Accounting Expert Has Not Violated the Anti-Corruption Code by Virtue of his Professional Experience
Posted on March 28, 2025 by Expert Witness Profiler
Back in 2012, Travelers Casualty & Surety Company of America (Travelers) provided Aluma Construction Corporation with a General Agreement of Indemnity and issued surety bonds guaranteeing Aluma’s completion of three construction projects in Puerto Rico. After being obligated to pay out on these bonds, a situation covered by the indemnity agreement with both the company and individual guarantors, Travelers initiated this lawsuit to recover their surety payments, along with associated costs and expenses, from those indemnifiers.
Additionally, Travelers claimed to have paid Aluma’s subcontractors, workers, and suppliers, thus asserting their right of subrogation against the Puerto Rico Aqueduct and Sewer Authority (PRASA) for those payments. What began as seemingly direct claims by Travelers against the project owner and the indemnifiers evolved into a complex legal battle involving PRASA, Aluma, and the indemnifiers, all disputing responsibility for construction delays and incurred costs. Chubb Insurance Company, a third-party defendant in this case, is an insurer of PRASA.
PRASA filed a motion in limine to exclude Carlos J. Iglesias Colon as Aluma’s financial expert on the grounds that Iglesias Colon has a conflict of interest violative of Puerto Rico’s Anti-Corruption Code.
Accounting Expert Witness
Carlos J. Iglesias Colon is a certified public accountant in the Commonwealth of Puerto Rico. He performed business valuations for sale of companies, tax purposes and litigation purposes for numerous companies.
He has served as an expert witness and consultant in financial matters in over 50 construction projects and court cases, specializing in construction project damages including home office overhead, site overhead and loss of labor productivity, among others.
Discussion by the Court
A. PRASA’s Motion in Limine
PRASA sought to disqualify Aluma’s expert witness, arguing that a conflict of interest existed due to his professional history with ECOVAL, LLC, where he had previously worked and currently served as Managing Partner. PRASA further contended that ECOVAL, a financial and litigation support firm, is currently retained to provide support to multiple executive agencies of the Puerto Rico government.
According to PRASA, the Anti-Corruption Code “was instituted by the legislature of the Commonwealth of Puerto Rico specifically to prohibit private contractors from obtaining direct benefits through governmental contracts, and at the same time profiting at the expense of the government by representing private interests against it.”
PRASA added “Iglesias is currently deriving income from his role as managing partner for ECOVAL, a juridical person who has contracts with the government of Puerto Rico; at the same time and because of this litigation, Iglesias is being paid to testify against PRASA, a public corporation.”
B. Aluma’s Opposition
Aluma maintains that “although ECOVAL represents other governmental agencies,” Aluma explains, “it does not represent and has not represented PRASA.” In other words, the contract between ECOVAL and other government agencies did not preclude Iglesias from participating in the trial as an expert witness in a case against other agencies or public corporations.
Aluma contended that the exclusion of Iglesias was unwarranted under Federal Rules of Civil Procedure 26 and 37, Federal Rule of Evidence 702, or any pertinent professional code of ethics governing CPA conflicts of interest. Furthermore, Aluma asserted that ECOVAL had not represented PRASA and held no confidential information obtained from PRASA; in addition, ECOVAL had no duties or obligations towards PRASA. Therefore, Aluma maintained that no conflict of interest existed for Iglesias in the matter at hand.
1. The Anti-Corruption Code
Whether PRASA fits within the Anti-Corruption Code’s definition of “executive agencies”
The first question is whether PRASA fits within the Anti-Corruption Code’s definition of “executive agencies.” PRASA argues that it is an executive agency; Aluma says it is not. The definition of “executive agencies” is found at §1883(a):
The bodies and entities of the Executive Branch of the Government of Puerto Rico, including public corporations, departments, agencies, offices, municipalities, or other instrumentalities.
While Aluma uses the term “independent public corporation,” the Court, however, has no basis to conclude that PRASA is not a public corporation falling within the Anti-Corruption Code’s definition of “executive agency.” Indeed, the parties’ recent joint proposed jury instructions included this very point as a stipulated fact, further supporting this conclusion.
Whether the Anti-Corruption Code should properly be interpreted as broadly as PRASA maintains in its motion in limine
Turning to the second, and ultimately determinative, question: whether the Anti-Corruption Code should be interpreted as broadly as PRASA maintains in its motion in limine. Specifically, PRASA argues that if an expert witness performs any work for any executive agency of the Commonwealth of Puerto Rico, that expert is automatically barred from testifying against any other Puerto Rican executive agency. In support of this position, PRASA points to the fact that Iglesias is the “managing partner of ECOVAL, a juridical person who has contacts with the government of Puerto Rico.” While neither PRASA nor Aluma disclose the specific executive agencies with which ECOVAL has dealings, Aluma asserts that Iglesias’ firm’s work does not involve PRASA. For the purpose of ruling on this motion, the Court assumes the truth of that contention.
Conflict of Interest
The Court does not conclude that the Puerto Rico Legislature intended the Anti-Corruption Code to bar the expert testimony of a witness against one executive agency simply because their firm does some work for another, unrelated executive agency, particularly when the subjects of their testimony are distinct. Firstly, the Code itself focuses on whether a person has a “conflict of interest” in dealing with the specific executive agency in question. Indeed, in § 1883(b), the Anti-Corruption Code defines “conflict of interest” to mean “a situation in which a personal or financial interest is or could reasonably be incompatible with the public interest.”
Furthermore, while it is readily apparent why a person who gains confidential governmental information while working for one executive agency should be prevented from using that same information to gain an unfair advantage against that very agency, the Court held that it is considerably more difficult to understand how a person who possesses no insider information against a particular executive agency should be forbidden from offering expert testimony against that agency.
Confidential Information
Secondly, the Anti-Corruption Code provides a detailed definition of “confidential information.” Specifically, the Code expressly prohibits a person from using “confidential information acquired in the course or as [a] result of any task entrusted thereto under a contract by the Government of Puerto Rico.” However, PRASA does not contend that Iglesias proposes to use any confidential information as defined by the Code in offering his expert opinions against PRASA. In fact, all PRASA offers on this point is its conclusory concern that “Iglesias is getting paid to testify against the same government that pays his employer and thus, his conflict of interest goes beyond a mere appearance; it is an unavoidable reality and precisely the conduct that sec. 1883a of the Anti-Corruption Code prohibits.”
Appearance of a Conflict of Interest
Thirdly, while PRASA is correct that the Anti-Corruption Code contemplates the “appearance of a conflict of interest,” the precise language of the statute strongly suggests that its reach is limited to work against the executive agency that hired the person. To illustrate this point, the statute states:
“(n) No person shall enter into contracts with executive agencies if there is any conflict of interests. Every person shall certify that he does not represent private interests in cases or matters that involve conflicts of interest, or of public policy, between the executive agency and the private interests he represents.”
Notably, the Puerto Rico Legislature was careful to use exact language, forbidding conflicts of interest “between the executive agency and the private interests he represents.” Moreover, while the Anti-Corruption Code prohibits the appearance of conflicts of interest, the Court interprets the statute as preventing the appearance of only those conflicts of interest within the meaning set forth in the Anti-Corruption Code.
In essence, the Court disagrees with PRASA’s overly broad interpretation of the Anti-Corruption Code. Rather, the Court finds, as Aluma argues, that because Iglesias and his firm have had no dealings with PRASA and have not obtained any relevant confidential information from their work with other executive agencies, no conflict of interest exists under the Anti-Corruption Code that would bar Iglesias from testifying.
2. Conflicts of Interest Among Expert Witnesses
Section 3.2(c) of the Anti-Corruption Code provides:
“Every person shall observe the precepts and principles of excellence and honesty that cover his profession, in addition to the ethical standards or rules of the Association or College of which he is a member and that regulate his trade or profession in the relationship with his competitors as well as with the Government of Puerto Rico and its employees or officials.”
In this provision, the Anti-Corruption Code incorporates the codes of conduct of the profession or trade of the expert. As Aluma correctly notes, PRASA has failed to identify any professional code of conduct that Iglesias allegedly violated. Consequently, this particular provision of the Anti-Corruption Code did not alter the Court’s determination that PRASA’s motion in limine to disqualify Iglesias under this Code is without merit. In conclusion, the Court held that PRASA has not demonstrated a violation of the Anti-Corruption Code by Iglesias and therefore denied PRASA’s motion in limine to exclude him on this ground.
Held
The Court dismissed without prejudice PRASA’s motion in limine regarding disqualification of Carlos J. Iglesias Colon as Aluma’s financial expert.
Key Takeaway:
While the Legislature’s determination to eradicate corruption is laudable, an interpretation of the Anti-Corruption Code as broad as the one urged by PRASA would have the counterintuitive impact of severely limiting the pool of experts available to testify against executive agencies, even where there is no conflict of interest.
In today’s world, the interrelationship between the government writ large and experts of all types is so ubiquitous that PRASA’s expansive interpretation of the Anti-Corruption Code would eliminate large swaths of potential experts who would otherwise be allowed to testify against the government of Puerto Rico, essentially limiting those who could testify against executive agencies to a miniscule number within Puerto Rico or to experts from outside Puerto Rico.
Case Details:
| Case Caption: | Travelers Casualty & Surety Company Of America Et Al V. Vazquez-Colon Et Al |
| Docket Number: | 3:18cv1795 |
| Court Name: | United States District Court for the District of Puerto Rico |
| Order Date: | March 24, 2025 |
