Order for discovery into causes of Puerto Rico’s fiscal crisis to be discussed
SAN JUAN – Judge Laura Taylor Swain issued an order Thursday referring to Magistrate Judge Judith Dein a motion in which the Official Committee of Unsecured Creditors seeks discovery to know the causes of Puerto Rico’s fiscal crisis.
On July 21, the committee sought discovery to learn the reasons behind Puerto Rico’s $73 billion debt. In particular, it seeks “to learn the role of public and private financial institutions in the structuring, underwriting, repackaging, and selling of the debt obligations that are now burdening Puerto Rico.”
“It is the Committee’s duty to shed light on at least some of the causes of the financial crisis, with a goal of determining whether any valuable causes of action exist and/or whether the facts uncovered could lead to the disallowance or subordination of certain claims,” the group stated as reasons for its request.
The committee is asking for hundreds of documents from Santander Securities, Santander Asset Management LLC, Banco Santander Puerto Rico, Popular Inc., Popular Securities LLC, Banco Popular de Puerto Rico and the Government Development Bank for Puerto Rico.
“As this Court is well aware, the Commonwealth and its related entities and instrumentalities entered into hundreds of bond issuances for tens of billions of dollars which led to the current financial crisis.
“These total in excess of $73 billion, including billions of dollars of debt held on the island of Puerto Rico itself. The various governmental entities issuing this debt did not act alone. Instead, they were aided by banks, advisors, and other financial entities which facilitated, approved of, and marketed this debt,” the committee argues.
As for the role of the financial institutions, the group asks: “Did banks such as Santander and Popular knowingly or recklessly misrepresent the risks associated with the Puerto Rico bonds they were selling to retail and other investors? Were bonds foisted through improper means on Puerto Rico institutions such as the ‘cooperativas’?” referring to cooperatives, or credit unions.
The motion is one of the items to be discussed in an omnibus hearing slated for Aug. 9.