The U.S. House Judiciary Committee approved legislation authored by Rep. Nydia M. Velázquez (D-NY) aimed at extending to firms working on Puerto Rico’s debt restructuring the same disclosure requirements that apply to companies involved in other bankruptcies.
The bill, H.R. 683, is meant to address instances where companies consulting for Financial Oversight and Management Board for Puerto Rico have simultaneously held bonds issued by Puerto Rico, raising conflict of interest concerns.
“The people of Puerto Rico deserve to have confidence that those consulting for FOMB are not tainted by a financial interest in how Puerto Rico’s debt is resolved,” Velázquez said. “At minimum, the same disclosure requirements that apply to a bankruptcy on the mainland should be enforced in Puerto Rico. That is a matter of simple fairness.”
Velázquez’s bill requires attorneys, accountants, consultants, and other professional persons employed by the Oversight Board in a Title III case to submit verified disclosures of their connections with the debtor, creditors, or persons employed by the Oversight Board, prior to being compensated under PROMESA.
The disclosures must comport to existing bankruptcy rules and include information on the identity of each entity or person with whom such professional person has a connection.
Under the bill, the U.S. Trustee would also review the disclosures submitted and potentially file comments with the Court should the disclosures not be properly submitted, potentially preventing compensation from a firm that is in violation. The new disclosure requirements would apply retroactively to individuals and companies already employed by the Oversight Board.
“Although patterned on Chapter 11 of the Bankruptcy Code, PROMESA did not incorporate all facets of Chapter 11 and other relevant provisions of the Code, including the mandatory disclosure requirements regarding actual or potential conflicts of interest that professional persons seeking to be retained in a bankruptcy case must make to the court prior to their retention,” said House Judiciary Committee Chairman Jerrold Nadler (D-NY).
“This bill would close that loophole and, to quote our colleague from New York, Velázquez, who authored the bill, ‘improve transparency and restore confidence and integrity’ in Puerto Rico’s restructuring process,” Nadler said.
“I thank Velázquez for her leadership in championing this bill and for her relentless dedication to ensuring that the people of Puerto Rico receive the fair, efficient, and transparent restructuring process they deserve,” he added.
Velázquez’s bill, the “Puerto Rico Recovery Accuracy in Disclosures Act,” was approved in Committee by voice vote. It will now need to be considered by the full U.S. House of Representatives.
“If companies are performing work surrounding Puerto Rico’s debt, at the same time they have a financial stake in how that debt is unwound, then there are significant ethical and transparency concerns,” Velázquez noted.
“This bill will bring greater transparency to the process. I want to thank Chairman Nadler and all my colleagues on the House Judiciary Committee for advancing this legislation. I’ll now be working to see it passed by the full House of Representatives,” she said.