Velázquez Seeks Crackdown on PROMESA Consultants’ Conflict of Interest
Washington, DC- Rep. Nydia M. Velázquez (D-NY) has introduced the “Puerto Rico Recovery Accuracy in Disclosures Act,” legislation that extends to firms working on Puerto Rico’s debt restructuring the same disclosure requirements that apply to companies involved in other bankruptcies. Recent news reports have documented how McKinsey & Company is advising Puerto Rico on the Island’s debt restructuring at the same time that it holds bonds issued by Puerto Rico.
“The people of Puerto Rico can’t have faith that this oversight board is putting their interests first if consultants helping implement the restructuring could profit from how much debt service is available under the very fiscal plans they design,” Velázquez said. “At bare minimum, the same disclosure requirements that apply to an ordinary bankruptcy on the mainland should hold true for Puerto Rico. Anything less than that impugns the integrity of the process.”
Velázquez’s bill requires attorneys, accountants, consultants, and other professional persons employed by the Oversight Board in a Title III case to submit verified disclosures of their connections with the debtor, creditors, or persons employed by the Oversight Board, prior to being compensated under PROMESA. The disclosures must comport to existing bankruptcy rules and include information on the identity of each entity or person with whom such professional person has a connection.
Under the bill, the U.S. Trustee would also review the disclosures submitted and potentially file comments with the Court should the disclosures not be properly submitted, potentially preventing compensation from a firm that is in violation. The new disclosure requirements would apply retroactively to individuals and companies already employed by the Oversight Board.
“Those who have been retained to help guide Puerto Rico through bankruptcy should be putting the Island, its people and its economy first,” Velázquez continued. “If companies are doing work on Puerto Rico’s debt, while simultaneously holding bonds in secret, there are very real concerns that standard is not being met. This bill will simply mean greater transparency in the process and a full understanding of any potential conflicts.”
Velázquez’s bill has been cosponsored by Rep. Jenniffer González-Colón (R-PR), House Natural Resources Committee Ranking Member Raúl Grijalva (D-AZ), Committee Chairman Bishop (R-UT) and Rep. Andy Biggs (R-AZ). The Natural Resources Committee has jurisdiction over PROMESA and Puerto Rico. Velázquez pledged to move the legislation toward enactment as quickly as possible.
The first Puerto Rican woman elected to Congress, Velázquez serves on the House Natural Resources Committee.