Citizens group: Plan of adjustment will pay illegal debt
By The Star Staff
In anticipation of today’s Title III Bankruptcy Court confirmation hearings, the Citizen Commission for the Comprehensive Audit of Public Credit said the plan of adjustment will pay debt deemed illegal and settle hundreds of debt avoidance actions.
“The legacy of the eighth Debt Adjustment Plan [DAP] proposed by the Financial Oversight and Management Board before [U.S. District Court] Judge [Laura Taylor] Swain is the endorsement of over 21 bond issues challenged for being illegally issued and in violation of our Constitution, which total $13.5 billion or 40 percent of the debt to pay, in addition to the closing of more than 120 claims for the return of illegal commissions against 20 banks for participating in the illegal scheme and the loss of more than $30 billion in savings, if the interest payment is added to the principal, due to the non-cancellation of null debt,” José González Taboada, president of the Citizen Commission for the Comprehensive Audit of Public Credit and a certified public accountant, said at a press conference.
Roberto Pagán, former president of the now defunct Commission for the Comprehensive Audit of Public Credit, created by Law 97 of 2015, pointed out that since 2016, the commission has warned that half of the accumulated debt of Puerto Rico was debt illegally issued in violation of the Constitution and should have been cancelled.
The oversight board in 2019 and other creditors, including vulture funds, recognized that in federal court but in the DAP, they renounce that claim with terrible repercussions for the people, he said.
In a motion filed with Judge Swain in 2019, the oversight board indicated that “all claims based on invalid General Obligation bonds should be rejected because the bonds were issued in violation of the Debt Service Limit and, [ …], to the Balanced Budgets Clause and, therefore, the bonds are void and the holders of said bonds have no remedy against the Commonwealth.”
“However, in this eighth version of the debt adjustment plan, and unlike other previous versions, this plan does not make a distinction between illegal or legal debt and is paying, on average, 70 cents on the dollar of illegal debt, forcing our island to make great sacrifices,” said Eva Prados, the executive director of the Citizen Commission. “Therefore, it is not surprising that the plan has the full support of the main vulture funds, because this agreement is nothing more than the result of the unethical practices and strategies of these speculators who ended up buying the contested debt in the middle of the litigation. and they managed to get the board to desist and make them a better offer.”
If citizens try to demand the return of debt paid illegally, they will not be able to do so under the DAP, González Taboada said.
“Meanwhile, and as we warned during the public hearings in the Legislative Assembly, the confirmation of this debt adjustment plan also implies the waiver of the right of our people to demand the return of billions in illegal commissions against 20 banks, and investment firms that sponsored and incited a fraudulent debt issuance scheme,” he said.
One group member accused the oversight board of lying when it says the DAP reduces debt repayments.
“This debt adjustment plan is not a new beginning for the island, much less a fair restructuring. It continues to impose unsustainable debt payments on the island, as independent Open Spaces studies and international economists such as Joseph Stiglitz have stated,” said Tato Rivera Santana, a planner and member of the Citizen Commission. “These experts have warned that this agreement with the bondholders continues to be an unsustainable commitment and that it leaves us without money to meet the basic needs and essential services of the people, and exposes us to another bankruptcy in the future.”