Tuesday, October 26, 2021

Puerto Rico lawmaker: Fiscal board member should not be confirmed by Senate

By on July 9, 2019


Rep. Tatito Hernández urges U.S. senators to consider Carlos García’s ‘conflicts of interest’ 

SAN JUAN — Puerto Rico Rep. Rafael “Tatito” Hernández Montañez said Tuesday that he wrote to the U.S. Senate alleging evidence of conflicts of interest and ethics with regard to Carlos García, a member of the island’s Financial Oversight and Management Board, as the upper chamber’s process to confirm the board’s appointments is underway.

“Since the first day, we have been consistent and denounced García’s conflicts of interest as a former adviser and government official, and now as a member of the board. Only a few days after the Senate has resumed its work and following the decision of the Court of Appeals for the First Circuit of Boston to extend the evaluation process of the members of the board, we want the chair of the Energy and Natural Resources Committee of the federal Senate, Lisa Murkowski, Senator Joe Manchin and Congresswoman Nydia Velázquez to have knowledge about the findings of our investigation,” Hernández said at a press conference.

“In this second evaluation process, the board nominees will be evaluated as federal officials, to whom section 109 of the Federal Code of Ethics will apply, specifically section 208 of title 18 on conflict of interest, and section 102 on the disclosure of finances,” he added.

Hernández detailed the following findings and said he would send a copy to the senators, as well as to the congresswoman, who has been questioning the accountability of the board’s members, and for which she introduced HR 683, the Puerto Rico Recovery Accuracy in Disclosures Act. The findings are the following:

— From 2001 to 2006 he was the Director of Banking Investments at Santander Securities and then President; from 2006 to 2009 he served as Vice President, Senior Executive President and President of Banco Santander.

— From 2009 to 2011 he chaired the Government Development Bank (GDB) and since 2017 is a member of the Fiscal Control Board.

— Garcia was part of one of the entities sued in litigation over Pension Obligation Bonds (POBs). As a member of the Board of Directors of the Santander Group from 2001 to 2009, he was responsible for the transactions of Santander Securities, one of the main subsidiaries of the Santander Group, which, together with UBS Financial Services and Ramírez & Co., carried out the issuance of Puerto Rico Retirement System bonds. Santander actively participated in the issuance and sale of a large part of the bonds as a member of the underwriters’ group.

— García, as the government’s chief financial officer appointed in 2009, allowed that the Retirement Systems Administration not invest the money from the issuance of retirement bonds so that their performance would repay the debt and the surplus would capitalize the system. This provoked the acceleration of the bankruptcy of the Retirement System and not only defrauded the system, but also deceived the cooperative members and retirees of the private sector of our country that lent them their life savings.

— As president of the GDB between the 2009-2011 period, he made six (6) issuances of COFINA [acronym for Sales Tax Financing Corp.] bonds and increased the borrowing margin from $9 billion to $16 billion. He created the COFINA scheme that differentiates between senior holders and subordinates, placing the full burden of the risk on local capital, to then, as a member of the Board, agree on the disastrous restructuring agreement of COFINA in 2018.

— In the same way, as President of the GDB, he used the scheme of issuing Public Buildings Authority (PBA) bonds, managing the money excessive fashion through the Infrastructure Financing Authority (AFI). But, as a member of the Board, he consented to declare his own PBA-issued bonds unconstitutional, for allegedly exceeding the borrowing margin.

“Garcia’s conflict of interest in the Fiscal Control Board is no longer limited only to his participation as president of the GDB in the transaction of the Retirement Systems, but also, as part of the Board of Directors of the Santander Group, he also supervised and was aware of the subscription, issuance and sale of bonds that Santander Securities managed. The question is, how can Carlos García participate in the evaluation of the legality of the issuance of the bonds by being a member of the [fiscal board], if he, himself, endorsed, sold and bought” them, the lawmaker questioned.

“It is not possible that this gentleman continues being part of the Fiscal Control Board. That is why our call to the Senate and the Congress is to question each of the nominees of the Board about their participation in public finance transactions, whether as a consultant, provider or intermediary. Likewise, whether they have received any contract or benefit from any of the investment institutions in Puerto Rico. 

“Also, we call on the director of the Board, Natalie Jaresko, to answer the information request we made on June 4, 2019, about how the members of the [board] voted when they approved the different resolutions adopted by this entity since its creation, since, to date, we have not received a response. It is time for accountability and to make this information public,” Hernández concluded.

Jaime El Koury, the board’s chief legal counsel, has told Caribbean Business in the past that the board “takes the issue of conflicts of interest very seriously. We have implemented a robust system of financial disclosures, which are made available to the public, and Ethics Advisor monitoring to ensure conflicts of interest are identified and avoided. Our process is not based on speculation, but on facts.”

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