Puerto Rico deserves a more transparent bankruptcy process
For too long, Puerto Rico has stood on unequal footing with the mainland United States. Puerto Ricans are every bit as American as the rest of the people in this country, and yet, we are so often treated like second-class citizens.
Now as Puerto Rico works to resolve an unprecedented economic crisis, a powerful New York consulting firm is profiting off our financial hardship, and it’s perfectly legal. It’s time we demand equal protection under the law.
When Congress outlined a process for Puerto Rico to restructure its debt and established the Financial Oversight and Management Board (FOMB) in 2016, it failed to match safeguards present in every other bankruptcy jurisdiction in the United States — once again putting Puerto Ricans at a disadvantage.
The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) contains zero requirements for companies hired to consult on the bankruptcy to disclose potential conflicts of interest. Whether an oversight or by design, at least one company has already exploited this loophole.
Fortunately, there is a bill in Congress that would close this loophole and grant Puerto Ricans the same rights and protections in bankruptcy that exist elsewhere in the U.S. — H.R.683 The Puerto Rico Recovery Accuracy Disclosures Act (PRRADA).
McKinsey & Company, one of the most powerful consulting firms in the world, was tapped to advise the FOMB on the bankruptcy only to be exposed later as having hidden a massive conflict of interest. McKinsey did not disclose that its investment arm holds at least $20 million in Puerto Rican bonds and that they stood to directly financially benefit from the taxpayer funded advice they were hired for.
What happened when this revelation was exposed? Nothing happened because, as the law currently stands, they did nothing illegal or in violation of their contract. McKinsey maintained their contract with the FOMB and remained eligible to collect payment as creditors of Puerto Rico. If PRRADA had been in place, McKinsey would never have been allowed to exploit the people of Puerto Rico.
McKinsey is a company that has been embroiled in scandal — from criminal investigations to the negative ramifications of their work. And Puerto Rico is not the only place where they have failed to play by the rules. The only difference is that when they failed to disclose conflicts of interest in Virginia, Texas, and New York, they were fined $15 million by the U.S. Department of Justice.
When it comes to the financial stability of Puerto Rico, transparency is the least we deserve. It is essential to helping Puerto Rico regain its strength after years of financial distress. This law will equalize the level of transparency required in Puerto Rico with that of American bankruptcy laws.
In Puerto Rico and on the mainland, we need to stress the importance of equal standards for Americans and fight to ensure the recovery process achieves its goal of rebuilding a strong economy on the island.
I urge the thousands of Puerto Ricans in Florida and all of our allies to please reach out to their members of Congress to encourage them to support this important legislation.