The Office of the Commissioner of Financial Institutions, Puerto Rico’s banking watchdog, was left out of the talks leading to the agreement through which the Treasury Department approved a $229 million tax refund to Doral Financial Corp., the regulator said Tuesday during a House public hearing.
Rafael Blanco, head of the agency known as the OCIF for its initials in Spanish, testified that a few days after learning of the agreement, we “offered our questions and suggestions to both the federal agencies that oversee Puerto Rico banks and Treasury.”
In his testimony during the scrutiny of House Resolution 375 submitted by Rep. José Báez-Rivera, Blanco referred to the agreement signed March 26, 2012, which Treasury subsequently nullified in April after determining that Doral allegedly did not have the legal right to it. That has unleashed a legal fight between the parties, after Doral took the matter to both the local and federal courts.
“It is worrisome that…we were not informed of this agreement, even when ultimately, Doral Bank benefited from the 2012 Closing Agreement,” Blanco said, adding that as soon as he learned of the agreement, he contacted representatives of the Federal Deposit Insurance Co. and the Federal Reserve Bank of New York.
Meanwhile Báez-Rivera, chairman of the House Commission for Public Safety and the Development of Initiatives Against Crime and Corruption — which is investigating the agreement between the government and the banking institution — Báez-Rivera rejected Doral’s claim that the cancellation of the tax return will negatively impact its finances.
“Doral’s financial situation is not due to Treasury’s actions; on Aug. 8, 2012 this corporation publicly said and told federal authorities it was under a supervised agreement with the FDIC looking to recapitalize,” Báez-Rivera said. “The Commission will continue to evaluate the documentation that has reached us related to the agreement we’re investigating. However, it is clear that based on what has been submitted so far, many people have a lot to of explaining to do.
Court orders gov’t to validate annulment
On June 5, Doral Financial Corporation turned to the Superior and Supreme Courts, filing legal action against the Commonwealth, Treasury, and its Secretary Melba Acosta Febo, in her official capacity, seeking a declaratory judgment that the Closing Agreement is valid.
On Monday, the Superior Court determined it lacked jurisdiction to determine whether Doral made the tax payments at issue and whether it is entitled to a refund. However, it gave Treasury five days to notify Doral as to the basis of the annulment of 2012 Closing Agreement.
“We are pleased the Superior Court confirmed that the actions taken by Treasury were within the parameters of the law, and that the court agreed with our assessment that this matter resides with the Treasury Department,” said Acosta.
The Court also determined that the annulment by Treasury of the Closing Agreement is not a final decision, but rather a preliminary adverse determination to trigger a formal adjudicative process, thereby providing Doral its opportunity to challenge the decision through an administrative proceeding before Treasury, which was what the agency requested when it filed its motion to dismiss the case because of lack of jurisdiction.