Ever since the government of Puerto Rico decided to negotiate its public debt two years ago and now with the imposition of the Oversight Board (OB), the fiscal crisis faced by the US territory has become a bonanza for dozens of companies and experts on financial matters, lawyers and economists, and even, officials in former administrations and politicians.
According to an analysis by el El Nuevo Día, despite the government not having compled any debt renegotiating process in almost two years and now, with the prospect of being caught in a hail of suits stemming from the end to the automatic stay on litigations provided for in PROMESA, millions of the Island’s taxpayer dollars have been allocated or spent on matters related with the public debt.
Puerto Rico’s creditors and insurers have also invested millions of dollars to stand up against the US territory, whether it be in the courts, developing add and political activism campaigns, or paying lobbyists.
The debt crisis has also served so other executives and companies, who formerly played roles in the issuance Puerto Rico’s debt, may now go through a revolving door as representatives of the Government or the creditors in the debt renegotiation process.
At just hours from the Island’s fiscal crisis falling into the hands of judges with the end of the automatic stay on litigations, El Nuevo Día offers a look into some of the players in the saga and the roles they have played or currently play.
Proskauer Rose LLP
A powerful law firm with main offices in New York which rendered its services to the Alejandro García Padilla administration when it was intent on renegotiating its deb. The firm played a key role in drafting the so-called creole (local) bankruptcy law subsequently declared unconstitutional by the Supreme Court. Under the AGP administration, Proskauer received contracts worth $4.3 million.
Currently, it is the main advisor to the OB. Its contract makes no mention to any fixed amount, but rather, its bill based on a formula combining the hours of services rendered and the names of those who rendering it. In the case of a firm’s partner, he/she could collect $1,000 an hour; an hour of services by a paralegal is charged at $250. The firm invoices any kind of incidentals following certain references, as does for trips, lodging, communications, etc.
For over two decades, the investment bank acted as one of the main underwriters and sellers of Puerto Rico debt.
According to data from specialized Bloomberg service, Citi or its affiliates participated in close to one hundred transactions involving Government debt. Payment to the investment banks is diverse, since it depends of the role it played in each instance, the type of security issued, market conditions, and its amount.
The firm was selected by the OB as its financial adviser and receives a monthly compensation of $250,000. Once the Island’s debt is restructured, it may collect commissions or other fees according to the type and value of each transaction.
The economist also worked along former number two at the International Monetary Fund, Anne Krueger, on the report to governor Alejandro García Padilla about the fiscal crisis and public debt which dramatized the insolvency of the public debt. These economists would have been outsourced by then Government’s legal advisor, Cleary Gottlieb, so their compensation is unknown.
He now works on macroeconomic analyses for the OB, such as for example the work he produced ahead of the fiscal plan certified in mid March. For those and other similar services, he reportedly earned a maximum of $87,500 between November 17, and February 28. For the months of March and April, he was hired for an additional $50,000, that is $25,000 a month.
One of the Island’s main economic and social analysis firms, it has served the Government at multiple levels throughout the years. The firms offers economic intelligence and consulting in highly specialized matters such as planning, federal funds management, and regulatory and environmental compliance. It had agreements in excess of $1 million during the last administration with state agencies and departments such as State, Education, Municipal Affairs, and Management and Budget. Late last year, the Government Development Bank (BGF, by its Spanish acronym) hired it to analyze the possibility of restoring its operation and solvency. As of that date, the firm was awarded a contract worth $245,000.
Leading to the preparation of the fiscal plan, the OB hired it for $55,000.
José Coleman Tió
He was legal adviser to BGF president, Melba Acosta Febo and then, the OB hired him, through his company RCT.
For his services to the legal entity, he was paid some $37,000 in the months of December and January. Coleman Tió was even mentioned as candidate to be executive director of the Board.
O’Neill & Borges
Between the years 2007 and 2016, the local law firm has retained contracts totaling $5.2 million with the Government, almost half of that with the BGF. The firm has been legal adviser in multiple bond issues of the Island. In 2014, the law firm was one of four rendering legal advise on the issuance of $3.5 billion in General Obligations. It was placed without the publication of financial statements and in it, jurisdiction was relinquished from Puerto Rico to New York. Court arguments indicate the issue to have been in violation of the constitution.
The firm is the OB’s main legal adviser in Puerto Rico. According to its contract, it would initially invoice $250,000 and would then provide a 10% discount on services invoiced, but it does not state its hourly cost. The firm indicated that the attorneys working directly with the OB are Hermann Bauer and Julio Pietrantoni.
The former resident commissioner in Washington was initially a hard critic of the imposition of a federal fiscal oversight board. But, amid pressure from the Treasury, he ended up supporting the idea, after considering that the legislation had been softened by eliminating the figure of the chief financial officer. This official would have had the power to make decisions directly in the agencies of the Puerto Rico government.
OB president, José Carrión III, is his brother in law. During the election campaign, The PNP faction that took Ricardo Roselló Nevares to both the party’s presidency and the governorship questioned that two of his wife’s clients purportedly lobbied around his bill to include Puerto Rico’s public corporations in Chapter 9 of the US Bankruptcy Code.
Last January, Pierluisi returned to his old law firm, O’Neill and Borges.
Emiliano Trigo Fritz
He was former liaison of governor García Padilla with the federal Treasure, particularly in all that related PROMESA. “(Trigo Fritz) was de facto boss at the PRFAA during the last administration,” said a former official of the García Padilla government.
The lawyer now works for O’Neill & Borges.
Jayson Padilla Morales
The former deputy secretary of the Department of the Treasury of the government of García Padilla was responsible for working on the financial reports of the Puerto Rican government.
He now provides the OB with the analyzes on the public revenues and expenditures submitted by the Rosselló Nevares administration. Padilla Morales earns some $12,500 per month between the months of January and June 2017, up to a cap of $80,000.
Luis G. Fortuño
Through his lobbying firm Steptoe & Johnson – to which his administration awarded over $20 million in contracts- the former governor lobbies for the Medicaid and Medicare Advantage Products Association (MMAPA).
In the midst of the crisis, the organization has taken lead in the federal capital, advocating for better access to federal health programs.
But, at the same time, Steptoe & Johnson has been lobbyist for municipal insurer Assured Guaranty. This insurer who actively lobbied in favor of the creation of the OB, is part of the negotiations with the PREPA and those being conducted by the Government. According to sources in the Puerto Rican government, the insurer has lobbied against the Island when it tries to demand additional funds for Puerto Rico.
The lobbying firm owned by Manuel Ortiz, a figure close to former governor Pedro Rosselló, was recently hired by the Puerto Rico Federal Affairs Administration.
Ortiz, however, acted as lobbyist for insurer Ambac Assurance, according to lobbying disclosure records in Congress. At the rate of between $5,000 and $10,000 in the quarter, Ortiz advocated for Ambac before Congress though the firm of Milbank, Tweed, Hadley & McCloy LLP.
During last year, he was also a lobbyist for Citigroup, which work meant income of between $5,000 and $20,000 during the quarter. The bank figured among the creditors of the PREPA.
It is a firm specialized in financial consulting, with particular expertise, in corporate reorganization processes.
The firm was hired by the Government Development Bank (GDB) last February with a budget allocation of $1.4 million. The FAFAA identifies the firm among PREPA’s advisers, although the Comptroller’s Contracts’ Registration Office had not recorded any other agreement by press time.
The firm recently established operations in the Island, but its executives are Jorge San Miguel and Juan Carlos Batlle.
San Miguel previously represented municipal insurer Ambac, while he was part of law firm Ferraiuoli LLC. Ambac’s chief executive officer, Nader Tavakoli who abruptly left his position last year, was a staunch critic of the García Padilla administration.
Batlle was president of the GDB during the second half of the Luis Fortuño administration and it was under his guide that the first steps were taken to reform the fuel purchase processes of the PREPA as well as the public-private alliances that transferred the Luis Muñoz Marín airport and the PR-22 into private hands. Previously he worked with Grupo Santander and Santander Asset Management, one of the firms that acquired Puerto Rican bonds.
Jefferies & Co.
With irregular presence in Puerto Rico, the investment bank has been part of the syndicates that have structured the Island’s debt in certain circumstances. During the administration of Luis Fortuño, the firm helped structure and place bonds for the Highways and Transportation Authority (HTA), General Obligations, and the new series by the Puerto Rico Sales Tax Financing Corporation (Cofina), upon the modification of the law to allocate more revenues from the IVU as collateral for that debt.
The firm is now part of the syndicate of banks who will be in charge of structuring Puerto Rico’s debt. Currently, the executive in charge of the firm is the former secretary of the Department of Economic Development and Commerce (DDEC, by its Spanish acronym), José R. Pérez-Riera.
It also advises the Public-Private Alliances Authority.
Bank of America – Merrill Lynch
According to specialized Bloomberg service, for years, the firm has been part of the syndicate of banks who have placed the Island’s debt. Though rarely, it managed to figure among the main underwriters, it participated in over thirty transactions.
By 2007, the firm attempts to carry out the controversial issue of Pensions Obligations’ Bonds (POBs), but recommended the Government not to go ahead after failing to secure enough buyers.
The firm had a cooperation agreement with Grupo Santander at the time of managing the issues by the Puerto Rico government and now acts as the Government’s main financial adviser in the restructuring process.
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