U.S. Rep. accuses Puerto Rico board of ignoring PREPA court ruling

Bloomberg News

U.S. Rep. Scott Fitzgerald, R-Wis., accused the Puerto Rico Oversight Board of ignoring the First Circuit Court of Appeal's rulings on the Puerto Rico Electric Power Authority bondholders' lien on revenues and their claim to 100% of what they are owed.

Fitzgerald as chair of the subcommittee of the Administrative State, Regulatory Reform and Antitrust in the Committee on the Judiciary was looking into the proceedings and made these accusations in a letter sent to Board Chair Arthur González Wednesday.

He asked González to meet with his staff as soon as possible and no later than May 30 to discuss the lack of progress in the PREPA bankruptcy.

"Rather than follow the First Circuit's ruling [on bondholders' lien on revenues], it appears that the board has instead chosen to prolong PREPA's bankruptcy by openly ignoring the court's ruling and continuing its fight to reduce the amount paid to bondholders," Fitzgerald wrote.

The board has spent over $400 million on lawyers and consultants in the bankruptcy, with little to show for the expenditure, Fitzgerald wrote. The board is suggesting the total costs could exceed $1 billion. The representative said this is inconsistent with the Trump administration's efforts to reduce waste, fraud and abuse.

The nearly eight years long bankruptcy "may be causing long-term harm to Puerto Rico," Fitzgerald said. He suggested that failing to reach a deal with the bondholders prevents PREPA from regaining access to the capital markets, which the Puerto Rico Oversight, Management, and Economic Stability Act directed the board to pursue for all of Puerto Rico's government entities.

The board "would rather engage in protracted litigation than make a deal," Fitzgerald said.

The board responded, saying it "welcomes the opportunity to brief" the congressman about PREPA's recovery "and the process to end PREPA's insolvency."

The board said it shares Fitzgerald 's concerns "and agrees that the Title III process must be resolved as soon as possible under fair terms that are in the interest of the people of Puerto Rico and supports Puerto Rico's economic recovery."

Fitzgerald also sent the letter to Treasury Secretary Scott Bessent and U.S. Rep. Jerry Nadler, D-N.Y., the ranking Democrat on the subcommittee.

Neither the Treasury nor representatives of Nadler immediately responded to a request for a comment.