Fiscal board to investigate Puerto Rico debt

From left, fiscal oversight board Executive Director Natalie Jaresko, member Ana Matosantos, and Chairman José Carrión III. (Juan J. Rodríguez/CB)

SAN JUAN — The fiscal control board confirmed Wednesday its intention to investigate the causes of Puerto Rico’s fiscal crisis, including the commonwealth’s debt issuance, disclosure and selling practices. It adds that the findings of this investigation will be made public.

“As we develop the parameters of the investigation and progress in the appointment of the independent investigator, we will be providing more information,” board Executive Director Natalie Jaresko said.

The board will create a special committee that will appoint an independent investigator. Its announcing statement adds that the probe will be carried out according to the investigative protocol recently approved by the board.

Puerto Rico fiscal board publishes protocol for investigations

The announcement comes at a time when federal Judge Laura Taylor Swain has before her a request by a group of creditors to specifically investigate government debt issuances.

A committee representing unsecured creditors in Puerto Rico’s Title III bankruptcy cases filed a lawsuit July 21 for Judge Swain to authorize a discovery process to investigate the role played by Banco Popular, Banco Santander and the Government Development Bank (GDB) in the issuances and transactions related to the commonwealth’s debt.

Puerto Rico gov’t objects to creditor request for probe into debt

The Government of Puerto Rico objected to the request made by this group of creditors, arguing that such exercise should be carried out by the fiscal control board pursuant to the federal Promesa law.

According to the panel, federal law empowers it to “conduct an investigation into Puerto Rico’s debt and its connection to the current fiscal crisis.” It adds that the process will help restore fiscal balance on the island, as well as return Puerto Rico to capital markets.

Meanwhile, the judge last week delegated the creditor committee’s request for investigation to Judge Judith Dein. The matter will be dealt with Aug. 9 as part of an omnibus hearing in San Juan for bankruptcy cases under Title III of Promesa.

As for the mechanism used by the board to carry out the investigation, it recently approved a protocol to carry out “informal” and “formal” investigations into any matter it deems worthy, as Promesa allows.

The protocol was approved by the board during a May 26 executive, or closed, meeting.

This week, the Government of Puerto Rico presented the protocol of investigation adopted by the fiscal board before the court so the judge is aware of the document.

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