Junta de Control Financiero




An update on the earlier blog post on the cases of Brigade Leveraged Capital Structures Fund, Ltd. v. García Padilla, 16-1610; National Public Finance Guarantee Corporation v. García Padilla, 16-2101 and Trigo v. García Padilla,16-2257, which seek a declaration that the PR Moratorium law is unconstitutional.


The Puerto Rico Government has asked Judge Besosa to stay proceedings due to section 405 of PROMESA which stays on all cases seeking monetary compensation from the ELA.


Judge Besosa, who previously decided the PR Recovery Act was preempted by section 903 of the Bankruptcy Code, ordered plaintiffs to brief the issue no later than July 18 and said he was unable to decide without this briefing. He further decided he was NOT going to grant a stay at this time and denied motions to the effect of staying case until the issue was decided.


In my experience, Judges issue temporary stays when they are convinced it is proper. The denials here show that Judge Besosa is leaning on not granting the stay request since none of these three cases request monetary compensation which is what section 405 of PROMESA precludes. I believe Judge Besosa will decide this and other issues in the cases by August 2016.



As part of PROMESA, a Congressional Task Force on Economic Growth in Puerto

Rico was created by section 409. The eight members are to be selected by both parties. On Friday, July 8, the Senate democrats designated Senator Bob Menéndez of New Jersey and Senator Bill Nelson from Florida. Senator Menéndez was a vocal opponent to PROMESA but Bill Nelson voted yes. The other six members of the Task Force have to be named no later than July 15, 2016, the date Congress is scheduled to adjourn for the summer. See section 409(c).


This Task Force is instructed to no later than September 15, 2016, provide a status report to Congress and no later than December 31, 2016, provide a status update that includes:


(1) impediments in current Federal law and programs to

economic growth in Puerto Rico including equitable access to

Federal health care programs;


(2) recommended changes to Federal law and programs

that, if adopted, would serve to spur sustainable long-term

economic growth, job creation, reduce child poverty, and attract

investment in Puerto Rico;


(3) the economic effect of Administrative Order No. 346

of the Department of Health of the Commonwealth of Puerto

Rico (relating to natural products, natural supplements, and

dietary supplements) or any successor or substantially similar

order, rule, or guidance of the Commonwealth of Puerto Rico;



(4) additional information the Task Force deems appropriate.


After this report is provided, the Task Force will cease operations.



What this means is that the time for this task force to come to PR, conduct hearings with the PR Legislature, the PR Department of Economic Development and Commerce, and the private sector is limited. Hence, it is likely the Task Force will rely on myriad presentations by NGO’s. One of the premier NGO’s in PR is the Center for the New Economy (CNE) an economic policy think tank in PR. One of its members, Sergio Marxuach, has testified before Congress on PR’s economic woes and is an open opponent to the Board, as is the CNE itself. He was purportedly offered a seat but declined. We must, however, examine the CNE’s structure in order to ascertain its intent. Mr. Miguel A. Soto Class, the CNE’s founder and Mr. Marxuach, its best know face, both have worked for PPD administrations and the latter was an assistant to the much maligned Melba Acosta. In addition, Mr. Antonio Luis Ferré Rangel is a member of its Board of Directors, as well as the Chief Operations Officer of the Ferré Rangel Group, the biggest business conglomerate in PR and statehooders’ most fervent enemy.


As with any NGO, the CNE depends on donations. Knowing who its donors are tells you a lot of the policies espoused by the organization.


In 2014, the CNE received a $1.9 million donation for two years from the Open Society Foundations to develop a ‘specific and measurable plan to increase civic capacity, transparency, and access to justice and equity in Puerto Rico’” . See also.

Purportedly based on this, the CNE has produced a paper entitled Devising a Growth Strategy for Puerto Rico in June 2016, which includes numerous policy proposals including the creation of the so-called growth commission that has taken shape in the form of the task force.


Why these developments? What has the $1.9 million donation have to do with anything? The Open Society Foundations was established by George Soros. Who is George Soros you may ask? Putting it simply, Mr. Soros is a currency pirate. In 1992 he took in $1.5 billion in profits by manipulating the English pound. and in 1997, he did the same to the Malaysian currency, see and here.


Mr. Soros is a modern day John D. Rockefeller, who acted as a pirate in business but gave generously to causes he approved of and is a heavy contributor to political campaigns. But what does Mr. Soros have to do with PR? Interesting question. Mr. Soros has been following the situation here and has called for bankruptcy and bailouts for the island.


Moreover, a day after the House approved PROMESA, “Brave New Films, a Culver City, Calif.-based group with ties to billionaire financier George Soros, released two films . . . detailing how Puerto Rico’s debt crisis has affected the island’s health care and education services.”  Soros has even been accused of trying to push PR to purchase a very expensive information system to which he has ties.


Mr. Soros involvement in Puerto Rico has included a little publicized appearance in a Open Society Foundation in February of 2015 in San Juan, where he addressed the crowd of Government officials, union and banking leaders. It was reported that Mr. Soros called PR the Greece of the Caribbean and a U.S. colony. At this presentation he was joined by his buddy, Joseph Stiglitz, a Nobel prize winner in economics who also has extensive ties to CNE. He is a harsh critic of the World Bank and the International Monetary Fund. His relationship with Soros runs deep. They co-narrated a book criticizing the George Bush administration; Dr. Sitiglitz is one of adulators in this Open Society Foundation video and cooperate in other liberal anti-market ideas.


In addition, Dr. Stiglitz is the founder of the Initiative for Policy Dialogue, which is one of the two institutions mentioned by the CNE with which wants to cooperate, see page 11 of Devising Growth Strategy for Puerto Rico, ante. In fact, one of the authors of this paper is José Antonio Ocampo, Professor of Professional Practice in International and Public Affairs at the School of International and Public Affairs of Columbia University and Co-President of the Initiative for Policy Dialogue. Coincidence? I don’t believe in coincidences.


What does all this mean? The CNE, Mr. Soros and Dr. Stiglitz oppose the Board, want a bailout for PR and deep haircuts for bondholders, i.e., bankruptcy. Since they will not be on the Board (or at least I hope so), the next best thing is to have a parallel structure advising Congress, such as the Growth Commission, which can be leveraged to influence the Board, and ensure it enacts policies that favor Soros and Stiglitz. No doubt this is the first of more to come..








Melba Acosta’s Resignation



Today, Governor accepted the resignation of Melba Acosta as President of the Government Development Bank. The resignation will be effective at the end of July. Her letter of resignation mentions the approval of PROMESA as a reason, but it will not start functioning until October at the earliest. And to say that she has accomplished what she came to accomplish is to ignore the realities of our financial crisis. Why then, did she resign with only 5 months left before the end of this administration? Let’s see.


Melba Acosta has shown a personality that needs to exercise control over her environment and refuses to share information with the public or the Legislature. The coming of the Supervisory Board will definitely take away many of her functions but it will not start functioning until October at the earliest. So that cannot be the reason.


Today, ENDI published a note about an investigation by the Securities and Exchange Commission of bond issues by PREPA. The note states that the investigation deals with this administration and that it started in 014. We all know that investigations of this type take time and the U.S. Attorneys Office likes to indict persons in positions of power close to elections. An SEC investigation may bring indictments pursuant to section 17(a) of the Securities Act de 1933 and Rules 10b-5 y 15c-12 of the SEC. In addition to criminal charges, which have to be done through the DOJ, the SEC may file civil suits against PR or the persons involved in violations of said laws and regulations.


And it is not only the SEC that will be involved in an investigation. Senator Orrin Hatch asked the SEC to investigate the PR bond issues and also said the Senate Finance Committee would conduct its own investigation. Does Melba know something we don’t know? ¿Are these investigations the reason for her resignation? Time will tell.