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Judge to Consolidate Bond Insurer Lawsuits Against Puerto Rico

By on January 22, 2016

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.   

By Eva Lloréns Vélez

One Comment

  1. Richard Lawless

    January 22, 2016 at 2:54 pm

    $11,000,000,000 Bond Fraud

    The
    Commonwealth of Puerto Rico recently released its final report on the Puerto
    Rico Electric Power Authority (PREPA).
    It found that “PREPA paid previous bondholders with capital received
    from new investors”. Some call this a
    Ponzi Scheme. They went on to claim “The
    abovementioned was done to benefit the financial community”. I suspect the Commonwealth is suggesting that
    committed fraud so that Wall Street firms could make massive fee income. Interesting take on a criminal act.

    Well
    It is time to name names:

    Puerto Rico Electric Power Authority – Issued $11,000,000,000 in
    fraudulent bonds.

    Moody’s, Finch and S&P issued false and misleading credit
    ratings.

    Morgan Stanley, Wells Fargo
    Securities, LLC, Citigroup, JP Morgan, B of A, Merrill Lynch, Barclays,
    Firstbank PR Securities, Goldman Sachs & Company, Jeffries, Mesirow
    Financial, Inc., Oriental Financial Services, Popular Securities, Ramirez &
    Company, Inc., RBC Capital Markets, Santander Securities, Scotia MSD, UBS FS
    Puerto Rico all sold
    these fraudulent bonds to unsuspecting Americans.

    Jack Lew, Secretary of the Treasury use to run one of the banks that sold
    these fraudulent bonds and is now pushing for bankruptcy authority and
    financial aid to the same company.

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