Letter to Chairman Jose Carrion and the Members of the Financial Oversight and Management Board - Rep. Velazquez and Other Lawmakers Want Puerto Rico Oversight Board to Recover from Banks Fees Earned on Invalid Debt

Letter

Dear Chairman Carrion and Members of the Financial Oversight and Management Board,

We write to inquire about the plans of the Financial Oversight and Management Board (FOMB) to pursue any legal claims against banks, advisors or any other parties to recover fees associated with $6 billion debt issued since 2012. While the FOMB and the Unsecured Creditors Committee (UCC) have filed in federal court that three bond issuances totaling $6 billion should be nullified for being in violation of Puerto Rico's constitutional debt limit , we would like to know if the FOMB will pursue further legal action to recoup associated fees.

As reported, the three unconstitutional bond issuances earned multiple financial institutions hundreds of millions of fees in the process, some even managing to "double-dip on these deals." According to a recent report by the Public Accountability Initiative, underwriting fees and swap termination fees paid out for the three offerings totaled $293,863,051. While the initial step to invalidate a portion of the debt is a positive one, without any legal action against the banks and advisors that counseled the Puerto Rico government to create and market the underlying bonds, we feel Puerto Rico will not be made whole.

Pursuant to PROMESA, Congress made the FOMB the trustee of the Government of Puerto Rico and gave the FOMB, the power to pursue avoidance actions and to bring money back to the Government of Puerto Rico. The FOMB has an affirmative duty to investigate the acts of the debtor and file a statement of any investigation including any fact discovered pertaining to dishonesty, incompetence, misconduct, and mismanagement of the debtor.

Furthermore, Congress gave the FOMB special powers to initiate claims that could return fraudulently transferred assets to Puerto Rico's coffers including taking any action necessary on behalf of the debtor to prosecute the case of the debtor. Considering no other entity may currently initiate such claims, the duty of the FOMB to do so is paramount. As you know, the two-year statute of limitations to pursue recoupment of these fees is quickly closing since the FOMB filed Title III Bankruptcy Protection petition on May 5, 2017. It is imperative to take adequate measures to resolve Puerto Rico's Debt, so the island will once again be able to experience economic and social prosperity after this difficult process is resolved.

Due to the time sensitivity of this matter and the fast-approaching deadline of May 2, 2019, we would greatly appreciate a response to these inquires by April 11th. Thank you.

Sincerely,