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house Bill H.R. 1192

Increasing Transparency in Cases Restructuring Puerto Rico’s Debt to Prevent Conflicts of Interest

Argument in favor

Disclosing and preventing conflicts of interest in bankruptcy proceedings is an accepted protection in bankruptcy proceedings on the U.S. mainland. The same standards should apply in the Puerto Rico government’s debt resolution proceedings.

jimK's Opinion
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02/23/2021
From what is presented here, this seems like a rational solution to a concerning problem. Transparency works as part of our bankruptcy process so why wouldn’t it apply as well to Puerto Rico - for the very same reasons it is done in DC or any of the states?
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burrkitty's Opinion
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02/24/2021
Close loopholes. Transparency good! Do it.
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Brian's Opinion
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02/23/2021
Corruption and financial mismanagement has plagued Puerto Rico for years, and since they cannot seek the same aid as US states, they need to have measures in place to increase transparency and help aid good government efforts. I support this bill, and I still support giving the people of Puerto Rico the opportunity to vote for statehood.
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Argument opposed

As currently written, this legislation’s disclosure requirements are too broad and would apply to too many people. The volume of disclosures that this legislation would require would be overwhelming; therefore, the disclosure requirements in this legislation should be refined before it is implemented.

Carina's Opinion
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02/23/2021
No, this should not be implemented. Puerto Rico is not a state and the United States is steeped in deep, deep debt. Like states within the United States must balance their own budgets and not overspend, it is important Puerto Rico and other countries whether territories of the US or not be responsible for their country and their budgets. The United States was in trillions of dollars of debt before Covid and now our country is in several trillions of dollars in debt more. It is poor budgeting and a poor decision to bail out Puerto Rico. I don’t believe any other country is helping the United States financially.
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Nick-Papagiorgio's Opinion
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02/23/2021
If this is even coming to a vote and it means all of the dirty dealing has already been done.
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Joshua's Opinion
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02/25/2021
Independence for Puerto Rico and cancel its debt!
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What is House Bill H.R. 1192?

This bill — the Puerto Rico Recovery Accuracy in Disclosures Act (PRRADA) of 2021— would require professionals employed in debt adjustment cases involving Puerto Rico to file verified statements disclosing their connections with the debtor, creditors and other interested parties before seeking compensation for their services.

Impact

Businesses and individuals connected to debtors, creditors, and other parties involved in Puerto Rico’s resolution of government debt; Puerto Rico’s government; Puerto Rico’s Fiscal Control Board (FCB); and conflict of interest disclosures in Puerto Rican government debt proceedings.

Cost of House Bill H.R. 1192

A CBO cost estimate is unavailable.

More Information

In-DepthSponsoring Rep. Nydia Velázquez reintroduced this bill from the 116th Congress to close a loophole in Puerto Rico’s debt restructuring process under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) that was passed in 2016. Testifying before the House Judiciary Committee in support of this legislation in the previous Congress, Rep. Velázquez said:

“This important bill will close a loophole in the Island’s debt restructuring process, improve transparency, and restore confidence and integrity in the process. Before Hurricane Maria devastated Puerto Rico in late 2017, the island was already in a deep recession brought on, in part, by trying to pay down over $120 billion in government debt. In response, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act – or PROMESA – in 2016 to set up an orderly bankruptcy process to restructure this debt, stimulate economic development, and put the Island on a path to financial recovery… As the committee is aware, the trust the American people have placed in our Bankruptcy system is based on a fair, efficient, and transparent process. Transparency, as required by section 327 of the Code and Rule 2014, applies to every corporate bankruptcy and ensures any conflicts of interest — or even the perception of a conflict — between those working on the bankruptcy and the debtor are disclosed. However, PROMESA does not have a similar requirement. My bill would address this oversight and apply a robust disclosure requirement to all PROMESA Title III proceedings, eliminating the double standard that the People of Puerto Rico are facing. Puerto Ricans should be confident that the Board’s bankruptcy advisors don’t have their ‘thumb on the scale’ to favor certain debts where they have a self-interest and ensure integrity in the PROMESA process.”

House Judiciary Committee Chairman Jerrold Nadler (D-NY) supported this legislation in the 116th Congress. He said:

“Although largely patterned on Chapter 11 of the Bankruptcy Code, PROMESA did not incorporate all facets of Chapter 11 and other relevant provisions of the Code, including, for example, the Code’s mandatory disclosure requirements regarding actual or potential conflicts of interest that professional persons seeking to be retained in a bankruptcy case must make to the court prior to their retention. This bill would close that loophole and, to quote our colleague from New York, Ms. Velázquez, who authored the bill, 'improve transparency and restore confidence and integrity' in Puerto Rico’s restructuring process.”

Natalie Jaresko, Executive Director of the Financial Oversight and Management Board (FOMB) for Puerto Rico, expressed support for this legislation while testifying before the House Committee on Natural Resources in a June 11, 2020 hearing on PROMESA implementation during the COVID-19 pandemic:

“FOMB continues to support the legislative proposal of Rep. Velazquez in the bill to extend the disclosure requirements of the Federal Rules of Bankruptcy Procedure to professionals employed by FOMB, Court, or debtor to avoid conflicts of interest and advance greater transparency and disclosure. The proposal, however, needs to be modified to assure its practical implementation. It currently requires disclosures of each professional's connections with all creditors, and in the Puerto Rico Title III cases over 165,000 creditors filed proofs of claim. We look forward to working with Congress on technical amendments to further the bill's objectives.”

In the 117th Congress, this legislation has six bipartisan House cosponsors, including four Democrats and two Republicans. Last Congress, this legislation passed the House by voice vote with the support of 33 bipartisan House cosponsors, including 26 Democrats and seven Republicans.


Of NoteCongress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in 2016 to set up an orderly bankruptcy process to restructure Puerto Rico’s debt, stimulate economic development and put the island on a path to financial recovery. The legislation established a financial oversight board, the Fiscal Control Board (FCB). It also implemented a process for restructuring debt and expedited processes for approving infrastructure projects to combat the island government’s debt crisis.

A board-appointed law firm investigating potential conflicts in Puerto Rico’s bankruptcy exposed the need for this legislation when it found that trading in Puerto Rico public debt is particularly problematic, as it gives rise to the appearance of conflict.

In 2018 and 2019, numerous high-profile articles detailing consulting firm McKinsey’s potential conflict of interest noted the company’s ownership of Puerto Rican government bonds even while it advised the island’s government on a financial overhaul to lighten its debts.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / NatanaelGinting)

AKA

PRRADA

Official Title

To impose requirements on the payment of compensation to professional persons employed in voluntary cases commenced under title III of the Puerto Rico Oversight Management and Economic Stability Act (commonly known as "PROMESA").

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Energy and Natural Resources
  • The house Passed February 24th, 2021
    Roll Call Vote 429 Yea / 0 Nay
      house Committees
      Committee on the Judiciary
    IntroducedFebruary 22nd, 2021

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    From what is presented here, this seems like a rational solution to a concerning problem. Transparency works as part of our bankruptcy process so why wouldn’t it apply as well to Puerto Rico - for the very same reasons it is done in DC or any of the states?
    Like (55)
    Follow
    Share
    No, this should not be implemented. Puerto Rico is not a state and the United States is steeped in deep, deep debt. Like states within the United States must balance their own budgets and not overspend, it is important Puerto Rico and other countries whether territories of the US or not be responsible for their country and their budgets. The United States was in trillions of dollars of debt before Covid and now our country is in several trillions of dollars in debt more. It is poor budgeting and a poor decision to bail out Puerto Rico. I don’t believe any other country is helping the United States financially.
    Like (6)
    Follow
    Share
    Transparency is always needed when dealing with all aspects of financial management! No excuse not to!
    Like (29)
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    Close loopholes. Transparency good! Do it.
    Like (29)
    Follow
    Share
    Corruption and financial mismanagement has plagued Puerto Rico for years, and since they cannot seek the same aid as US states, they need to have measures in place to increase transparency and help aid good government efforts. I support this bill, and I still support giving the people of Puerto Rico the opportunity to vote for statehood.
    Like (25)
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    We have to support the people of Puerto Rico. But the corrupt government needs to be watched like a Hawk.
    Like (13)
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    Transparency is always a good policy. Those who don’t want it, or want to circumvent it somehow, invariably have something to hide. The more transparency the better.
    Like (11)
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    This is an issue that has been going on for many years. I have had friends passionately involved but as time passes and little changes they seem to have lost steam and turned their back on having hope for Puerto Rico. A quick trip to Wikipedia < https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_crisis? > shows that corrupt financial institutions and politicians have been at it for decades. To be sure the perpetrators blame the victims. There are undoubtedly papers and books written. We need people with great knowledge and the highest integrity to straighten things out. The current proposed legislation seems feeble at best. Transparency? These days the criminals are comfortable committing crimes in public.
    Like (10)
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    The people of Puerto Rico deserve the same transparency that people in the United States have. Transparency helps to avoid abuse of power.
    Like (8)
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    Yes, more transparency means fairer decisions, how can you decide or evaluate something if you are obscured from information
    Like (6)
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    If this is even coming to a vote and it means all of the dirty dealing has already been done.
    Like (5)
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    You could make it a state which would solve some of the issue created by corporations.
    Like (5)
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    They need full statehood
    Like (5)
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    The transparency that works in the states should be afforded to U.S. territories.
    Like (5)
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    Transparency in all things involving and using taxpayer money should be mandatory
    Like (4)
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    Appears to make sense to close this loophole for not only transparency purposes, but to minimize the risk for corruption.
    Like (4)
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    I am always in favor of transparency, especially when it involves how money is spent. To do anything less is to invite and condone corruption
    Like (4)
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    Puerto Rico needs our help. And we are obligated to give it. The United States literally owns the island since it is a Territory. Peculiarly, no one living on the island is an American Citizen
    Like (3)
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    Yep! Bipartisanship!
    Like (3)
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    Absolutely, transparency is the corner stone of our democracy and preventitive of abuse.
    Like (2)
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