Lawmakers Intro Bill Aiming for More Transparency of Puerto Rico Bankruptcy
The Puerto Rican Financial Oversight and Management Board recently announced it would reduce public spending on the island to pay off the more than $70 billion it owes bondholders. However, The New York Times had previously reported that the Board’s consultant, McKinsey & Company, had bought millions of dollars’ worth of Puerto Rican bonds at a deep discount and had not disclosed that investment. The put the consulting firm, which is advising a federal oversight board as it leads the island through fiscal reforms and a debt restructuring, in a position to profit from the plans that it is helping to design -- and this has raised concerns about its partiality. In response, Congresswoman Nydia Velázquez (D-NY) led her House colleagues, Jenniffer González-Colón (R-PR), Rob Bishop (R-UT), and Raúl Grijalva (D-AZ) -- the incoming Chair of the House Natural Resources Committee, whose Committee would have jurisdiction -- in introduced a bipartisan bill on Wednesday to strengthen reporting requirements. The measure would require all professionals to make the usual sworn disclosures -- not just McKinsey, but also other experts working for Puerto Rico’s oversight board, including Citigroup, Ernst & Young and Proskauer Rose. It would also give the Justice Department’s bankruptcy watchdog, the Office of the United States Trustee, an explicit mandate to investigate possible conflicts of interest and empower the federal judge handling Puerto Rico’s case to block the payment of an advisor’s fees if a conflict is found. “The people of Puerto Rico can’t have faith that this oversight board is putting their interests first if consultants helping implement the restructuring could profit from how much debt service is available under the very fiscal plans they design,” said Velázquez. Grijalva told WaPo he will use the Committee’s authority to probe the board’s alleged conflicts of interest, as well as its proposals for having Puerto Rico pay back its creditors. More here.