A commission reviewing the legality of Puerto Rico’s debt died Wednesday, but may soon live again in another form.

Gov. Ricardo Rosselló signed a measure terminating the Puerto Rico Commission for the Comprehensive Audit of the Public Credit, after the measure was approved by the commonwealth's Senate and House of Representatives.

The governor and legislators from his New Progressive Party said it should be up to the legal system to pass judgment on the validity of various bonds, and that the audit commission’s work was interfering with negotiations seeking to restructure the island's debt.

Demonstrators for the Puerto Rico debt audit commission in front of the island's Capitol building in mid-April
Demonstrators for the Puerto Rico debt audit commission in front of the island's Capitol building in mid-April

Demonstrations outside Puerto Rico’s capitol building on Monday and Tuesday failed to sway senators and representatives inside as they debated and then voted against keeping it.

The commission was set up by the Puerto Rico legislature in July 2015 to look into the circumstances surrounding the issuance of the debt. The commission aimed to identify invalid debt. Some members believed it was opening doors to bondholder claims against those who prepared official statements or others involved with the bond issues.

Since then, the group released two “pre-audits” that raised questions about the legality of much of Puerto Rico’s debt. A few days after its second report, on the Puerto Rico Electric Power Authority’s 2013 bond, the U.S. Securities and Exchange Commission announced it was launching an investigation of that sale.

On Thursday the former commission’s president, Roberto Pagán, told The Bond Buyer that a group had formed to support the effort, and people at the University of Puerto Rico had encouraged him to form a new citizens’ commission to audit the debt.

Pagán said he expected to form the new commission soon, albeit without the government’s financial or other support. The new board will draw on support from Puerto Rico’s people and will use legal precedents to gain access to documents associated with the debt, he said.

The previous commission was moving backward in time with each successive report. Pagán said he was unsure if that practice would continue with the new board.

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