On September 24, 1998, about 1319 atlantic standard time, a Convair 240, N91237, collided with water about two miles short of runway 28 near Luis Munoz Marin International Airport in Loiza, Puerto Rico. The airplane was operated by Trans Florida Airlines as Flight 237, under the provisions of Title 14 CFR Part 121, and Visual Flight Rules (VFR). Visual meteorological conditions prevailed and a VFR flight plan was filed. The Airline Transport Pilot (ATP), First Officer, and one passenger was not injured, and the airplane received substantial damage. The cargo flight departed Luis Munoz Marin International Airport enroute to Santiago, Cuba, at 1315 AST. According to the pilot-in-command, after a normal pre-flight inspection and an engine run-up, he began the takeoff roll. During the takeoff roll, there was a fluctuation of Brake Mean Engine Pressure (BMEP-a measurement of engine output), on #2 engine. At this point the pilot elected to abort the takeoff. The airplane was brought back to a hangar where a Federal Aviation Administration (FAA) Airworthiness Inspector boarded the aircraft and witnessed another engine run-up with no abnormalities noted. The pilot then stated, the airplane was taxied to the departure runway where a third engine run-up was performed with no abnormalities noted. The pilot stated, after take off, as the airplane climbed through 200 feet MSL, he heard a loud bang or back fire from the #2 engine, the BMEP indicator fluctuated and dropped showing about 150 BMEP difference with respect to engine #1, oil temperature started to rise rapidly, oil pressure dropped and the airplane started to vibrate. At this point, according to the pilot, he commanded the first officer to reduce the #2 engine to "dry" power, upon which a second bang or backfire was heard from the #2 engine. The #2 propeller was then feathered by the First Officer. The airplane was leveled off at 400 feet MSL where, according to the pilot, in an attempt to return the airplane to the airport, altitude could not be maintained and the airplane was force landed in a salt water lagoon. The airplane came to rest in approximately eight feet of water. The term "dry" power refers to engine power without the use of ADI (anti detonant injection) water injection. This gave the right engine 53 inches of manifold pressure as opposed to 59 inches of manifold pressure available with water injection. An FAA Inspector who examined the crash site noted that the left wing was separated from the fuselage with the left engine in place, the left wing tip was damaged and the tail cone received slight damage. Also noted were that the nacelle flaps appeared to be in the mid-position, the right engine propeller was not fully feathered, and the wing flaps were extended about three degrees. Due to hampered recovery efforts brought about by recently passed Hurricane Georges, the airplane was not recovered from the salt water lagoon for 70 days. The flight crew completed the engine out emergency procedure in accordance with the prescribed checklist.