Ponce, Puerto Rico, Weathers Bad Times : Scandals, Depression Cramp Style of Grand Old City

With FBI agents sniffing around bank records again and the mayor fleeing town amid a new financial scandal, it’s not the best of times for Ponce, Puerto Rico’s faded center of high society and old money.

For decades, this port of 195,000 people on the dusty southern coast was the home to the island’s proudest families. Their pastel-colored mansions, built with sugar and coffee fortunes, lined the narrow streets.

“Ponce is Ponce” is the Puerto Rican way of explaining the old city’s wealth and unique character.

Recently, however, the turn-of-the-century Caribbean glitter has been dulled by several criminal investigations, a slumping economy and empty city coffers.

“There isn’t enough money to feed the dogs in the dog pound and nothing for invitations to the mayor’s inauguration,” Mayor-elect Rafael Cordero, who takes over City Hall this month, said in an interview.

Ponce has figured even in New York scandals. U. S. Rep. Robert Garcia (D-N. Y.), his Puerto Rican wife, Jane Lee Garcia, and San Juan lawyer Ralph Vallone were indicted in November on federal bribery and extortion charges arising from alleged fraud in military contracts.

Old-Line Background

Lee Garcia is the upper-class descendant of an Englishman who (along with Germans, Frenchmen, Americans, Jews, Galicians and others) sought his fortune in booming 19th-Century Ponce and helped to make it a hotbed of literature, music, politics and architecture.

Months of federal and Commonwealth investigations into the city’s finances reached a climax last month, when a federal grand jury charged former Mayor Jose Tormos Vega and two other officials with extortion of $1.2 million in U.S. public housing funds in 1982 and 1983. They allegedly channeled the money through several local banks.

Vega’s successor as mayor, Jose Dapena Thompson, a member of one of Ponce’s original families and one of the island’s best-known politicians, was not indicted but was named as a conspirator in the case. He quickly resigned and left for Washington, D. C., with his family.

Tormos Vega quit in 1984 and this year was convicted on federal extortion charges in a scheme in which officials and a Shearson-American Express broker tapped a $66-million Shearson loan to the city.

2 Others Convicted

Juan Luis Boscio, head of the Ponce Development Authority, and broker Miguel Serrano also were convicted in that case.

Unofficial reports are that the FBI is looking into a tangle of transactions at Ponce Federal Bank, including alleged money-laundering, political slush funds and questionable loans.

Another Puerto Rico bank, Girod Trust, collapsed in 1984 when its Ponce-born founder, Alberic Girod, pleaded guilty to eight federal charges, including conspiracy and money-laundering.

Some observers believe Ponce’s old-line background, including complex in-law relationships, could have contributed to the scandals by giving participants a sense of immunity from the law.

“It’s like an old dowager that the world has passed by,” said one source who requested anonymity. “It’s the one town where the old-boy network really works.”

Mayor-elect Cordero and others rejected that view, however. They said the scandals could have happened anywhere.

Although three of Puerto Rico’s five governors have come from Ponce, the city has been eclipsed by San Juan, the bustling capital 90 miles to the northeast.

Big Economic Upheavals

Ponce never recovered from the economic shift from agriculture to manufacturing in the 1940s, and was hit hard when its struggling petrochemical industry collapsed in 1974.

One by one, the city’s institutions have moved to San Juan. These include the daily newspaper and the headquarters of Banco de Ponce, the largest Hispanic-owned bank in the U.S. mainland.

A modern highway that has linked Ponce and San Juan since the mid-1970s has hurt the Ponce economy. Many residents use it to go to work and shop in the capital.

A $330-million Commonwealth public works program has restored some century-old homes and reduced the unemployment rate to 18% from 29% five years ago, but the average family’s annual income is about $7,200, 21% less than in San Juan.

Cordero said he hopes that new highways, tourism and a reordering of city finances will bring Ponce out of its slump.