Fiscal board member agrees with extending disclosure requirements

By John McPhaul

Financial Oversight and Management Board member Arthur González supported on Thursday a legislative proposal in the U.S. Senate and the House of Representatives to extend the disclosure requirements of the Federal Rules of Bankruptcy Procedure to those professionals hired by the oversight board, official committees or debtors in the procedures under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA.)

González, a professor emeritus at New York University School of Law, testified before the Senate Committee on Energy and Natural Resources regarding Senate Bill 375 and its companion measure, House Bill 1192, the Puerto Rico Recovery Disclosure Accuracy Act of 2021.

González drew on his experience with the interpretation and application of United States Bankruptcy Law, and some large and complex bankruptcy cases such as those involving Enron, WorldCom, Chrysler and Sunbeam, which he presided over as chief judge of the United States Bankruptcy Court for the Southern District of New York.

“Extending the disclosure requirements of the Federal Rules of Bankruptcy Procedure to professional individuals seeking compensation under PROMESA will help avoid conflicts of interest and provide greater transparency through increased disclosure,” González said in a written statement.

However, the bill currently requires that each professional’s connections to all creditors be disclosed.

González stated that a technical application of the term “creditor” would make compliance with the law virtually impossible and extraordinarily costly, since more than 165,000 creditors filed claim forms under Title III.

“The burden of meeting such a requirement would likely make it impossible for smaller, understaffed professional firms to undertake such a massive cross-checking effort in order to participate in the PROMESA case,” González said. “The most severe impact would be suffered by the firms located on the island.”

“Limiting cross-checking to creditors with claims greater than a certain amount would greatly reduce the burden and be consistent with established practice in the disclosure process in bankruptcy cases of the size and scope of Title Three cases,” he said.

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