A Puerto Rico judge has revived an “audit” of Puerto Rico’s debt.
Judge Lauracelis Roques Arroyo reversed Gov. Ricardo Rosselló’s attempt to dismantle the debt audit commission. Roques Arroyo is a member of the Carolina Region of the Puerto Rico Superior Court.
Through law 97 of 2015 the Puerto Rico legislature and then governor Alejandro García Padilla created the Puerto Rico Commission for the Comprehensive Audit of the Public Credit. The commission aimed to find Puerto Rico debt that was legally invalid.
The commission’s first report in June 2016 reviewed documents connected with the commonwealth’s $3.5 billion general obligation bond and $1.2 billion tax and revenue anticipation note, both sold in 2014. In this report it raised doubts on the legality of much of Puerto Rico’s bond debt.
In late September 2016 the commission questioned the legality of the series 2013A power revenue bond from the Puerto Rico Electric Power Authority. It brought up concerns with the behavior of Morgan Stanley, Ernst &Young, and URS Corp. in the bond sale and the period leading up to it.
In early October, possibly in response to the commission’s work, the U.S. Securities and Exchange Commission started an investigation of PREPA’s 2012 and 2013 bonds.
The judge’s order late last week returned three public interest members to the board, according to attorney Manuel Rodriguez Banchs. The order also said the governor has no authority to intervene with the commission. It said that the dismissal of the public interest members was illegal.
The board has $650,000 in its account right now, said board member Roberto Pagán. This is adequate to do a substantial amount of additional work, he said.
Rosselló is considering how to react to the judge’s order, according to the El Vocero news web site.
In the winter Puerto Rico House President Carlos “Johnny” Méndez Núñez sponsored a bill to shut down the debt audit commission. Méndez Núñez is in the same party as Rosselló. The bill has no co-sponsors and hasn’t advanced, according to Pagán.