If Puerto Rico Thinks Bankruptcy is a Better Solution, They Have a Rude Awakening Coming!

   Commentary

   Richard Lawless

One should look no further than the Puerto Rico Electric Power Authority’s (PREPA) pending bankruptcy.

All credible financial analysts agree that PREPA only needs slightly more than a 10% reduction in debt service to continue paying its bills and operating as expected.  Over a three-year period, the utility negotiated with their bond holders for a 15% reduction in debt.  This consensual agreement gave the utility almost 50% more than it needed to get back on track. 

If the bankruptcy judges execute the hearings without personal or political bias, PREPA will get only what it needs to operate safely.  That number should reflect about a 10% reduction in debt, far less than was offered to the utility in their consensual negotiations with their bond holders.

For PREPA to receive a more favorable outcome in court they will have to shape an argument based on the following factors:

1.     PREPA has allegedly been over charging its customers every year for high quality crude oil while paying and taking delivery of sludge oil.  The difference in cost is hundreds of millions of dollars each year. That money is unaccounted for.   (Business wire 4-16-16, RICO Lawsuit)

2.     PREPA must pay unusually high accounting fees to KPMG to produce misleading financial statements each year. 

(KPMG lead auditor, Puerto Rico Senate Hearing 6-24-15)

3.     PREPA must pay unusually high bond rating fees each year to secure misleading bond ratings for their new bond offerings.  

(Puerto Rico Monitor 4-5-16, FINRA Settlements, on-going SEC Investigations)

4.     PREPA must pay unusually high sales fees to the major Wall Street Banks for them to knowingly market troubled bonds as safe investments.

(Reuters 6-28-17)

5.     PREPA budgets hundreds of millions of dollars each year for equipment maintenance and the money disappears while the repairs are rarely done. 

(SEC Whistleblower Financial Audit 1-18-16)

6.     The Puerto Rico Fiscal Control Board although mandated through legislation to approve consensual agreements with Puerto Rico’s Creditors, the Board has elected to ignore the legislation costing PREPA many millions in future litigation.

(Puerto Rico Fiscal Control Board 6-27-17)

7.     PREPA has numerous law suits, FBI and SEC investigations going on now, costing PREPA tens of millions in legal and consulting expenses.

(AlixPartners $28 million, etc.…)

8.     PREPA has massive unfunded pension obligations, although the pension contributions are budgeted every year they rarely contribute what was promised.

The PREPA attorneys and accountants will have to shape an argument that if they are to maintain their current level of mismanagement and malfeasance, more money must be taken from the innocent bondholders.

In an honest legal system, PREPA is unlikely to prevail.

Richard Lawless is a former senior banker who has specialized in evaluating and granting debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego and Bachelor’s Degree from Pepperdine University. He sits on several Corporate Boards and actively writes for several finance publications.

Puerto Rico News Digest For July 8, 2016

ICE SEIZES COUNTERFEIT GOODS IN OSJ

From ICE:

"Special agents with U.S. Immigration and Customs Enforcement's (ICE)
Homeland Security Investigations (HSI) seized $6.5 million in counterfeit
merchandise Wednesday in Old San Juan with assistance from U.S. Customs
and Border Protection (CBP) and the U.S. Postal Inspection Service...During
the operation, HSI special agents and partner law enforcement officers target-
ed 14 retailers of counterfeit goods infringing on the trademarks of Gucci, Mi-
chael Kors, Prada, Channel, Ray Ban, Coach, Dolce & Gabbana, Oakley, Nike,
Ray Ban and the National Basketball Association. They also executed five sear-
ch warrants. The total manufacturer's suggested retail value (MSRP) of the sei-
zed goods is approximately $6.5 million. First time offenders of violating intell-
ectual property laws were served with a notification of a violation of law. In the
case of reoffenders, HSI will present their cases for prosecution..."

SCIENTISTS OPPOSE LA PARGUERA BILL

From The San Juan Daily Star:

"Opposition to Senate Bill 1621, which would permit the permanence of summer 

houses illegally constructed on public land on the La Parguera shorefront in Lajas, 

is growing as more than 50 experts in oceanography, ecology, geology, planning 

and other disciplines related to natural and environmental science signed a letter 

directed to Gov. Alejandro García Padilla asking him to veto the bill that was pas-

sed by the Puerto Rico Legislature last week..."

MELBA ACOSTA RESIGNS AS GDB PRESIDENT

From Caribbean Business:

"On Thursday, La Fortaleza announced the resignation of Government Develop-

ment Bank (GDB) President & Chairwoman Melba Acosta, effective July 31. In 

her resignation letter dated July 6, she says it is time to refocus her professional 

career, after 12 years of public service, three of which took place under the Alej-

andro García Padilla administration...With Acosta’s exit, the GDB would have 

four of its seven director posts vacant. Although it didn’t publicly announce it,

La Fortaleza filled on May 17 two vacancies with the appointment of Rafael Vé-

lez Pérez and Carlos Bonilla Agosto..."

PRASA TO START SEEKING EXTERNAL FINANCING

From News Is My Business:

"Puerto Rico Aqueduct and Sewer Authority Executive Director Alberto Lázaro 

confirmed Thursday the agency is waiting for the governor to sign the law that 

will allow it to pursue external financing to begin talking to creditors next month. 

Once the PRASA Revitalization Act is signed, the public corporation will have 

the leverage it needs to approach potential creditors for some $900 million in new 

funding to cover infrastructure improvements, payments due to contractors and 

other expenses, Lázaro said, during the monthly luncheon sponsored by the Ass-

ociated General Contractors..."

Puerto Rico And The State of The U.S. Bond Market

Samuel Rosin


United States held municipal bonds have reached peak investment. Des-
pite record-low yields due to consistently low interest rates, record high
investment led municipal bond funds to accrue $632 billion in assets as
of June 1.

This comes in direct contrast to Puerto Rican municipal bonds. Reduced
to junk status in 2014 by three major credit agencies, the island’s local,
state, and national tax-exempt bonds make up the vast majority of its $70
billion debt.

On May 1, Puerto Rico defaulted on the first major scheduled payment on
its municipal bonds...[CONTINUE READING]

Puerto Rico News Digest For May 24, 2016

VOTE ON CONTROL BOARD TOMORROW

From The San Juan Daily Star:

"The U.S. House of Representatives Natural Resources Committee confir-
med that it will hold a hearing Wednesday to vote on legislation that impo-
ses a fiscal control board on Puerto Rico. In an official statement issued late
last week by the committee chaired by Rep. Rob Bishop (R-Utah), the comm-
ittee established that it would begin the mark-up of the bill on Tuesday at 5
p.m. and the process would extend until Wednesday between 10 a.m. and
12:30 p.m., according to a report by CyberNews..."

'LOS LOBOS' GANGSTERS CAUGHT NEAR MEX BORDER

From Breitbart:

"Two members of a dangerous Puerto Rican gang that operates in a manner
similar to a drug cartel  have been arrested near the Texas border. Federal au-
thorities recently arrested Carlos E.  “El Negro” Carrion Nieves and Orlando
“Elvin” Martinez Nunez near this border city. The two men are named in a six-
count federal indictment out of Puerto Rico, accusing 17 members of the group
with multiple crimes in furtherance of the criminal organization. While federal
authorities do not refer to the Puerto Rican criminal organization as a cartel, a
close look at the indictment reveals that their method of operation is very simi-
lar to those used by drug cartels in Mexico..."

SAN JUAN MAYOR GETS 'F' ON FINANCES

From Caribbean Business:

"Puerto Rico Comptroller Yesmín Valdivieso blasted San Juan Mayor Car-
men Yulín Cruz on Monday, giving a grade of “F” to the mayor’s handling
of the capital city’s finances and refuting the mayor’s claims of having a sur-
plus in the municipal coffers. During an AM news radio interview in Notiuno
630, Valdivieso said that Cruz had earned a failing grade because “she is car-
rying a debt of [around] $888 million as of June 2014.” The comptroller added
that the mayor’s claims of a surplus were “not real because the so-called surplus
is the result of a loan...”

GOVERNOR PITCHES $9.1 BILLION BUDGET

From News Is My Business:

"Puerto Rico Gov. Alejandro García-Padilla on Monday unveiled a proposed
budget for Fiscal 2017 of $9.1 billion, down $700 million from the original
budget that was approved last year and $192 million less than the adjusted cu-
rrent budget. The proposed budget — which must be approved by the Legisla-
ture by June 30, the end of the current fiscal year — is based on an actual pro-
jection of revenues and includes a reduction in the government’s operating ex-
penses of nearly $3 billion, compared with the last spending budget filed by
the previous administration..."

Credit Rating Agencies Throw Our Senior Citizens Under the Bus And Congress Pulls Out All Stops to Protect Their Wall Street Friends!

Commentary

Richard Lawless










Once again we are faced with one inevitable truth.  Our legislators protect Wall
Street, not us.

The municipal bond market is approximately $4.2 trillion dollars. Municipal
bonds are a favorite of retired Americans and Senior Citizens for their double
tax free income.  80% of the bonds issued are either directly held by these folks
or held through a mutual fund.

Senior Citizens rely on this income to supplement their social security and pen-
sions.  The average bond holder has a household income of $30,000 or less.

There is clear and compelling evidence of massive municipal bond fraud on the
part of S&P, Moody’s and Fitch.  The Puerto Rico financial collapse spurred a
number of Senatorial Hearings in Puerto Rico.  In these hearings there was di-
rect sworn testimony from municipal agency executives that the rating agencies
knew they were bankrupt but for the right fee would issue a good credit rating
for their bonds.  Subsequent accounting audits of the bond issues verified that
the entities were technically bankrupt when S&P, Fitch and Moody’s issued good
credit ratings to them.  $56 billion of the $70 billion in bond debt issued, is held
by Americans in the fifty states.

In addition to first hand testimony and audits there is abundant evidence of coll-
usion between the rating agencies.  Much like the results of a DNA test; 10,000,
000 to 1 probabilities, the odds that the three rating agencies got the same things
wrong across so many bond issues, leaves no doubt, there was collusion. Make no
mistake, the evidence is overwhelming and this is a massive criminal enterprise in-
volving hundreds of billions of dollars.

All of our Congressman and Senators have been given the testimony and the audits.
The legislatures are aware of the SEC and FBI investigations and are doing every-
thing they can do to obstruct any progress on that front.  There are even CIA recor-
dings that implicate the Puerto Rico FBI and US Attorney offices in this criminal
enterprise.

While most of our Representatives do nothing, a small but powerful group of Con-
gressman and Senators are aggressively throwing us under the bus to protect their
contributors.

A complete and full report was also sent to the House and Senate Oversight Co-
mmittees. I recommend that all Americans call the numbers below and let them
know, “WE ARE MAD AS HELL AND WILL NOT TAKE IT ANY MORE”.


House Committee on Oversight                           Senate Committee on Oversight
2157 Rayburn House Office Building                   340 Dirksen Street (Senate Offices)
Washington, DC 20515                                        Washington, DC 20510

Phone: (202) 225-5074  Fax: (202) 225-3974        (202) 224-4751



Mr. Lawless has twenty-five years of experience in performing forensic accounting reviews.  Mr. 
Lawless received his Bachelor of Science Degree from Pepperdine University and a Master’s in 
Business Administration with a focus on finance from the University of San Diego.  Richard has
had a long banking career as a commercial lender and has served as a senior and executive ma-
nager for major banking institutions. In these roles Mr. Lawless was responsible for billions of 
dollars in assets.  Mr. Lawless has also served as Chairman and CEO for a number of non-ban-
king companies some of which have been in the energy sector. Mr. Lawless' opinions are exclu-
sively his own and do not necessarily represent those of Th Puerto Rico Monitor, its contributors 
or advertisers.

GDB Rejects Shutdown & Privatization Rumors

Press Release

Government Development Bank

April 1st, 2016


Today, Melba Acosta Febo, President of the Government Development Bank
for Puerto Rico ("GDB" or the “Bank”), issued the following statement in res-
ponse to several rumors recently reported in the media:

“The Government Development Bank became aware of rumors claiming that
a bill will be introduced today to shut down the Bank. This rumor is false – the
GDB will neither shut down nor be privatized.

This irresponsible rumor is damaging to the Bank as an institution, as well as
needlessly harmful to our employees and their families. Bank management has
met with employees and informed them that, due to the fragility of the Bank’s
liquidity, all available options are currently being reviewed. These options will
responsibly address the issues facing the Bank and will not involve the dismi-
ssal of public employees. As we have for weeks, GDB representatives continue
to engage with a considerable group of our creditors about the restructuring of
the GDB’s debt. As we have stated publicly, the Government is also considering
additional measures to address this situation, such as declaring a temporary mo-
ratorium on payments, and amending the GDB charter.

I, and representatives of the Puerto Rico Electric Power Authority (“PREPA”),
were recently in London attending meetings regarding the GDB’s and PREPA’s
soon-to-expire insurance policies. This was a long scheduled trip – though these
policies are active, we are in the process of negotiating their renewal. During the-
se meetings, I provided an overview on the Commonwealth’s finances, covering
the Krueger report, the Fiscal Adjustment Plan, the public offer made to bondhol-
ders and the status of the Commonwealth’s and PREPA’s debtrestructuring nego-
tiation processes.

As I have stated publicly on multiple occasions, including this week, it is impor-
tant that everyone in Puerto Rico understand that the GDB’s fiscal standing, as
well as the Commonwealth’s fiscal standing, is delicate due to the fiscal crisis we
are confronting. For this reason, the GDB’s Board of Directors and management
continue to urgently evaluate all available options to safeguard public finances.
We will continue to move forward on several initiatives simultaneously as no
final decisions have been made at this time.”

Even An Immediate Bailout of Puerto Rico Is Unlikely To Save It!

Commentary

Richard Lawless


For almost a decade it appears that the island of Puerto Rico has been 
issuing municipal bond debt that it knew it could never repay. Municipal 
entities in Puerto Rico like the government owned electric utility have 
been technically bankrupt for many years. This utility and almost every 
other municipal entity on the island have been paying the credit ratings 
agencies and banks tens of millions of dollars a year to secure unjusti-
fied credit ratings The utility by itself spends $40-$60 million dollars 
a year with the ratings agencies and banks to keep the money flowing.

A simple review of the bond offering memorandums, easily available to 
anyone, shows almost all these entities to be in dire financial condition, 
many, if not most, technically bankrupt. Unbelievably, the credit agencies 
were lining up to offer A & BBB ratings for the right fees.  Wall Street’s 
biggest banks did the same thing and then sold these very troubled bonds 
to their unsuspecting investors.

There has been over $5 billion dollars in losses so far to the bond holders 
who bought the utilities bonds, mostly retired Americans of modest means.
No one has been questioned, no one has gone to jail.  

When you look closely at these bond offering memorandums you will not 
only see that the entities never had the money to make the payments on the 
bonds but bond offering after bond offering, the entities claim to be raising 
money for improvements.  The improvements never get done, the money 
disappears and the following year another request for money for the same 
project appears in a new memorandum and once again the money disappears
and on and on.

The bonds rating agencies never mention the improvements never get done 
but the money disappeared. The Agencies claim that the bond payments will
be made in whole or in part from accounts receivable that have not been co-
llected in a decade and in small print say they are unlikely to be collected in 
the future. Again not important I guess.

The Puerto Rico Legislature held committee meetings where executives from 
the utility and the lead auditor from Ernst and Young claim the ratings agencies 
and banks were fully aware the utility was bankrupt when they issued the A & 
BBB ratings.  Umm, everyone wants to seem to ignore this fact.

Everywhere I looked in Puerto Rico I saw the same thing. Junk bonds with a 
very high likelihood of default sold to everyday Americans as low risk retire-
ment income.  While this concerns me greatly, it is not why I am so concerned.  
You see, after I looked at Puerto Rico, I looked at Chicago, Compton, Oakland, 
California and New York.  You guessed it, much of the same. Until these issues 
are addressed, throwing more dollars at Puerto Rico will only postpone the 
inevitable.

When Bernie Madoff started out many people saw the same thing.  Reports 
were made to the SEC and ignored, the FBI and ignored the DOJ and ignored. 
He could have been stopped at $100,000,000 dollars, instead he stole $40 bi-
llion dollars before it all collapsed.  There were whispers and they were igno-
red. I am screaming from the mountain top and I hope you are listening.

Everyone acknowledges that Madoff ran a Ponzi scheme.  The early investors 
were promised things he could not deliver and new investors were sought out 
to pay off the early investors and so on.  Over time its gets bigger and bigger 
and finally the last investors lose everything.

Today there are approximately 60,000 entities that issue municipal bonds. Four 
trillion dollars in bonds are in the market today, owned entirely by Americans, 
mostly retired Americans.  These retired Americans might get $900 a month 
from Social Security, $500 a month from savings and another $600 a month 
from their bonds.  They are barely making it on the $2,000 a month. Take away
the $500 in bonds and they lose their home, can’t pay for medicine or simply 
give up. 

If the municipal market activity was to slow down or temporarily stop, it is 
possible that the American people would see $2-$2.2 trillion dollars in losses. 
 The house of cards built on fraud and deceit would collapse.

How could this happen?  It is easy, in the 2007-2008 CMBS/CDO crash that 
brought America to its knees, 6 million jobs were lost, millions more lost their 
home and trillions in wealth was wiped out.  That too was a Ponzi scheme built 
on false credit ratings. 

One person was charged with a crime, a crime that almost ruined our country.  
If no one is held accountable, why not do it again. So they did!

Our congressmen and Senators go to plush lunches with these folks, they go 
on wonderful fact findings trips to exotic locations, paid for by these folks, 
they get political contributions and for special favors, they get outlandish sp-
eaking fees.  It’s a great deal and they will protect it regardless of how many 
Americans they have to throw under the bus.

Other politicians want to buy votes. It is an election cycle. Have you listened 
to the speeches?  Free community college, no four years of free college, free 
this, free that. Why not?  Just because we have 19 trillion dollars in debt do-
esn’t mean we can’t have 25 trillion in debt. What debt, you guessed it, bond 
debt.  You see when you can’t raise taxes anymore and still keep you job, you 
have to take the money from someone.  Why not issue bonds and default on 
them later!  No one is paying attention, who reads those pesky bond offering
memorandums anyway. If  they are rated AAA or A or BBB, they must be 
good!

Most Americans don’t know that Municipal Bonds are not reviewed or moni-
tored by any agency.  Our tough talking politicians responded to the American 
people by passing a law that requires the agencies issuing these bonds, self-re-
port. I am not kidding, they wrote into law that the issuing agencies, credit a-
gencies and banks will not be monitored unless they write to the SEC and admit 
to doing something wrong themselves.  No really, this is true.  $4 trillion dollars 
and accountable to no one.  Our leaders even passed laws that make it very di-
fficult to sue if  someone like me uncovers it all.  I am sure it had nothing to do 
with those lunches, free vacations, political contributions and paid speeches. 
That would be cynical.

How about the press.  Well you see how they uncovered the CMBS/CDO cri-
sis. No wait a minute, it was American’s like me.  They did report on it when
it could no longer be ignored.  The financial papers get their business from the-
se very same firms, they wine and dine them, vacation with them and count on 
them to advertise in their papers.  When is the last time you can remember that 
the Wall Street Journal, The Financial Times or Bloomberg broke a meaningful 
story? Investigative journalism is dead unless it fits the political bias of a specific 
paper.

This house of cards is starting to collapse.  First Puerto Rico with Chicago next.  
At first the papers will print what their told to, it’s the economy, lack of jobs, the 
weather.  Anything but the truth.  When it becomes more than one or two cities, 
when the numbers are too big to ignore, someone will tell the truth and everyone
will ask how this could have happened?  How could it have gone on for so many 
years?   

Richard Lawless is CEO of Commercial Solar Power in Temecula, CA. The opinions expressed in the 
preceding commentary are solely his own and do not necessarily reflect the views of The Puerto Rico 
Monitor or its advertisers.

The Municipal Bond Market Will Bring America To Its Knees, Once Again

Commentary

Richard Lawless


Back in 2007–2008 it was the Commercial Mortgage Backed Securities
(CMBS) and CDO’s that almost caused America’s financial markets to
fail. It cost six million jobs and millions of Americans lost their homes.
The loss of wealth was huge.

The four trillion-dollar municipal bond market is next. The municipal mar-
ket has been on fire for the last decade. Much like the CMBS and CDO
markets in 2007, the Bankers, the Rating Agencies and the Bond Sales
Organizations have been making outrageous amounts of money. Like a
drug, once Wall Street gets used to those profits, almost anything will be
done to maintain them.

I recently wrote about a utility company that was technically bankrupt but
repeatedly issued billions in bonds that couldn’t be repaid. This company
pays forty to sixty million dollars a year to the Rating Agencies and Banks
to issue these bonds. The agencies and banks wanted that money and were
willing to repeatedly commit fraud to get it.

In this case, the Senate held hearings in which the executives of the utility
made it clear that the Banks and Credit Rating Agencies knew that they
were technically bankrupt and could not repay these bonds. A clear admi-
ssion of guilt. The CPA firm that prepared the utilities financials testified
that the Credit Agencies and Banks were aware of their dire financial posi-
tion but granted false ratings and sold the bonds to their investors anyway.
To clarify this corruption further, an audit was prepared that showed clearly
that the company could never repay these bonds and that information was
clearly available in all the bond offering memorandums. Yes, the memoran-
dums that no one seemed to read.

In the case of this utility company, the bond holders (investors), mostly re-
tired Americans, lost $5 billion dollars, so far. More losses are sure to
follow.

This was all reported to the SEC, FBI and U.S. Attorney. The U.S. Attor-
ney's position is that it is unlikely that any person committed a criminal act.
True, I am not kidding, I actually recorded that call. Is it any wonder why
political outsiders are all the rage this election cycle! Maybe we have had
enough of this.

I was so put off by this whole experience that I started looking into bond
offerings across the country.  Guess what?  No surprise here, this practice
is pretty widespread.  Because of the all the money involved our political
leaders have all turned a blind eye to it.

Based on my preliminary analysis, it appears that we will be looking at the
loss of $2.2 trillion dollars in wealth, mostly held today by retied Americans.

You see, this collapse cannot be avoided.  The municipal market is a giant
Ponzi scheme.  Debt is issued as a municipal bond knowing that the munici-
pal agency can’t repay it.  Over the past decade or more these very same
agencies have been refinancing their debt with great regularity.  Paying off
the unpayable old debt with money from new investors (bond buyers).  Once
the refinancing slows or God forbid stops, the whole house of cards collapses.
Bernie Madoff was just a boy scout compared to these guys.

That day is coming soon.  The fraud is so obvious that it was idiot simple for
an old banker like me to find it.  Greed and a political system that is in large
part financed by these very same companies has put off the day of reckoning
for many years.  These municipalities are in such bad shape that even fraudu-
lent credit ratings will not be enough to draw investors.

Be prepared, the American people are going to take tremendous losses. How
much, it’s hard to be sure.  What I can be sure about is that just like the CMBS
and CDO fraud of 2007-2008, our leaders will not prosecute those responsible
because they are owned by these criminals in our broken political system.


Richard Lawless is CEO of Commercial Solar Power in Temecula, CA. The opinions expressed in the 
preceding commentary are solely his own and do not necessarily reflect the views of The Puerto Rico 
Monitor or its advertisers.

Wall Street May Be Responsible For Puerto Rico’s Downfall

Commentary

Robert Williams


The major Banks and Credit Rating Agencies have been using Puerto
Rico as a private piggy bank for almost a decade.

Wall Street for almost a decade has been providing billions of dollars
in municipal debt to Puerto Rico when it was completely unjustified.
Wall Street provided Puerto Rico Government Agencies new capital
based on income that by any standard should not be included in reve-
nues. The Banks and Credit Rating Agencies knew this but push th-
rough billions in new bonds and short term lines of credit anyway.

I took a look at a number of bond offerings in Puerto Rico. Each issue
was for approximately $650,000,000. In the Offering Memorandums,
Wall Street claimed their uncollectable receivables as income, leaving
the investors with the misleading belief that Puerto Rico could make
the payments on the bonds. They couldn’t. Puerto Rico in all cases
secured more capital from other sources (lines of credit) and made up
the shortfall in revenues up by using the lines of credit.

A Ponzi Scheme is a criminal activity where a group of investors are
brought in and promised attractive returns that never really exist. To
keep the first investors blind to the fact they were misled, the compa-
ny quickly raises more money from new investors to pay the old inves-
tors.  It is a house of cards and it requires continued borrowing to keep
it going.

The question is why would these major banks and the credit rating agen-
cies participate in a Ponzi Scheme?  The answer may be the attractive
fee income they earned.


Mr. Williams is the editorial writer for Commercial Solar Power, an industry leading 
utility scale energy company. His opinions are solely his own and may not reflect those
of The Puerto Rico Monitor.

Video of US Senate Judiciary Committee Hearing on Puerto Rico

Video is from the hearing held on December 1, 2015. Total length is approximately 2 hours and 20 minutes.

Video of US Senate Finance Committee Hearing on Puerto Rico

Video is from the hearing held on September 29, 2015. Total length is approximately
2 hours and 21 minutes. Actual content begins at 23:33.

Puerto Rico News Digest For September 10, 2015

PUERTO RICO BRACES FOR BUDGET CUTS

From AP / WINK News:

Puerto Rico is bracing for widespread spending cuts after the government
released a long-awaited fiscal reform plan on Wednesday that would redu-
ce much of the island’s $72 billion public debt and calls for restructuring
the remainder at the expense of bondholders. The five-year plan proposes
that the government cut subsidies to municipalities and the University of
Puerto Rico, offer early retirement and reorganize or merge state agencies.
It also calls on the government to extend until 2021 legislation that would
freeze new hires, salary increases and collective bargaining agreements.
Gov. Alejandro Garcia Padilla acknowledged in a televised address that
Puerto Ricans already have had to endure new taxes, an increase in utility
bills and layoffs during a nearly decade-long economic stagnation.

FINANCIAL CONTROL BOARD TO BE ESTABLISHED

From Caribbean Business:

A five-member, independent financial control board will be tasked with
ensuring that the recently released Fiscal & Economic Growth Plan (FE
GP), once approved, is followed, and would have the necessary powers
to ensure compliance, particularly if subsequent administrations decide
to do away with the final plan. It would be in place for the five-year pe-
riod of the plan, after which further extending its term would be conside-
red. Moreover, the board would have the authority to approve the plan,
as well as the power to force budgetary cuts, among other corrective ac-
tions, which will be part of draft legislation to be submitted to the Legis-
lature for its establishment. It has yet to be revealed when the Economic
Recovery Working Group will deliver its proposed legislation to Puerto
Rico lawmakers for their necessary approval.

WATER RESERVOIR LEVELS FOR TODAY

Carraizo is on the far left, while La Plata is immediately to its right.
Users served by both reservoirs are currently subject to water ratio-
ning. Some rain has fallen over the area this morning, with more ex-
pected over the next two days, as two low pressure systems pass over
the area.

SCHOOLS MAY RETURN TO NORMAL SCHEDULE

From The San Juan Daily Star:

If the water levels at the Carraízo and La Plata reservoirs continue in-
creasing, the Education Department may change the policy implemen-
ted at the beginning of the school year and return to normal school days
and hours -- offering classes Monday to Friday or extending school hours
 at those public schools where class periods have been reduced due to wa-
ter rationing. In a radio interview Tuesday, Education Secretary Rafael
Román said the rationing plan has cost the agency close to $1 million in
the purchase of water cisterns and water storage containers for the sch-
ool’s cafeterias, among other facilities, in order to supply water at the
affected schools. Román said that toward the end of the week he will be
discussing the state of the reservoirs and the changes made in the ratio-
ning plans.

CRUISE SHIP PASSENGES FLOWN TO PR

From Yahoo! News:

Officials say Carnival Cruise Lines is flying 770 passengers to Puerto
Rico after their ship caught in fire in the U.S. Virgin Islands. The
president of the company that manages the dock where the ship is ber-
thed says six chartered flights were headed Wednesday to Puerto Rico.

Puerto Rico News Digest For July 1, 2015

'IVU' SALES TAX JUMPS TO 11.5% TODAY

The 'Impuesto sobre Ventas y Uso' sales tax, or 'IVU', increased to 11.5% at
midnight today. Long lines could be seen at stores all over the island yester-
day, as consumers rushed to purchase home improvement materials, school
supplies, tires and numerous other goods before the tax increase. Most non-
prepared food items are exempt from the tax, although prepared foods are
not. The tax increase, voted in recently by the legislature after some acrimo-
nious debate, has so far proved to be very unpopular among many sectors of
the population. The tax was passed into law with the aim of increasing reve-
nue for the financially desperate island government.

SPANISH LANGUAGE BILL DEFEATED 

From The San Juan Daily Star:

The legislation that would declare Spanish as the official language and English
the second official language was defeated in the Senate late last week. Senate
Bill 1177 would have required the use of Spanish in all three branches of gov-
ernment in detriment to the 22 percent of island residents whose first language
is English and may encounter roadblocks in their dealings with the government.
An amended version of the bill was passed in a voice vote but the bill was de-
feated after it got a vote of 12-10 with three abstentions, falling short of the 26
votes needed for approval. The legislation seeks to repeal a 1993 law that decla-
red Spanish and English as offi cial languages of the Government of Puerto Ri-
co, returning to the state of the law in 1902. The 1993 law had the effect that the
government can use either of the two languages in offi cial documents and ins-
criptions.

GOVERNMENT UPDATES FINANCIAL, DEFICIT INFO

From Caribbean Business:

The Puerto Rico government filed late Tuesday a supplement to its quarterly
report submitted May 7 that updates the financial condition of the common-
wealth amid recent developments that have affected the government’s overall
fiscal picture. Among the document’s disclosures, the Government Develop-
ment Bank (GDB) states that the most recent projections point to a fiscal year
2015 budget deficit of $705 million to $740 million, after taking into consi-
deration tax refunds paid “in excess of the reserve included in the budget for
fiscal year 2015.” The government bank had previously estimated to close this
fiscal year with a deficit amounting to about $191 million. The projected de-
ficit doesn’t include nearly $291 million in tax refunds that are currently pen-
ding payment. Moreover, the report adds this figure may be “significantly
higher,” if U.S. generally accepted accounting principles (GAAP) were used.

DEM CANDIDATE O'MALLEY CALLS FOR PR HELP

From PJ Media:

Democratic presidential candidate and former Maryland Gov. Martin O’Malley
wants the U.S. to step in and bail out Puerto Rico. ”As a nation we must help our
fellow U.S. citizens not only because it’s the right thing to do, but because our re-
gion’s economic stability depends on it,” O’Malley said in a statement today, ur-
ging President Obama and Congress to act. “Those who attempt to exploit this
situation to gain a financial or political advantage” would find that “Puerto Rico
will be united against you,” the governor warned creditors. “While Governor Gar-
cia Padilla has taken the courageous first steps to steer Puerto Rico through this
crisis, we must act now to avoid Puerto Rico’s economic collapse,” O’Malley said.

Puerto Rico's Population Swap: The Middle Class For Millionaires

Feature

BBC

Franz Strasser

Puerto Rico's struggling economy has led to an exodus of young
people moving to the US mainland - while wealthy Americans are
starting to call San Juan home. As a result, the economy and iden-
tity of both places are changing in surprising ways.

While the US economy is steadily improving, Puerto Rico's unem-
ployment rate has remained at over 13%, twice the US national
average, for the last decade. The island is facing a fiscal  crisis with
$72bn (£47.5bn) in debt.

So the government is looking elsewhere for relief. It has started to
lure America's super wealthy from the US East Coast. Two acts
passed in 2012 guarantee no capital gains taxes and a mere 4% tax
rate on their business to those who make Puerto Rico their primary
residence.

More than 500 eligible individuals have answered the call...
[CONTINUE READING]

Puerto Rico News Digest For April 30, 2015

TAX REFORM FAILS IN HOUSE 

From Caribbean Business:

After a session that ran past 3 a.m. Thursday, the Puerto Rico
House of Representatives voted down the tax reform bill after
failing to secure enough votes from the Popular Democratic Party
(PDP) majority.Along with the New Progressive Party minority
delegation, PDP Reps. Luisa Gándara, Manuel Natal, Carlos Var-
gas, Ángel Matos, Luis Raúl Torres and Luis Vega Ramos all
voted against the measure. The final vote count was 22 in favor
and 28 against.

JUDGE STOPS GAY MARRIAGE RULING

From The San Juan Daily Star:

San Juan Superior Court Judge Ángel Pagán Ocasio paralyzed a ru-
ling on a lawsuit filed by several New Progressive Party (NPP)
lawmakers who are demanding that the governor defend current law
that declares gay marriage illegal. Pagán Ocasio said he wants to
wait for the U.S. Circuit of Appeals in Boston, which paralyzed
another lawsuit seeking to legalize gay marriage in Puerto Rico
pending a U.S. Supreme Court ruling on the matter. The government
decided that it was not going to defend the island’s anti-gay ma-
rriage laws as part of a lawsuit fi led by civil rights activist Ada
Conde and her wife, who were married in the mainland U.S. As
a result, several NPP lawmakers went to court to demand that the
government defend current law.

$1.9M IN COCAINE SEIZED NEAR PR

From Yahoo! News:

Authorities in Puerto Rico have seized nearly 150 pounds (68 kilo-

grams) of cocaine near an uninhabited island just west of the U.S. 

territory. U.S. Customs and Border Protection said in a statement 

Wednesday that the drugs are worth an estimated $1.9 million. 

INVESTORS OFFER PREPA 30-DAY EXTENSION

From Bloomberg:

Investors in the debt of Puerto Rico’s power utility have offered 

a 30-day extension of a creditor agreement that expires Thursday, 

according to a person with knowledge of the situation. Prepa, as 

the Puerto Rico Electric Power Authority is known, has $8.6 billion 

of securities. Under the bondholder offer, the electricity provider 

would give creditors a restructuring plan by June 1, said the person,

who requested anonymity because an agreement hasn’t been reached.

Puerto Rico Gets Downgrade—Is It America's Greece?

Feature

Everett Rosenfeld

CNBC

CNBC

Standard & Poor's downgraded Puerto Rico last week to CCC+, giving
the perennially struggling U.S. territory the same credit rating as Greece.

Puerto Rico has been called "Greece in the Caribbean" or "America's
Greece" in light of its poor credit ratings,  high debt levels and flagging
economy with high unemployment. But the situation is much less dire
for the American territory than it is for Greece, in part because Puerto
Rico's debt levels are a much lower percentage of its GDP, compared
with Europe's "sick man"...[CONTINUE READING]

PR Spoils The Rich As Middle Class Flees

Photo: The Real Deal Guide To Puerto Rico

From The Associated Press:

PALMAS DEL MAR, Puerto Rico (AP) — Bond trader Ben Eiler
swapped life in suburban Georgia for an island in the Caribbean, and
he didn't even have to apply for a visa.

The towering 38-year-old native of Arkansas is one of at least 250
people who've accepted Puerto Rico's invitation to well-heeled U.S.
citizens to move to the island and enjoy life without taxes on capital
gains, an enticing offer for those whose income is derived from
investments.

[...]

This semi-autonomous U.S. territory sets its own tax policy, and its
residents pay no federal tax on income derived locally. Mired in a
recession for almost a decade and with an unemployment rate stuck
above 13 percent, more than double the U.S. rate overall, it decided in
2012 to try to lure wealthy investors who would be likely to buy
expensive real estate, establish...[CONTINUE READING]

Puerto Rico News Digest For December 19, 2014

NEW CUBA RELATIONS COULD BENEFIT PR

Cuban President Raul Castro

From The San Juan Daily Star:

Except for the tourism sector,the resumption of relations
between the United States and Cuba could benefit Puerto Rico
economically.

The Puerto Rico Manufacturers Association (PRMA) said
Washington’s actions should be seen as an opportunity for Puerto
Rico. PRMA President Waleska Rivera said the reopening is
important for economic and humanitarian reasons. She said her
group has studied the topic. “Among our strengths are that we
are bilingual and know the business environment in the United
States,” she said. “We have to strengthen our production capacity
to serve the labor market and our export culture.” During an island
Senate probe of the subject of Cuba in 2007, several economists
said Puerto Rico could benefit from the reopening of Cuba
because it could represent a $600 million market for exports from
Puerto Rico that could go up to $1 billion in 10 years.

PR PAYS FIRST VIDEO GAME TAX CREDITS

From Gameindustry.biz:

This week marked a milestone in the Puerto Rican game development
scene. On Monday, the Puerto Rico Film Commission issued its first
disbursement of production incentives to a game developer.

The first game to receive the incentives is Breach TD, a free-to-
play mix of tower defense, MOBA, and real-time strategy elements
from San Juan-based Space Rhino Games. To date, Breach TD is
also the first project to apply for the incentives, which offer
developers a 40 percent tax credit on salaries and production
costs (but can only be claimed for projects that cost more than
$100,000).

AUTHORITIES SEIZE EXOTIC ANIMALS

From Yahoo News:

Authorities in Puerto Rico have seized some 250 exotic animals
they say were bound to be sold illegally on the island. The
animals seized include a pink tarantula, an albino python,
several red-eye frogs and 242 aquatic turtles.

PR TEAM TO RECOVER BODY OF TOURIST IN USVI

From Fox News Latino:

The Puerto Rico Emergency Management Agency, known as PREMA,
said Thursday that it dispatched a humanitarian mission to St. Thomas
to recover the body of a Canadian tourist who died after falling
into the sea in a rocky area.

Ten divers, a doctor and three specialists in search and recovery
travelled to the U.S. Virgin Island territory to help local  authorities,
PREMA said in a statement.