Just weeks after the Oversight Board’s Special Claims Committee (SCC) and the Unsecured Creditors Committee (UCC) sued hundreds of central government contractors and bondholders, Judge Laura Taylor Swain yesterday approved another provision that will allow to do the same in the Retirement Systems Administration (ASR, Spanish acronym) and the Highways and Transportation Authority (PRHTA).
After an expedited hearing, Swain granted the UCC recognition by the court to act as co-plaintiff and co-fiduciary of the causes that that group and the SCC would file in a matter of days.
The decision will allow the fiscal entity and the UCC to attempt to recover payments believed to have been made in a preferential or fraudulent fashion to suppliers or contractors in these agencies, whether they are advisory firms, asset management firms in the ASR or builders and engineering or architecture firms in the PRHTA.
In the case of the central government, the lawsuits were filed against contractors who received payments that in total amounted to at least $2.5 million and were made up to four years before the Title III petition.
Yesterday, the parameters for claims to be filed in the ASR and PRHTA were not discussed in court.
Swain’s decision came at the expiration of the two-year period to sue those who could have contributed to the debtors’ insolvency or received payments 90 days before the ASR and the PRHTA applied for PROMESA Title III.
Swain said that since President Donald Trump has not yet formalized the Board´s nominations, the so-called “Aurelius risk” remains latent, in reference to the case that resulted in the unconstitutionality of the Board. Last April, Swain acknowledged the UCC’s authority to sue third parties on behalf of the Puerto Rican government, among other reasons, because the Board decided to share that authority in the face of the possibility that the entity would be left ineffective after the ruling of unconstitutionality.
At present, the Board continues its operation because the First Circuit Court of Appeals extended its validity until next July. The expectation is that in that period the appointments of its members will be confirmed.
Swain’s ruling now allows the complaints process against third parties to be extended to all other government entities covered by Title III.
Between last April 30 and May 2, the SCC and the UCC sued 256 small and medium companies, multinationals and individuals who have provided services, sold goods to the government or are central government bondholders under the premise that they received payments that did not proceed. According to the Board, as part of that process, 85 other entities or individuals signed agreements to reach an understanding instead of being sued.
In the case of the central government, the deadline for such lawsuits was May 2. Now, the SCC and the UCC have until next Monday to file actions against creditors of the ASR and PRHTA.
Swain ruled on the matter even though municipal insurers such as National Public Finance Guarantee and Assured Guaranty, among others, raised a possible conflict of interest by the UCC, as the group would not have creditors from the ASR and PRHTA.