The Bond Buyer - - Front Page - By RoBeRt Slavin

is rais­ing con­cerns over the Over­sight Board’s in­de­pen­dence from fed­eral in­flu­ence as it seeks to re­pair the debt­strapped ter­ri­tory’s econ­omy.

A Puerto Rico jour­nal­ist group is rais­ing con­cerns over the Over­sight Board’s in­de­pen­dence from fed­eral in­flu­ence as it seeks to re­pair the debt-strapped ter­ri­tory’s econ­omy.

The Cen­ter for In­ves­tiga­tive Jour­nal­ism re­ported last week that aides for key U.S. Rep­re­sen­ta­tives like Rob Bishop, R-Utah and Paul Ryan, R-Wis., Sen­a­tors in­clud­ing Or­rin Hatch, R-Utah , and Mitch Mc­Connell, R-Ky. and deputies at the U.S. Trea­sury fre­quently have made warn­ings and rec­om­men­da­tions to board mem­bers and staff.

In Oc­to­ber 2017, Sens. Jeff Flake, R-Ariz. and Mike Lee, R-Utah urged board mem­bers to con­sider pri­va­tiz­ing the Puerto Rico Elec­tric Power Author­ity, ac­cord­ing to the jour­nal­ism group. Both sen­a­tors had a his­tory of re­ceiv­ing cam­paign con­tri­bu­tions from the en­ergy in­dus­try. Nei­ther sen­a­tor im­me­di­ately re­sponded to a re­quest for com­ment.

In Jan­uary 2018 Gov. Ri­cardo Ros­selló an­nounced that he would seek PREPA pri­va­ti­za­tion. The board en­dorsed the idea and it has been re­ported that the board had lob­bied for this be­fore the gover­nor an­nounced it.

The Cen­ter for In­ves­tiga­tive Jour­nal­ism pre­sented the first three re­ports in what it plans to be a se­ries of ar­ti­cles on its find­ings from doc­u­ments, let­ters and emails it has gained through a law suit. The re­ports are based on 5,600 doc­u­ments, let­ters, and emails and the group is seek­ing ad­di­tional ma­te­rial from the board.

One of the three re­ports dis­cusses the his­tory and sta­tus of its ef­forts to get doc­u­ments from the board.

When the U.S. Congress con­sid­ered the Puerto Rico Over­sight, Man­age­ment, and Eco­nomic Sta­bil­ity Act in the first half of 2016, key gov­ern­ment sup­port­ers said that the board would be “in­de­pen­dent.”

For ex­am­ple, a White House web page from June 7, 2016 said, “PROMESA cre­ates an in­de­pen­dent over­sight board to help im­ple­ment needed re­forms while re­spect­ing Puerto Rico’s self-gov­er­nance. Con­gres­sional lead­ers from both par­ties have com­mit­ted to work with Pres­i­dent Obama to set pol­i­tics aside and nom­i­nate a well-func­tion­ing, in­de­pen­dent group of ex­perts to serve on the board.”

As another ex­am­ple, a U.S. House Nat­u­ral Re­sources Com­mit­tee page on PROMESA quotes Mas­sachusetts In­sti­tute of Tech­nol­ogy Pro­fes­sor Si­mon John­son and in­ter­na­tional ar­bi­tra­tion lit­i­ga­tor Mark Cym­rot as sup­port­ing PROMESA be­cause it would cre­ate an “in­de­pen­dent over­sight board.”

A source who for­merly worked in the Obama ad­min­is­tra­tion con­cern­ing Puerto Rico said PROMESA ex­plic­itly said the fed­eral gov­ern­ment should pro­vide in­for­ma­tion and ad­min­is­tra­tive sup­port to the board at the board’s re­quest. He pointed to sec­tion 104 (c) (1) and (n) as ad­dress­ing these top­ics.

He said he had many con­ver­sa­tions with board but didn’t tell board mem­bers what to do.The hur­ri­canes in Septem­ber 2017 were a “game changer,” the for­mer of­fi­cial said. To deal with the out­come, the board has had to com­mu­ni­cate more ex­ten­sively with Wash­ing­ton to co­or­di­nate aid and de­ter­mine how the aid will fit in with board-ap­proved fis­cal plans.

It is OK for Congress to run and in­flu­ence Puerto Rico through open hear­ings and leg­is­la­tion, said In­sti­tute for En­ergy Eco­nomics and Fi­nan­cial Anal­y­sis di­rec­tor of fi­nance Tom Sanzillo.

How­ever, he said the se­crecy that Sen­a­tors Flake and Lee used in try­ing to en­cour­age pri­va­ti­za­tion is con­cern­ing. Sanzillo added that he be­lieved there was no eco­nomic ra­tio­nale for pri­va­tiz­ing PREPA.

The fact that the sen­a­tors had ac­cepted en­ergy in­dus­try money is an added con­cern, ac­cord­ing to Sanzillo, as it gives the per­cep­tion that they have a con­flict of in­ter­est.

The board re­leased a state­ment to the Bond Buyer that said in part:

“The Over­sight Board main­tains reg­u­lar com­mu­ni­ca­tions with mul­ti­ple stake­hold­ers, in­clud­ing fed­eral gov­ern­ment agen­cies and their of­fi­cials, as well as mem­bers of Congress and their staff. The com­mu­ni­ca­tions are an in­te­gral part of the Over­sight Board’s re­spon­si­bil­i­ties, as es­tab­lished in PROMESA, given the im­por­tance of these of­fi­cials and the im­pact of their de­ter­mi­na­tions on all eco­nomic sec­tors of Puerto Rico.” ◽

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