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  #281  
Old 06-23-2019, 10:19 AM
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https://www.alreporter.com/2019/06/1...saster-relief/

Quote:
Faith leaders call for Puerto Rico pension protection, debt and disaster relief
Spoiler:
Archbishop Roberto González, the Secretary General of the Puerto Rico Bible Society Reverend Heriberto Martínez and the island’s Catholic Charities head, Reverend Enrique Camacho, released a statement Friday calling for pension guarantees, debt relief and disaster assistance for the island on Friday.

“This week, as the oversight board met and workers voted on new pension proposals, we appreciate that the oversight board kept the promise to protect the pensions,” the three said in a statement. “We stand with labor leaders in urging the passage of pension plans that protect the vulnerable and protect the pensions of most of our people.”

González, Martínez and Camacho announced their position in a statement at a press conference in the Cathedral of San Juan Bautista. This is one of the oldest cathedrals in the hemisphere.

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The head of the religious development group Jubilee USA, Eric LeCompte, joined the San Juan press conference along with Catholic, United Church of Christ, Lutheran and Disciple religious leaders from the United States.

“For the first time in any debt restructuring for a U.S. city, territory or country, we are seeing pensions being protected,” noted Jubilee USA director and United Nations debt expert, Eric LeCompte. “While we are extremely pleased by the pension proposals, we also must see Puerto Rico’s debt cut by at least 80 percent.”

Puerto Rico is a U.S. territory. They have $72 billion in debt and are struggling to recover from the 2017 Hurricanes Irma and Maria. The major Puerto Rico religious leaders assert their ability to resolve disaster and debt crises are hampered by their relationship with the United States.

“Our ability for resiliency, recovery and resolving our own challenges is tied to our political and colonial status. We call on our people and our officials to begin a new and creative dialogue to resolve our political status,” asserted González, Martínez and Camacho in their statement.

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Since 2015, with the support and advice of the religious Jubilee USA Network, we called on decision makers, our people and the faithful to work toward a Jubilee for Puerto Rico.

“In the face of a debt crisis and a 60 percent child poverty rate, we called for debt relief, stopping austerity policies, protecting public pensions and reducing child poverty on our island,” Gonzalez, Martinez and Camacho wrote. “We’ve been concerned about corruption in our own government. Congress made a promise that in exchange for debt relief and a ‘super bankruptcy process,’ a fiscal oversight board would be imposed on Puerto Rico.”

“After Congress passed emergency debt relief legislation in 2016, we felt debt relief was in sight,” the three wrote. “Early plans created by Puerto Rico’s oversight board saw debt payments cut by 80 percent. Congress passed protections for the pensions and the official audit process. Congress began to move forward measures to reduce child poverty. We hoped that the promises made to our people would be kept.”

“Sadly, in the fall of 2017 when Hurricanes Maria and Irma ravaged our island, our hopes for debt relief and child poverty reduction became additional victims of the hurricanes,” González, Martínez and Camacho continued. “Because of rosy economic growth projections from potential federal aid and construction monies, the oversight board negotiated to pay more debt. While there were some innovations in PREPA and COFINA debt proposals, they fell short in delivering enough debt relief — they fell short in the promise of a Jubilee.”

They said if there is failure to provide the island with enough debt relief, “the cost is paid by our people — especially by our children.”

They stated that Congress has failed to pass all of their recommendations to reduce child poverty, but did acknowledge that President Donald Trump last week signed a bill to deliver more than $50 billion for recovery and called on congress and the White House to continue this effort and deliver the additional $70 billion that’s still needed to recover.

“Because of the work of noted economists and our partners at Jubilee USA, we know we cannot risk an overall debt cut of less than 80 percent,” González, Martínez and Camacho said.

The United States invaded and seized Puerto Rico from Spain in 1898 during the Spanish American War. All Puerto Ricans are U.S. citizens by birth.

The current population of the island is 3,177,000, which is down considerably from 2010, when 3,722,000 still lived on the island. The high unemployment, poverty and crippling debt crisis had already begun an exodus from the island. The hurricanes have hastened that process.


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  #282  
Old 06-24-2019, 08:55 AM
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https://www.fxstreet.com/analysis/if...e-201906202234

Quote:
If You’re Not Watching Puerto Rico, You’re Missing a Glimpse of the Future

Spoiler:
They lie, cheat, and steal? No way!

In 2014, Puerto Rico issued $3.5 billion in bonds backed by the full faith and credit of the Commonwealth. Now the island’s fiscal managers, a group known as the PROMESA board, an entity that Congress created, claims those bonds are worthless.

While investors put down their hard-earned cash to buy the bonds, the board members have claimed in court that, because the debt issuance put the island over its legal debt limit, the debt should be canceled.

Note that the board isn’t asking to reverse the transaction – as in, give investors their money back. They are lobbying to erase the debt so that the Puerto Rican government keeps the funds and the investors get stiffed.

Investors are fighting back, but chances are the oversight board will win.

Detroit did the same thing in 2014, and Chicago looks like it could be next on the hit list.

The oversight board claims that zeroing out these investors while paying others $0.45 to $0.55 on the dollar is the way to bring Puerto Rico back to financial stability.

But debt isn’t their only problem.

They have pension problems that make Illinois look like a good actor.

Puerto Rico owes roughly $45 billion to its pension fund. These are payments due to almost 170,000 retirees that mostly live on the island and count on the cash to live. The government has zero, nada, zip in the pension account.

After running out of money a couple of years ago, Puerto Rico went to a pay-as-you-go system. It ditched all of the pension scheme payment programs for public companies, utilities, the courts, municipal governments, and other covered entities, and came up with a simple percentage of payroll that must be paid in to cover current pensions payments due.

The approach puts nothing away for the future, and therefore doesn’t amass funds that can earn investment returns.

But Puerto Rico can’t even manage to get this right.

The Financial Oversight and Management Board for Puerto Rico, an organization tasked with maintaining funding benefits for all retirees, recently issued a report in which it commented:

It is very troubling that 20 municipalities and seven public corporations are also not remitting individual employee payroll withholdings for that employee’s defined contribution retirement account.

The deadbeats include the city of San Juan, which owes $72 million; the Puerto Rico Aqueducts and Sewer Authority (PRASA), which owes $67 million; and the Puerto Rico Ports Authority, which owes $31 million. All in all, the debtors owe the Commonwealth government pension program more than $300 million.

The program that the Puerto Rican government ran into the ground by stealing the money and using it for other purposes is now even further behind as participants refuse to pay.

The report goes on:

Continued payment of retirement benefits without reimbursement from these employees is an unauthorized expenditure under the certified budget and every effort must be taken to collect these delinquent debts or offset these incremental unbudgeted expenses within other areas of the budget.

Wow. So, it’s a problem when entities won’t pay the government, but when the government doesn’t make good, it can simply walk away?

The point of the story is straightforward. There is a bag. The bag was created by profligate politicians who over-promised and over-spent for years, leaving pensions woefully underfunded and city and state governments teetering on the brink of bankruptcy. They will not be held accountable. They went on to lucrative lobbying jobs.

The bag will not be held by the government because it is nothing but a pass-through funded by taxes. It will not be held by pensioners who hold sway over politicians at the ballot box through unions.

The bag will be handed to investors who purchased bonds that will be declared worthless and taxpayers who will be required to fund huge deficits.

I’ve covered the list of problem children many times, and will keep pointing them out. From Chicago and the state of Illinois to Stamford and the state of Connecticut, there are many cities and states that will use the everything-is-fine-until-it-isn’t routine to steal money from investors and then extort money from taxpayers.

Sell their bonds, move away from their jurisdictions.

Don’t be left holding the bag.


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  #283  
Old 06-24-2019, 05:40 PM
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https://twitter.com/cate_long/status...65995856982017

Quote:
Assured files joinder to Ambac motion for 2004 discovery of pension liabilities. Will be heard July 24 (Get your popcorn pension nerds @JanetheActuary @meepbobeep @Public_Pension @biggsag) https://drive.google.com/file/d/1w2g...ew?usp=sharing … #muniland $AGO
https://drive.google.com/file/d/1w2g...Y08B2WBHx/view

Quote:
1. Given that Assured has billions of dollars of exposure to bonds issued by
Puerto Rico entities, Assured, like Ambac Assurance Corporation, has a substantial interest in
receiving any information that may be produced, and in participating in any depositions that may
be taken, concerning the Rule 2004 Motions.

2. Through this joinder, Assured seeks to join in the relief requested in the
2004 Motions for the purposes of receiving any documents obtained by, and participating in any
depositions taken in connection with, the 2004 Motions. Assured, therefore, respectfully requests
that any order entered by the Court pursuant to the 2004 Motions expressly provides that Assured
shall receive all documents obtained by, and participate in all depositions taken in connection with,
the 2004 Motions.

3. Nothing herein shall prejudice Assured’s right to independently seek Rule
2004 discovery from the Commonwealth of Puerto Rico, the Puerto Rico Fiscal Agency and
Financial Advisory Authority, the Financial Oversight and Management Board for Puerto Rico, or
any other party.
https://www.thebalance.com/what-is-a...4-exam-4022897

https://www.nolo.com/legal-encyclope...ankruptcy.html
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  #284  
Old 06-29-2019, 10:48 PM
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https://www.reuters.com/article/us-u...ILdSTv5Y6JsjkE

Quote:
U.S. judge limits bondholders' claim on Puerto Rico pension system assets

Spoiler:
(Reuters) - A U.S. District Court judge on Thursday ruled that bondholders’ claim on the assets of Puerto Rico’s public employee pension system ended when the system filed for bankruptcy in May 2017.

The ruling is a setback for owners of nearly $3 billion of bonds sold by the system after a U.S. Appeals Court in January determined they had a legally enforceable claim as of December 2015 on assets pledged by the pension fund to pay off the debt.

But Judge Laura Taylor Swain decided the claim on employer contributions to the Employees Retirement System did not extend into bankruptcy.

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The judge is hearing cases involving the U.S. Commonwealth’s attempt to restructure about $120 billion of debt and pension obligations.

After completing restructurings for Puerto Rico’s sales tax-backed debt and its Government Development Bank, the island’s federally created financial oversight board is addressing core government debt. The board recently announced an agreement with a court-appointed committee representing more than 167,000 retirees that includes reductions in certain pension payments.

Robert Gordon, a partner at Jenner & Block and the retiree committee’s lead counsel, called Swain’s latest ruling “very important and appropriate.”

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“In combination with the plan support agreement recently reached by the Official Retiree Committee with the oversight board and other plan support agreements recently made, it appears that momentum is developing toward a plan of adjustment for Puerto Rico,” he said in a statement.

The board has said a plan was coming soon even though Puerto Rico’s government opposes pension cuts it includes and only a small percentage of bondholders have agreed to a restructuring of general obligation and Public Buildings Authority debt.

Prior to its bankruptcy filing, Puerto Rico’s pension system liquidated almost all of its cash assets and the government moved to a pay-as-you-go system in which pension benefits are paid out of the island’s general fund.


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  #285  
Old 06-30-2019, 07:50 PM
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https://fixedincome.fidelity.com/ftg...d64c0000_110.1

Quote:
Judge rules against Puerto Rico ERS bondholders

Spoiler:
Puerto Rico bankruptcy Judge Laura Taylor Swain has ruled that holders of Employees Retirement System bonds are not entitled to continued payment in bankruptcy, saying among other things that the bonds’ revenues weren’t protected “special revenues.”

Swain issued her ruling in an adversary proceeding on Thursday. It affects $3.2 billion of ERS bonds in default since July 2017.


The Puerto Rico Oversight Board, as a representative of ERS, was the plaintiff and about 30 investment funds holding the ERS bonds were the defendants.

The plaintiff had asked Swain to find that Bankruptcy Code 552(a) had prevented the bondholders’ claim to ERS revenue during the post-bankruptcy petition period, since July 2017. The bondholders had argued that Swain should say their liens were still valid on ERS property collected since July 2017 and that the bondholders’ claims were “special revenues,” not subject to diversion in a bankruptcy.

With regards to special revenues, the bondholders claimed that section 928 of the Bankruptcy Code, which defines special revenues, and which preempts the part of the code that allows for the diversion of pledged revenue, is relevant to their bonds’ revenue.

Swain rejected the bondholders' argument, saying that one of the code’s definitions of special revenue describes them as associated with transportation or utility entities and the ERS was not one of these.

Another of the code’s definitions said the special revenues must be from a “particular function of the debtor.” Swain said the employer contributions to ERS “are a means of collection and delivery of deferred compensation to commonwealth employees, and ERS therefore functions as a conduit for distribution of employers’ contributions rather than as a provider of a ‘particular function’ or service that itself produces revenue.”

Commenting on the decision, municipal bankruptcy expert James Spiotto said that Swain had taken a very narrow view of the functions of the ERS.

Spiotto noted that the ERS holders earlier successfully challenged Swain’s rulings in the Court of Appeals for the First Circuit. He said he expected they would challenge this decision in that court.

The bondholders say that Bankruptcy Code 552(b)(1) provides an exception to Bankruptcy Code 552(a)’s statement that the debtor’s property wasn’t subject to pre-bankruptcy liens.

Swain said 552(b)(1) is relevant only to property the debtor gained before the bankruptcy. Since the employer contributions are calculated each year and change according to various conditions, they are property received after the bankruptcy, she argued. Therefore, they are liable to being impaired as part of 552(a).

Spiotto, managing director at Chapman Strategic Advisors, said he found Swain’s reasoning somewhat narrow.

Spiotto said there haven’t been legal cases that can serve as precedent for cases of municipal pension systems that owe bond payments in bankruptcy. Past cases of pension obligation bonds have involved bonds issued by the central government and not retirement systems. There are “unique” and “esoteric” issues in this case that may be appealed, he said.

Finally, Swain rejected the bondholders’ appeal to the U.S. Constitution as preventing the bondholders’ liens. The bondholders said the takings clause of the Fifth Amendment prevented ending the liens without just compensation.

Swain said that the U.S. Congress clearly created the Puerto Rico Oversight, Management, and Economic Stability Act to end liens like those the bondholders claim related to the ERS bonds. She said she couldn’t go against Congress’ will in PROMESA.

In August 2018 Swain ruled that the ERS bondholders didn’t have a perfected security lien on ERS property. The bondholders appealed this decision to the First Circuit and in January that court rejected it, saying that the lien had been perfected. The higher court sent the issue of what to do with ERS bonds back to Swain, who operates in the U.S. District Court for Puerto Rico.


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  #286  
Old 06-30-2019, 07:51 PM
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https://fixedincome.fidelity.com/ftg...SPR_____BW5565

Quote:
The Far-Reaching Effects if Puerto Rico Snubs Precedent and the Rule of Law

Spoiler:
by Dominic Frederico, CEO, Assured Guaranty (AGO)

HAMILTON, Bermuda--(BUSINESS WIRE)-- The current Financial Oversight and Management Board for Puerto Rico (Oversight Board) is attempting to invalidate more than $6 billion of general obligation bonds and to initiate clawbacks of principal and interest payments to bondholders. It claims that the bonds were issued in excess of a Puerto Rico constitutional debt limit, notwithstanding the Commonwealth’s specific representations to the contrary when the bonds were issued. In taking these actions, the Oversight Board ignores U.S. Supreme Court precedent, dating back to the 19th century, that if an issuer specifically represents the validity of its bonds to investors at the time of issuance, it is barred from later denying repayment based on a claim of invalidity. The actions also violate the basic tenets of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which the U.S. Congress enacted in June 2016 to provide a formal process for Puerto Rico’s debt restructuring, restoration of its capital market access and to provide supervision of its financial management by the Oversight Board.

Dubious legal assertions aside, how does trying to repudiate previous debt issued and approved by the duly authorized Puerto Rico government help to restore its capital markets access? This illustrates how far the current Oversight Board has strayed from the purpose of PROMESA.

The Oversight Board has initiated multiple lawsuits not just against bondholders to invalidate liens, but also against hundreds of vendors and contractors who worked for the Puerto Rico Government, in an attempt to claw back billions in payments. In fact, it has allocated $1.5 billion of Puerto Rico taxpayers’ money towards litigation and consultant fees.

Rather than continue to deny valid legal obligations, invalidate lawful liens, and ignore decades of municipal finance custom and practice, the Oversight Board should join with other parties to work in good faith to end costly adversarial legal proceedings. If Puerto Rico does not emerge from Title III bankruptcy proceeding soon and instead remains mired in decades of litigation, it will hurt Puerto Rico’s economy and its residents. This will also raise borrowing costs for local and state governments across the U.S. as concern about contagion from Puerto Rico’s unresolved debt crisis spreads.

On February 15, 2019, the U.S. Court of Appeals for the First Circuit held that PROMESA’s procedure for appointing Oversight Board members is unconstitutional. The appeals court allowed 90 days for President Trump and the Senate to appoint and confirm a new board or reappoint some or all of the current board, later extending the deadline to July 15. The U.S. Supreme Court has agreed to hear arguments as to the constitutionality of the Oversight Board appointments later this year.

This First Circuit decision creates an opportunity for a newly reappointed board to fulfill PROMESA’s stated goals for Puerto Rico: achieving fiscal responsibility and regaining access to the capital markets. By improving transparency and fiscal governance, and by promoting consensual agreements between creditors and the government, the Oversight Board can create the conditions for swiftly resolving the debt restructuring process, achieving long-term economic growth and restoring the capital markets access that is critical for a vibrant economic future for Puerto Rico and the modernization of its infrastructure.

Restoring the Commonwealth’s credit access through adherence to the rule of law is essential for ensuring that municipal bond investors, U.S. municipal officials, U.S. taxpayers – and all Americans who benefit from lower-cost financing for the construction of utilities, hospitals, bridges, schools and other public works – have confidence that even in tough situations, the laws governing the municipal bond markets function as they should.


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  #287  
Old 06-30-2019, 08:41 PM
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https://www.pionline.com/courts/supr...o-pension-case
Quote:
Supreme Court requests advice on Puerto Rico pension case
High court also rejects taking on 2 shareholder suits

Spoiler:
The Supreme Court is asking for the opinion of the U.S. solicitor general on whether it should consider a petition from the Roman Catholic Archdiocese of San Juan, Puerto Rico, to decide if courts can override a religious organization's legal structure and force affiliates to face joint and several pension liability as a single entity.

The archdiocese filed for bankruptcy protection in August after receiving a $4.7 million judgment in a case brought by pension plan participants against the Superintendence of Catholic Schools of the Archdioceses of San Juan.

After the Puerto Rico Supreme Court authorized immediate seizure of church assets, the archdiocese tried but failed to seek bankruptcy protection.

Several groups of past and current participants in the Catholic teachers' pension plan sued the archdiocese in 2016. In addition to the lawsuit here that was filed in Puerto Rico court, the participants have sued the archdiocese in U.S. District Court in San Juan for terminating the plan and then claiming exemption from ERISA as a church plan.

Asking for the solicitor general's opinion is often considered a strong indicator that the court will accept the case when it reconvenes in the fall.

In other orders issued Monday, the Supreme Court declined to take two cases brought by pension fund shareholders.

Toshiba Corp. vs. Automotive Industries Pension Trust Fund involved purchasers of Toshiba Corp. American depository receipts that were not sponsored by the company but issued by financial institutions and can trade on exchanges

The company sought to revisit a decision by the 9th U.S. Circuit Court of Appeals in San Francisco allowing plaintiffs led by the $1.2 billion Automotive Industries Pension Trust Fund and the $2.9 billion New England Teamsters & Trucking Industry Pension Fund to pursue the case against a foreign company. A 2010 Supreme Court decision limits lawsuits against companies involving foreign-bought securities in U.S. courts.

"On its face this is good news for investors but, as always, it is challenging to interpret the full significance of a cert denial," said Daniel S. Sommers, partner with the Cohen Milstein Sellers & Toll PLLC law firm in Washington, in an email.

The Supreme Court also denied a petition to revisit the issue of when stock loss causation lawsuits can be brought. Petitioner First Solar Inc., a large producer of solar panels whose stock is traded on the Nasdaq exchange, was sued by investors led by the £12 billion ($15.23 billion) Mineworkers' Pension Scheme and £9.1 billion British Coal Staff Superannuation Scheme. The investors' lawsuit was upheld by lower courts, which said the schemes had made the necessary factual showing to pursue a trial.


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  #288  
Old 06-30-2019, 09:02 PM
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https://born2invest.com/articles/pay...n-puerto-rico/
Quote:
Why you should be paying attention to Puerto Rico
In 2014, Puerto Rico issued $3.5 billion in bonds backed by the full faith and credit of the Commonwealth.


Spoiler:
Now, Puerto Rico’s fiscal managers, a group known as the PROMESA board, an entity that Congress created, claims those bonds are worthless.

While investors put down their hard-earned cash to buy the bonds, the board members have claimed in court that, because the debt issuance put the island over its legal debt limit, the debt should be canceled.

Note that the board isn’t asking to reverse the transaction—as in, give investors their money back. They are lobbying to erase the debt so that the Puerto Rican government keeps the funds and the investors get stiffed.

Investors are fighting back, but chances are the oversight board will win.

Detroit did the same thing in 2014, and Chicago looks like it could be next on the hit list.

The oversight board claims that zeroing out these investors while paying others $0.45 to $0.55 on the dollar is the way to bring Puerto Rico back to financial stability.

But debt isn’t their only problem.

They have pension problems that make Illinois look like a good actor.

Puerto Rico owes roughly $45 billion to its pension fund. These are payments due to almost 170,000 retirees that mostly live on the island and count on the cash to live. The government has zero, nada, zip in the pension account.

After running out of money a couple of years ago, Puerto Rico went to a pay-as-you-go system. It ditched all of the pension scheme payment programs for public companies, utilities, the courts, municipal governments, and other covered entities, and came up with a simple percentage of payroll that must be paid in to cover current pensions payments due.

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The approach puts nothing away for the future and therefore, doesn’t amass funds that can earn investment returns.

But Puerto Rico can’t even manage to get this right.

The Financial Oversight and Management Board for Puerto Rico, an organization tasked with maintaining funding benefits for all retirees, recently issued a report in which it commented:

“It is very troubling that 20 municipalities and seven public corporations are also not remitting individual employee payroll withholdings for that employee’s defined contribution retirement account.”

The deadbeats include the city of San Juan, which owes $72 million; the Puerto Rico Aqueducts and Sewer Authority (PRASA), which owes $67 million; and the Puerto Rico Ports Authority, which owes $31 million. All in all, the debtors owe the Commonwealth government pension program more than $300 million.

The program that the Puerto Rican government ran into the ground by stealing the money and using it for other purposes is now even further behind as participants refuse to pay.

The report goes on, “Continued payment of retirement benefits without reimbursement from these employees is an unauthorized expenditure under the certified budget and every effort must be taken to collect these delinquent debts or offset these incremental unbudgeted expenses within other areas of the budget.”

Wow. So, it’s a problem when entities won’t pay the government, but when the government doesn’t make good, it can simply walk away?

The point of the story is straightforward. There is a bag. The bag was created by profligate politicians who over-promised and over-spent for years, leaving pensions woefully underfunded and city and state governments teetering on the brink of bankruptcy. They will not be held accountable. They went on to lucrative lobbying jobs.

The bag will not be held by the government because it is nothing but a pass-through funded by taxes. It will not be held by pensioners who hold sway over politicians at the ballot box through unions.

The bag will be handed to investors who purchased bonds that will be declared worthless and taxpayers who will be required to fund huge deficits.

I’ve covered the list of problem children many times and will keep pointing them out. From Chicago and the state of Illinois to Stamford and the state of Connecticut, there are many cities and states that will use the everything-is-fine-until-it-isn’t routine to steal money from investors and then extort money from taxpayers.

Sell their bonds, move away from their jurisdictions.

Don’t be left holding the bag.


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  #289  
Old 07-11-2019, 09:44 PM
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https://www.reuters.com/article/us-u...KCN1TY2ZI?il=0

Quote:
Puerto Rico oversight board sues governor over pension law

Spoiler:
SAN JUAN (Reuters) - Puerto Rico’s federally created financial oversight board sued the bankrupt U.S. commonwealth’s governor and fiscal agency on Wednesday over a new law that transfers municipal pension and health insurance costs to the government.

FILE PHOTO: Puerto Rico Governor Ricardo Rossello speaks during an interview in New York City, U.S., November 2, 2017. REUTERS/Brendan McDermid/File Photo
The litigation marked the latest skirmish in an ongoing battle between the board and the government over spending priorities.

The board said it is seeking to invalidate the measure known as Law 29 because it does not comply with its certified fiscal plan that calls for municipalities to continue to cover those costs. It said this violates the 2016 federal PROMESA Act, which established the board and a debt restructuring process for Puerto Rico.

“Law 29 will undermine the government’s ability to pay pensions to all retirees whenever Puerto Rico’s government faces fiscal distress,” said Oversight Board Chairman José Carrión in a statement.

“Exempting municipalities and putting that burden on the commonwealth sets a terrible precedent that other employers may try to use in the future,” he added.

The lawsuit was filed in federal court in Puerto Rico as part of the island’s ongoing bankruptcy case to restructure about $120 billion of debt and pension obligations.

Law 29, which was enacted in May by Governor Ricardo Rossello, will add $311 million in additional government spending in fiscal 2020 and $1.7 billion through fiscal 2024, according to the lawsuit.

Christian Sobrino Vega, Puerto Rico’s chief financial officer, said the government’s legal team will review the lawsuit.

“The actions of the Government of Puerto Rico during this administration seek fiscal responsibility while also procuring the necessary resources for providing essential services to the citizenry. This includes and requires safeguarding the operation and finances of the municipalities,” he said in a statement.

Puerto Rico lawmakers passed a fiscal 2020 budget that includes funding for local pensions and health insurance costs to aid cash-strapped municipalities despite warnings from the board that Law 29 is inconsistent with the fiscal plan. On Monday, the board imposed its own budget on the government that does not include those costs.

After running out of pension assets, Puerto Rico’s government turned to a “pay-as-you-go” system in which all public pension costs are paid through its general fund annually. The central government then gets reimbursed by public corporations, agencies and municipalities for payments made on behalf their employees.

Last year, Rossello sued the board over its imposed budget, arguing the panel exceeded its powers. Judge Laura Taylor Swain, who is hearing the island’s bankruptcy, ruled in August that the board has broad and exclusive authority over Puerto Rico’s budget under the PROMESA Act, although it cannot demand changes in law.


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Old 07-11-2019, 10:29 PM
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Mary Pat Campbell
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probably not -directly- related to PR financial trouble, but...

https://www.governing.com/topics/pol...pvU7pUN3Il_R9g
Quote:
In Bankrupt Puerto Rico, Ex-Officials Arrested for Corruption

Spoiler:
Two former Puerto Rico officials, alonsg with the head of an accounting firm and three others, were indicted over allegations of theft, money laundering and wire fraud, escalating federal investigations that have been swirling around the bankrupt U.S. territory.

Julia Keleher, who served as the commonwealth's secretary of education from January 2017 until April, and Angela Avila-Marrero, the head of the commonwealth's health insurance administration until last month, were among those charged, the U.S. Justice Department said Wednesday. Fernando Scherrer-Caillet, managing partner of the BDO Puerto Rico accounting firm, and two others were also indicted.

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The "defendants engaged in a public corruption conspiracy and benefited at the expense of the Puerto Rican public and students," said Neil E. Sanchez, special agent in charge of the U.S. Department of Education's Office of Inspector General's Southern Regional Office, at a news conference in San Juan on Wednesday morning.

The steps stem from ongoing investigations of the island's departments of education and health and add to the turmoil gripping Gov. Ricardo Rossello's administration just as it faces a pivotal stage in the government's more than two-year long bankruptcy. Last month, Rossello fired his treasury secretary, Raul Maldonado, after the official disclosed that his department was being investigated for potential corruption.

Rossello is already battling with the island's federal oversight board over Puerto Rico's annual budget and is in the middle of negotiating with bondholders over a plan to cut nearly $18 billion of the central government's debt.

"You clearly have less confidence in the governor or the people in there," said Daniel Solender, who helps manage $24 billion of state and local debt, including Puerto Rico securities, as head of municipal investments at Lord Abbett & Co. "There's clearly some issues in oversight."

Keleher allegedly pressured her department to execute a contract to a company, Colon & Ponce, which the former education secretary had a close relationship with. The firm was awarded a $43,500 contract that increased to $95,000, even though it was unqualified under the terms of the request for proposals, according to the Justice Department.

Avila-Marrero is accused of steering contracts totaling $2.5 million to BDO and providing internal information to the company. BDO then subcontracted the work and paid unauthorized commissions, which inflated the cost of the contracts, according to the Justice Department.

A spokesperson for BDO at an outside public relations firm didn't immediately respond to a request for comment.

In a statement Wednesday, Rossello said his administration "will not tolerate corruption and anyone who fails that trust must pay with the full weight of law" before going on to call "for collaboration with the agencies of law and order."

Currently abroad on a family vacation, Rossello said he was returning to the island immediately "recognizing the importance and significance of the arrests that have taken place today, as well as their impact on the government."


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