Fiscal board requests Puerto Rico utility’s retirement system suit be moved to federal court
SAN JUAN – The Financial Oversight and Management Board for Puerto Rico wants to a lawsuit filed by the directors of the Puerto Rico Electric Power Authority’s (Prepa) Employees Retirement System (ERS) moved from local to U.S. District Court. The directors want the system declared separate from the utility and have the fiscal board barred from interfering.
The civil action was filed in March in San Juan Superior Court by Prepa Retirement System Chairman José Ramón Rivera and other board trustees. Among the relief sought are an injunction providing that Prepa’s retirement system is separate from the utility and the commonwealth, and a statement declaring that the executive order issued in March interferes with the independence of the retirement system and, thus, is null and void.
The fiscal board says it has the authority to have the civil action moved to U.S. District Court, for it interferes with its ability to restructure the utility as its representative in the power company’s bankruptcy process under the federal Promesa law.
The executive order issued in March calls for Prepa’s board to be appointed trustee of the utility’s retirement system with authority over the retirement system’s current trustees. It also calls for the publication of actuarial reports and audited financial statements of the retirement system. The information had to be delivered to the island’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym) for the preparation of the amended fiscal plan for fiscal year 2019.
In the suit, the directors of Prepa’s retirement system argue they have fulfilled all of their fiduciaries duties to issue actual reports and audited financials, and that the only statements pending are those of 2016 and 2017, which have not been issued because of Prepa’s failure to deliver documents needed for their completion.
In the lawsuit, Prepa retirement system officials contend the system is a legal entity separate and independent of the utility and not under the scope of the executive order issued in March.
The retirement system “is a Trust created through the Collective Bargaining Agreement executed in 1942 by and between the Puerto Rico Electrical Industry and Irrigation Workers Union (UTIER, by its Spanish acronym) and the then Water Resources Authority,” now known as Prepa, the civil suit reads.
The retirement system, they further argue, has been defined “as a de facto trust, not governed by the legislation adopted by the Puerto Rico Legislature and applicable to the public retirement systems. In fact, the Retirement System, since its creation in 1946, has been governed exclusively by the Electric Power Authority’s Employees Retirement System’s Bylaws, which has been modified occasionally, as considered necessary, with the consensus of the Board of Trustees of the Retirement System and Prepa.”
The legislature and the courts recognized Prepa’s retirement system as an independent entity.
“The independent nature of the Retirement System has been endorsed by the Puerto Rico courts. In fact, in UTIER v. PREPA, SJ2015CV00100, the Puerto Rico Court of First Instance, San Juan Court, entered judgments, currently final and unappealable, on April 5, 2016, and on August 28, 2016, in which it ruled that the Retirement System is a de facto trust since its creation on June 25, 1945, with private purposes, that does not require the execution of a public deed or its recordation in the Registry of Trusts to constitute its legitimacy,” the civil suit adds.
Retirement system officials also say Prepa does not need the retirement system actuarial reports or statements to develop its fiscal plan.
“The only reason defendants in this case have to interfere with the Retirement System is that they are not content or in agreement with what is stated by the Retirement System’s actuaries and auditors and they intend to change their conclusions. The only entity authorized by law and Bylaws to make changes to the actuarial reports and financial statements is the Retirement System’s Board of Trustees,” the civil suit reads.