rico, and it happened because these people felt protected, that they were politically immune," said Celeste Benitez, a former education secretary in a PDP administration.
That was their biggest miscalculation.