A group of Puerto Rico credit unions filed an “adversary proceeding” before Judge Laura Taylor Swain, who presides over Puerto Rico’s Title III bankruptcy proceedings, arguing that at least three public agencies violated their fiduciary duties since 2009 when they promoted an excessive offer and sale of government bonds to the co-ops, generating an undue concentration of risk.
The legal claim, which was filed under Title III of the Puerto Rico Oversight, Management and Economic Stability Act, requests declaratory, injunctive and equity remedies and monetary compensation in accordance with the applicable legal provisions, including those of PROMESA and of the Bankruptcy Code.
The seven credit unions that filed the complaint are: Cooperativa de Ahorro y Crédito Abraham Rosa; Cooperativa de Ahorro y Crédito de Ciales; Cooperativa de Ahorro y Crédito de Juana Díaz; Cooperativa de Ahorro y Crédito de Lares y Región Central; Cooperativa de Ahorro y Crédito de Rincón; Cooperativa de Ahorro y Crédito Vega Alta, and; Cooperativa de Ahorro y Crédito Dr. Manuel Zeno Gandía.
They are part of a “Cooperative Financial System” comprised of 116 co-ops with total assets of $8.6 billion, with 988,086 members and 300,000 non-member depositors, 2,921 employees and more than 120 branches in all municipalities.
Attorney Harry Anduze represents the seven co-ops in the complaint that states that the Commonwealth carried out concerted efforts to unduly obtain resources from the cooperatives to fund the Government Development Bank so that it could finance government operations and instrumentalities through loans that they knew did not have adequate sources of repayment.
“These targeted sales of P.R. bonds to cooperatives were promoted by the GDB, Puerto Rico’s Department of the Treasury, the Commonwealth’s Office of the Commissioner of Financial Institutions and the Commonwealth’s regulatory body for cooperatives, the Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico (COSSEC),” the lawsuit stated.
“The risks caused by the actions and omissions of these entities today hover over the capital and reserves of the Cooperative Financial System of the island,” it further noted.
This lawsuit is a continuation of the claims and work headed by the G25, a group of cooperatives formed in 2015 and which has led efforts before the agencies concerned with Puerto Rico’s bankruptcy, both in the United States and on the island.
Their efforts include policy proposals presented to the Executive and Legislative Branches of Puerto Rico and appearances before the U.S, Treasury, the National Credit Union Association and U.S. Congress.