The Puerto Rico Oversight Board's financial disclosures for staff and board members this month fell short of federal requirements, casting a shadow on its efforts to lead the restructuring of the island's debt, according to two attorneys who are following the case.
“The failure to disclose is undermining the legitimacy of the day-to-day operations of the board,” said Carlos Cuevas, a member of the Centro Roundtable group commenting on Puerto Rico and a research associate for The University of Houston School of Law.
On July 13 the board released revised financial disclosure statements from all seven members, indicating their financial status as of Dec. 31. That followed February's posting of statements for their finances as of August. The board also posted statements of first quarter transactions by all board members, including José Ramón González, though his filing was initially mislabeled.
While then-interim executive director Ramón Ruiz posted a disclosure in February, the board didn’t post an updated one in July. Ruiz who left the board staff earlier this year owned at least $265,000 in Puerto Rico bonds and debt, by market value, according to his February release.
Section 109 of the Puerto Rico Oversight, Management, and Economic Stability Act states that the board's members and staff will be subject to federal conflict of interest requirements found in section 208 of title 18 of the United States Code. This section states that government employees who participate in deciding, investigating, or advising on matters that they have a financial interest in will be subject to penalties.
The board hasn’t posted a transaction report for the first quarter from executive director Natalie Jaresko or general counsel Jaime El Koury. Jaresko was hired with an annual salary of $625,000 on March 20. El Koury was hired Feb. 23.
Jaresko’s initial financial statement addressed her finances as of January. El Koury’s information was relevant as of Feb. 28.
Jaresko and El Koury should have provided transaction reports for the first quarter of 2017, as all the board members except Ramón González did, Cuevas said.
In their updated financial statements, Board members José Carríon III provided no figures for income and asset types, while member Carlos García released only minimal figures. Carríon’s and García’s failure to disclose the amounts is contrary to the letter and spirit of the law, Cuevas said.
Section 109 of PROMESA requires that the staff as well as the board members disclose their financial information in conformity with section 102 of the Ethics in Government Act of 1978. These include the disclosure of amounts of income streams and market values of individual assets.
Because the Puerto Rican people didn’t elect the board they should be more transparent than a traditional government, Cuevas said.
If the board “wants full transparency from the government and people of Puerto Rico, they must lead by example,” Cuevas said. “What is good for the goose is good for the gander.”
On July 13 the board released a press statement with some of their members’ updated financial information discussed above. It stated: “The Oversight Board chairman [Carríon] explained that PROMESA has no requirements regarding when disclosures need to be made or how frequently they need to need to be updated. The Oversight Board, however, is committed to annual financial disclosures in addition to quarterly transactional disclosures by all Oversight Board members and designated senior staff.”
“Since day one, when the financial information [of the board was first released in February], I said the disclosures were incomplete,” said attorney John Mudd, who represents a supplier to Puerto Rico in the debt restructuring case. “Many complained but no one took the issue to any ethics board.” Mudd is the creator of the Control Board Watch web site.
Mudd said he thought the board members should include their salary and investment amounts in their postings.
In their July 13 release the board said they had hired Andrea Bonime-Blanc as their ethics advisor. It said she had reviewed and analyzed their second wave of financial disclosures, made in June and July.
The board didn't respond to a request for comment for this story.
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Updated July 19, 2017 at 5:19PM: An earlier version failed to report that Ramon Ruiz has left his position with the board.
Updated July 24, 2017 at 4:34PM: This story has been updated to reflect that José Ramón González filed a disclosure.