By Simone Baribeau
Puerto Rico's federal oversight board may be overseeing the commonwealth's finances, but it is doing everything it can to ensure that financial information about the commonwealth remains out of everyone else's sight.
Examples of the attempts of the Financial Oversight and Management Board (FOMB), as the federally appointed board is known, to hide Puerto Rico's financial information are myriad. The group argued that the law overseeing Puerto Rico's restructuring meant that it didn't have to comply with local disclosure requirements, a stance that US District Judge Jay A. Garcia-Gregory smacked down last month.
"Complying with Puerto Rico's disclosure requirements would not impede or frustrate the purpose of [the restructuring law]," Garcia-Gregory ruled. "A citizen's right to access public documents goes hand in hand with [the law's] purpose."
The board has also fought vigorously to avoid handing over drafts of its fiscal plan and the models that underlie them to creditors, arguing that they are protected by deliberative process privilege, which shields policy materials used before decisions are made. While creditors want to see changes to numbers, data, projections and assumptions, the FOMB argued that it shouldn't have to produce those because creditors will "leverage differences between interim drafts...in order to mount a challenge to the fiscal plan." Which, to be fair, is probably exactly what they intend to do. But why shouldn't they? The court is now forcing them to turn over some of the data.
And even in cases where numbers will ultimately come to light, the oversight board has frustrated, or at least not pushed for, disclosure. An English version of the commonwealth's fiscal year 2019 budget is nowhere to be found. Even the link on the island's fiscal authority's website that says that it links to an English version of the budget, only links to an English cover letter, along with the Spanish budget. It strains credulity to believe that no English copy of the budget exists for review by the commonwealth and the FOMB's various advisors.
This is the one issue where creditors and Puerto Rico residents are not at odds - it is in everyone's interest to have additional disclosure. Creditors, of course, are going to try to eke out as much money from Puerto Rico as they can to pay back their debts. And residents have a right to see how their money has been spent and determine whether the oversight board and the government is working in their interests. Locals cannot just blindly trust the government to after decades of mismanagement have left the commonwealth with an unsustainable debt load.
For its part, the oversight board has shown a reluctance to focus on past wrongdoing, choosing instead to accept the situation as it is and move forward with the debt on the books. Board Chairman Jose Carrion has called an audit of the island's debt a waste of time and said that he is not interested in a finger-pointing exercise.
While that's reasonable, Puerto Ricans may actually be interested in some finger pointing of their own. Even if they see it as a way to get rid of some debt, which is highly unlikely, there's real value in holding people accountable for their actions. The unsecured creditors committee is trying to do just that by holding its own independent investigation into financial institutions - an action the oversight board also opposes.
In the end, oversight can't occur effectively if its aim is secrecy, rather than disclosure.
Simone Baribeau covers the territories, hospitals, pensions and industrial development bonds for Debtwire Municipals. She can be reached at Simone.Baribeau@acuris.com.
