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  • Writer's pictureThe San Juan Daily Star

Dispute arises over testimonies of top fiscal board officials

Financial Oversight and Management Board Chairman David Skeel

By The Star Staff

Puerto Rico Electric Power Authority (PREPA) bondholders opposing the utility’s debt adjustment plan and the Financial Oversight and Management Board are engaged in a dispute over the admissibility of separate testimony from the oversight board’s chairman, David Skeel, and its executive director, Robert Mujica.

The dispute is one of many in hearings to determine whether PREPA’s debt deal should be confirmed. The debt deal proposes to reduce PREPA’s $9 billion bonded debt to about $2.5 billion.

The oversight offered Skeel’s testimony in favor of PREPA’s debt adjustment at confirmation hearings that began this week, but a set of bondholders argued he made remarks that he was not qualified to make.

“The length of the PREPA bondholders’ objections speaks not to an effort to harass, but to the volume of deficiencies with Mr. Skeel’s direct testimony in this hotly contested confirmation proceeding,” the objecting bondholders said. “Mr. Skeel’s over-100-page-long declaration is laden with legal argument, improper opinion testimony, factual statements for which he has no personal knowledge, and statements concerning matters that the Oversight Board has claimed are privileged (blocking any ability by objecting parties to test such assertions).”

U.S. District Judge Laura Taylor Swain’s decision on the objections could affect how further disputes over testimony in the hearing are handled. The oversight board has requested that Swain modify her procedures so that responses to objections aren’t due until before evidence closes.

“The Oversight Board now suggests that the Court modify the process it outlined at the pre-trial conference for handling objections to written direct testimony,” the bondholders said. “The fact that the Oversight Board does not want to spend time defending its voluminous and improper fact witness declarations does not warrant a wholesale abandonment of the procedures that this Court, and not the PREPA Bondholders, proposed.”

The change would allow witness testimony to continue at a more undisturbed pace, rather than potentially requiring lengthy legal argument prior to each witness’s testimony and preserve objecting parties’ ability to lodge timely objections as testimony proceeds, the oversight board argued.

Bondholders said allowing witness testimony that is improper is a problem.

“The oversight board should not be allowed to introduce inappropriate and objectionable testimony into the record wholesale without any impediment whatsoever, subject only to a retroactive ruling on the papers,” bondholders argued. “Critically, it would be a waste of the parties’ already limited trial time to defer decision on objections to direct testimony until the close of evidence, which would require parties to conduct cross-examination on direct testimony that may ultimately be stricken entirely.”

Regarding Mujica’s testimony, opponents of the plan, including certain groups of bondholders, monoline insurers and PREPA’s bond trustee, said Mujica’s declaration was laden with improper testimony, including legal arguments, opinion testimony, and statements for which he has no personal foundation.

“As to the latter, the Oversight Board now claims that Mr. Mujica testified to the matters at issue at his deposition, but a review of the relevant transcripts will show that Mr. Mujica’s testimony does not demonstrate personal knowledge,” the bondholders said. “Just because a witness was questioned on a topic does not mean that he is competent to provide trial testimony on the matter.”

The oversight board pointed out that the objecting bondholders have been in possession of the substantive portions of Mujica’s declaration for three weeks.

“Nevertheless, the objecting bondholders once again waited until the last minute … to send the Oversight Board 44 pages of objections to the declaration of Mr. Mujica,” the board said.

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