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Fiscal board: Agencies taking too long to provide information needed to resolve claims


Jaime El Koury, legal counsel for the Financial Oversight and Management Board

By The Star Staff


The Financial Oversight and Management Board has complained about the lack of transparency of government agencies, saying it is delaying the reconciliation of proofs of claims in the government’s bankruptcy case.


The oversight board warned that it will allow claims to stand against agencies that do not answer requests for information on time.


In a letter to Julian Bayne Hernández, deputy executive director of the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials, oversight board legal counsel Jaime El Koury said he appreciated AAFAF’s ongoing efforts to assist the board in obtaining the data needed to conduct the claims reconciliation process expeditiously but rejected AAFAF’s efforts to change a two-step procedure to hasten the process.


The FOMB reminded the agency of a March 2 letter establishing the procedure.


“As you know, the claims reconciliation process continues to be hampered by significant delays in obtaining access to information. In light of those delays, the March 2 Letter notified AAFAF of two steps the Oversight Board intended to take in order to facilitate and expedite the reconciliation of general unsecured claims,” El Koury said in a letter dated April 22.


First, the oversight board said it would set claims reconciliation thresholds for addressing the remaining claims filed against the commonwealth, the Employees Retirement System, and the Public Buildings Authority as follows: for claims filed in amounts lower than $10,000, the board would allow all such claims as filed, and for claims filed in amounts between $10,000 and $100,000, the board would perform a review to ensure they are not fraudulent.


If the claim is not so determined, the oversight board would allow the claim as filed.


Second, the oversight board would engage with creditors and, where appropriate, allow claims regardless of whether it has received from AAFAF or the commonwealth’s agencies or instrumentalities complete information necessary to fully reconcile the claim.


While the AAFAF proposed changes to the two-step procedure, the board rejected them.


“Unfortunately, your recommendations do not resolve the primary issue raised in the March 2 Letter: the lengthy delays we face in obtaining responses to information requests to the agencies and instrumentalities of the Commonwealth,” the oversight board said.


Requiring the oversight board, as suggested by AAFAF, to obtain certifications of nonpayment, whether from the agency or from the creditor, would only compound the problem by requiring the board to obtain additional documentation prior to allowance, the oversight board said.


“In addition, the cost-benefit analysis you propose ignores the fact that, in order to determine whether a claim is susceptible to or worthy of an objection, AAFAF and the Oversight Board must first obtain information necessary to fully reconcile the claim,” El Koury wrote.


He said the information-gathering process — an iterative process that requires engagement from professionals at A&M, Proskauer, and O’Neill — is the largest driver of professional costs.


While the oversight board says it will continue to seek information from the agencies, if the agencies do not answer, it will allow claims against them to stand.


“To the extent the agency is unable to respond within the timeframe stated in each letter, the Oversight Board may proceed to allow those claims without obtaining additional information from AAFAF or the Commonwealth’s agencies,” El Khoury’s letter said. “Further, the Oversight Board intends to reduce the threshold for high-level review set forth in our March 2 Letter from $100,000 to $75,000.”


The oversight board will continue to object to deficient claims, will validate asserted litigation case numbers to confirm that a given case is valid and has not been dismissed or resolved, and will validate contracts against the online registered contracts.

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