WASHINGTON - The confidentiality agreement between the Department of Treasury and the Puerto Rico Electric Power Authority (PREPA) strived to inform the federal Executive branch on the fiscal situation of the public corporation and the ongoing negotiations with bondholders.
“There was an interest in knowing about the state of conversations with creditors and the financial situation,” as indicated yesterday, Javier Quintana, executive director of the PREPA, who only very recently found out about the arrangement, signed by his predecessor on March 10th, 2015.
According to Quintana, at the moment the confidentiality agreement was signed, one of the dates for the leniency agreement between PREPA and creditors from the AdHoc group would expire. The AdHoc group represents close to 70% of the public corporation’s bondholders. Quintana stated that similar agreements had been signed with creditors.
In mid-July, Quintana did not know about the agreement with PREPA.
Its existence was not acknowledged in a meeting of PREPA’s Government Board this past July, even though Carlos Gallisá, one of the public interest representatives, had then asked about the issue.
Gallisá held that neither PREPA’s restructuring officer, Lisa Donahue, nor the members of the Board of Directors or the representatives from the Cleary Gottlieb law firm said to have known anything about the confidentiality agreement.
But, days later, Quintana stated that “advisers” had confirmed the existence of a confidentiality agreement, which expired last March. Quintana, who assumed control of PREPA in August of 2015, held that the agreement was signed at the request of the Government of Puerto Rico.
The agreement was signed by former executive director of PREPA, Juan Alicea Flores, as well as by Timothy Bowler, the then assistant secretary of the Treasury for Financial Stability.
Quintana has been told that the exchange of information only occurred in March of 2015. “If the agreement was signed by the previous director, the Board of Directors had to have known it,” said Gallisá, for his part.
At least since June 29th, just as the Senate was approving the PROMESA Act that imposed a federal Oversight Board over the Government of Puerto Rico, the Chairman of the Committee on Finance, Senator Orrin Hatch (R-Utah), had asked in a letter to Treasury Secretary Jacob Lew, about the reach of this agreement.
When responding to Senator Hatch’s letter, in another missive on July 29th, the federal Treasury recognized the existence of the confidentiality agreements that also include the Public Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico (COSSEC), as revealed yesterday by El Nuevo Día.
The confidentiality agreement or exchange of “nonpublic information” with COSSEC was signed on December 22nd, 2015 by the then executive president of COSSEC, Daniel Rodríguez Collazo, and the Treasury director for the Office of State and Local Finance, Kent Hiteshew.
“Our relationship with the United States Department of Treasury, as with any other governmental instrumentality, is carried out within the functions of our ministerial duty as regulator. The agreements subscribed with the different governmental entities, as part of a joint interagency effort, requires the exchange of confidential financial information,” indicated interim executive president of the COSSEC, José A. Flores Vázquez.
“We understand that the Treasury will use this ‘nonpublic information’ in conjunction with the monitoring of developments in the Commonwealth of Puerto Rico,” said Flores Vázquez, former director of Legal Affairs, in a letter sent to Hiteshew last April.
In another letter from Hiteshew, dated back to April 4th and sent to Emiliano Trigo, Federal Affairs adviser to Governor Alejandro García Padilla, he stated that the information gathered by the Treasury and the National Credit Union Administration (NCUA) about the financial situation of cooperatives in Puerto Rico could be shared with several officials from the Island's government, among them Chief of Staff Grace Santana, and the Commissioner of Financial Institutions, Rafael Blanco.
But, Commissioner Blanco warned yesterday that he never had any knowledge of the confidentiality agreement by which the Treasury Department would have had access to nonpublic information about the finances of the Island’s cooperatives; much less did he have access to reports from the Treasury about the cooperatives' fiscal situation, he stated.
Blanco pointed out that the matter wasn’t brought to the attention of COSSEC’s Board of Directors either, of which he is a member.
El Nuevo Día had informed before that the Department of Treasury had a full grasp of the fiscal challenges faced by the Island’s cooperatives, which own about 1.3 billion dollars in Puerto Rican Government bonds and, like other creditors, could face losses under a restructuring of the public debt.
According to Flores Vázquez, “the country’s cooperatives are currently solid and possess liquidity, which is their greatest strength.”
Meanwhile, a spokesperson from the Treasury Department yesterday confirmed that, aside from the agreements with COSSEC and PREPA, “there are no other confidentiality agreements with Puerto Rico or any of its entities.”
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