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Puerto Rico Board Faces Test With Supreme Court Records Case

Oct. 12, 2022, 9:00 AM

The US Supreme Court’s decision to hear a case over journalists’ demand for records from the federal board overseeing Puerto Rico’s finances will heighten transparency issues that irk the island’s residents, a review that could impair its operations.

The Puerto Rico Financial Oversight and Management Board last week successfully petitioned the Supreme Court to consider overturning a pair of lower court orders that it produce communications subject to Puerto Rico constitutional public disclosure law. The appeal pits what the board says is its constitutional right to sovereign immunity against the journalists’ calls for greater clarity in its endeavors to recalibrate Puerto Rico’s financial system.

Puerto Rico-based investigative news organization Centro de Periodismo Investigativo Inc. has already used previous disclosures in a series of reports critical of the board’s role and operations.

If forced to disclose thousands of other “internal and sensitive documents” sought by CPI, the board will experience “grave difficulties” carrying out its congressional mandate of turning the territory into a reliable borrower with sustainable debt, it has told the Supreme Court. The board warned it could face a flood of litigation “similarly demanding vast tranches of the board’s internal documents.”

A date for oral argument has not been announced.

The case is teed up to inspect language in the 2016 law that created the federally-appointed oversight panel and could further stoke resentment by island residents of the board’s decision-making.

“It could just be one more headache for the board” if it’s forced to produce damaging or embarrassing emails, said market and credit research analyst Matt Fabian of Municipal Market Analytics Inc. But if the disclosures seriously bring into question its legitimacy, “this could lead to a faster exit for the board,” he said.

Potential Consequences

It’s unclear what will be revealed should the board be forced to disclose additional records sought by CPI.

“If it somehow casts into doubt the legitimacy of the decisions the board has made,” it could impact current bondholders, said Fabian. The security underlying reorganized debt obligations isn’t likely to be altered, but bondholders rely on the willingness and ability of the territory’s government to repay its debts, he said.

If the board is forced to make a fast exit, that will create even more uncertainty for bondholders, potentially putting their investments at greater risk, Fabian said.

“You just don’t know where a legislature that’s known to be hostile vis-a-vis bondholders will go,” he said.

Should the board’s legitimacy be eroded, calls to end its presence and put the island’s finances back in control of its government could become louder. On Capitol Hill, US Rep. Ritchie Torres, a New York Democrat, has already introduced a bill that would amend the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) by disbanding the board after it certifies budgets for at least two consecutive years, instead of four.

“The Financial Oversight and Management Board represents a cardinal sin against the sovereignty and self-determination of Puerto Rico,” he said in an April statement when introducing HR 7409.

Although many of Puerto Rico’s financial creditors have previously called for greater financial transparency from the board and the local government, none have publicly weighed in on CPI’s fight for board communications and documents.

Puerto Rico bond insurer Ambac Financial Group Inc., and investors Whitebox Advisors LLC, the Vanguard Group Inc., Franklin Templeton, and Invesco Ltd. declined to comment for this story. Pacific Investment Management Co., GoldenTree Asset Management LP, Nuveen LLC, and Lord, Abbett and Co. LLC didn’t respond to requests for comment.


The legal feud started with a suit CPI filed in 2017 to force the turnover of communications between board members and government officials, financial disclosures provided by board members to the US Department of Treasury, and financial data provided by the commonwealth.

The board is appealing a 2-1 decision handed down by the US Court of Appeals for the First Circuit in May, finding that Congress abrogated the board’s right to sovereign immunity under the 11th Amendment. A finding of sovereign immunity would have generally protected the board from being sued.

Affirming an earlier ruling by the US District Court for the District of Puerto Rico, the First Circuit said Congress was “unmistakably clear” in PROMESA that any legal action taken against the board can be brought in federal court and injunctive relief may be granted.

“In doing so, the court introduced uncertainty into this area of law and risked nullifying a basic protection in situations where Congress did not intend to do so,” the board said in a statement when it filed its Supreme Court petition.

Although the board has produced about 18,000 documents, the nonprofit organization is seeking roughly another 20,000 records it believes could contain important information.

CPI has already published reports critical of the board’s role and communications with congressional staffers pushing to privatize the island’s electric utility. The organization gained national attention in 2019 when it published a leak of humiliating text messages sent by former governor Ricardo Rosselló on the Telegram app to members of his cabinet. Rosselló resigned shortly afterwards.

The board’s ongoing resistance to sharing communications with the Puerto Rican government and numerous financial disclosures raises red flags, CPI executive director Carla Minet told Bloomberg Law.

“We’ve seen all these years how the board and the government of Puerto Rico keep making excuses or try to pass the ball as to who is responsible for decision-making,” she said.

The Board’s Debt Plan

There’s no indication that any potentially shocking revelations from the board’s communications could upset the commonwealth’s debt adjustment plan. The plan was approved earlier this year by Judge Laura Taylor Swain of the US District Court for the Southern District of New York, who was appointed to oversee Puerto Rico’s $120 billion debt and pension liability restructuring process.

The plan restructures the central government’s $33 billion debt load and addresses a broke public pension trust. The judge also previously approved a deal to rework about $18 billion in bonds repaid from revenues on the island’s sales tax.

The board’s work has involved cost-cutting reforms to the island’s labor laws, budget, and public pension system—changes that have met with resistance from island residents and politicians.

The case is Financial Oversight and Management Board for Puerto Rico v. Centro de Periodismo Investigativo Inc., U.S., No. 22-0096.

To contact the reporter on this story: Alex Wolf in New York at

To contact the editor responsible for this story: Maria Chutchian at, Melissa B. Robinson at