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OBoard looks for out-of-court settlements with government vendors

The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico on Friday launched an informal resolution process that does not require onerous litigation to resolve its recent vendor actions, it announced.

The resolution process is designed to resolve the majority, if not all of the vendor claims out of court and without the need for vendors to hire counsel, unless the vendors wish to have a lawyer represent them in the process.

The Special Claims Committee, together with the Official Committee of Unsecured Creditors (UCC,) filed in May claims against some 250 vendors to recover some $4.2 billion in payments made by the Commonwealth of Puerto Rico, the Highway & Transportation Authority, and the Employees Retirement System that were in conflict with Puerto Rico and U.S. bankruptcy law.

The Oversight Board’s Special Claims Committee identified individuals and entities which received payments above $2.5 million without a valid contract or for whom payments didn’t match the respective contract during the four years prior to May 2017, when the Oversight Board initiated the debt adjustment proceeding under the Puerto Rico Oversight, Management and Economic Stability Act.

“It is the responsibility of the Oversight Board to preserve the right to recover money that may not have been paid appropriately before Puerto Rico’s bankruptcy,” said David Skeel, a member of the Oversight Board’s Special Claims Committee.

“We do understand the burden of these actions on vendors who are subject to the complaints, and we have been developing this resolution process to avoid time consuming and costly litigation,” he said.

The resolution process begins with an exchange of information to determine whether the payments to vendors were legitimate and whether the claim should be dismissed.

Vendors should provide their information to DiCicco Gulman and Company, the financial advisory firm to the Special Claims Committee, by no later than July 17, 2019, the Oversight Board said.

Local Puerto Rico counsels Estrella LLC, representing the Special Claims Committee, and Casillas, Santiago, and Torres, representing the UCC, will assist the information gathering and will serve as attorney points of contact for each vendor. If vendors require more time to respond, DGC, Estrella and CST will work with vendors to provide an extension.

Vendors whose matters were not resolved during this first phase’s exchange of information will have the opportunity to settle the matter. In cases where the face value of the potential amount to be recovered is below a certain dollar mount, the Special Claims Committee hopes to settle the claim without an order from the court, if the court grants such settlement authority.

Claims that are not dismissed or settled may enter a mediation process. Only claims that cannot be resolved during the information exchange, settlement, or mediation would proceed to litigation.

“The Special Claims Committee and the UCC will file a motion with the U.S. District Court for the District of Puerto Rico to establish response deadlines that will comfortably allow the informal resolution process to proceed without the pressure of litigation deadlines,” the regulatory body said.

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This story was written by our staff based on a press release.

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