Monday, May 29, 2017

[COLUMN] For the Control Board, Independence is Key

By on July 28, 2016

john muddBy: JOHN MUDD – Lawyer & Legal Analyst
Twitter: @MUDDLAW
Blogwww.johnmuddlaw.com

This summer marks the beginning of an unprecedented era for Puerto Rico and its relationship with the federal government of the United States. Thanks to the years of irresponsible fiscal policies that have resulted in a staggering public debt, the federal government has effectively suspended our right to self-governance at the request of the current administration, installing a control board to rectify our mistakes, better our finances and reinvigorate our economy.

The task this board must undertake is colossal, and it will undertake it in an atmosphere clouded by uncertainty, thanks to a Securities & Exchange Commission investigation into the debt issuances authorized by outgoing Government Development Bank President and former Puerto Rico Treasury Secretary Melba Acosta, and a congressional “task force” that will assess the outstanding debt and offer dubious, politically driven recommendations to the board.

Nonetheless, the board will be tasked not only with approving a fiscal plan put forth by our government, but also overseeing negotiations with creditors (which the current government has not done in good faith), implementing reforms intended to improve Puerto Rico’s fiscal situation, spark growth in the private sector and, if need be, authorizing the restructuring of certain portions of our debt. The board will also likely examine current and former budgets, analyze specific line items and investigate why, last year, with larger-than-expected revenues, the government was supposedly still unable to pay the bills for which money was already appropriated.

The key to all of this will be the board’s total independence, both from the domestic political pressures of Puerto Rico and the divisive national debt politics, which took center stage in the months leading to the passage of the Puerto Rico Oversight, Management & Economic Stability Act (Promesa). Those who have followed postings elsewhere know that I have long viewed this indispensable independence as the control board’s greatest virtue, allowing it to make necessary decisions unabated by political influence, and it is the reason that I have long championed the board as a policy solution to our crisis.

However, there is no doubt that stakeholders on all sides of this crisis will seek to influence the board for their own benefit—even if doing so does not help the board to serve its ultimate mission of bringing growth back to our economy. Many of the names being mentioned in Washington, D.C., as potential board members have close ties with the Alejandro García Padilla administration, organized labor or the U.S. Treasury Department and bring a polluted mindset to the table. Puerto Rico does not need or deserve that.

Already, for example, the U.S. Treasury Department is reportedly working with García Padilla administration officials to revise fiscal growth projections—a task that should be left to the independent board—before board members are officially appointed. While this may serve the interests of the outgoing administrations in San Juan and Washington, it is a dishonest way to influence the board’s work before it can it can make its own examination of Puerto Rico’s finances.

For this reason, Puerto Ricans must be extremely vigilant and vocal, both in their support for appointees and actions that uphold the board’s independence, and in opposition to those who would compromise it. Partisan politics have brought us to this junction; we do not need more of the same.

That is why, in this monthly column, and through my new citizen’s watchdog group Control Board Watch, I will analyze the many rumors circulating about the board, its potential appointees and staff. In doing so, I will promote appointees, staff and policy decisions that promote the board’s total independence from political forces, and empower it to restore our economy to a position of strength. In addition, I will try to explain the different issues pertaining to the cases challenging governmental actions, as well as explaining the different nuances of Promesa.

Finally, a short note on the mounting number of cases challenging assorted acts by Gov. García Padilla in reference to Puerto Rico’s defaults. At this time, there are five cases in Puerto Rico’s Federal District Court challenging these actions and the applicability of Promesa’s stay to their cases. What the government’s propaganda did not tell us is that the stay does not apply to cases that do not seek monetary compensation and even if they did, the stay may be lifted, as two of these cases seek. Once a motion for lifting of the stay of Promesa is filed, the Federal Court has 45 days to determine, after a notice and hearing, if the stay is to remain. If it does nothing, the stay is automatically lifted. See section 405(f) of Promesa.

—John Mudd is an attorney and legal analyst in Puerto Rico with over 30 years of experience.  He is admitted in Puerto Rico, the U.S. District Court for Puerto Rico and the First and Fourth Circuit Court of Appeals. For more than three years, he has been analyzing the possibility of a control board for Puerto Rico. You can follow him in on Twitter @MUDDLAW and on his blog www.johnmuddlaw.com.

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