Puerto Rico Oversight Board hires outside debt investigator

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The Puerto Rico Oversight Board has hired the firm Kobre & Kim to assist its investigation of Puerto Rico’s debt.

The board’s contract with Kobre & Kim will be posted to the board’s web site in the next few days, a spokesman for the Board said Thursday. The board's plan for a “comprehensive investigation” of the debt was announced Aug. 2.

“The scope of work should include ... a review of the factors contributing to Puerto Rico’s fiscal crisis, including changes in the economy, expansion of spending commitments and entitlement programs, changes in the federal funding it receives, and its reliance on debt to finance a structural budget deficit,” according to the request for proposals.

In addition the board sought, “a review of Puerto Rico’s debt, the general use of proceeds, the relationship between the debt and Puerto Rico’s structural budget deficit, the range of its debt instruments, and how Puerto Rico’s debt practices compare to the debt practices of states and large municipal jurisdictions; and ... a review of Puerto Rico’s debt issuance, disclosure, and selling practices, including its interpretation of Puerto Rico’s constitutional debt limit.”

The findings will be made public, the board said.

The board formed a special committee of board members José Carrión III, Arthur González, Ana Matosantos, and David Skeel Jr., which selected Kobre & Kim.

Kobre & Kim exclusively works on disputes and investigations. Most of its investigators are lawyers and most of its clients are corporations.

The Puerto Rico Oversight, Management, and Economic Stability Act indicated in Title I, section 104(o) that the board “may investigate the disclosure and selling practices in connection with the purchase of bonds” issued by Puerto Rico for or on behalf of retail investors.

The board’s debt investigation may be similar to a probe by a commission initiated by Popular Democratic Party legislators in July 2015. In April 2017 New Progressive Party Gov. Ricardo Rosselló and allies in the legislature ended funding for that commission. Rosselló said it would be up to the legal system to pass judgment on the validity of various bonds.

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