Judge to Consolidate Bond Insurer Lawsuits Against Puerto Rico
SAN JUAN – Federal Judge Gustavo Gelpí has consolidated several lawsuits filed over Puerto Rico’s debt to avoid inconsistent rulings and save time and money.
“Both cases assert most of the same claims,” including the same defendants, Gelpi said in a court filing.
Both cases will now go before U.S. District Judge José Fuste in Puerto Rico.
Financial Guaranty Insurance Co., or FGIC, sued Puerto Rico on Tuesday for diverting $164 million in revenue streams meant to pay the island’s debt through a clawback mechanism. The firm insures about $1.2 billion in debt. The lawsuit will be consolidated with another one brought by two other bond insurers, Assured Guaranty and Ambac Financial, which also argues that the so-called clawbacks violate the U.S. Constitution and federal law.
The lawsuits came after the governor signed executive orders in November and in December implementing the clawback mechanism established by the constitution to redirect revenues earmarked for debt in certain public corporations in order to pay constitutionally guaranteed debt and other essential services.
After learning about the FGIC lawsuit, Gov. Alejandro García Padilla insisted that the government will prevail in court. The clawbacks are permitted by the commonwealth’s constitution, which was ratified by Congress.