The Board’s Intervention in the Brigade Litigation

As promised, the P.R. Control Board filed its motion to intervene on Friday, in the four cases for which Judge Besosa had had a hearing as to the lifting of the PROMESA stay. The Board urged Judge Besosa to deny the motions by different plaintiffs seeking the lifting of the stay since the Boardbelieves that the Commonwealth’s limited resources are better spent working with the Oversight Board and helping the Oversight Board begin its monumental tasks of negotiating fiscal plans and ensuring that Puerto Rico regains access to capital markets, rather than litigating these four cases, the other eight related cases the Commonwealth is currently defending, and the additional cases that will likely follow in the event the stay is lifted.” See page 21.

The intervention is much more than a pat on the back to the PR Government. The Board also stated:

In order to ensure that the Oversight Board is able to realize the full benefit of the PROMESA stay, the Oversight Board requests that the Court include in its order denying the lift stay motions the following requirements: (i) the Commonwealth must account for the funds over which it has already exercised control pursuant to the Moratorium Act and the Executive Orders, for future revenues and expenditures, and for all transfers to and from the Government Development Bank (“GDB”) since April 6, 2016; (ii) the Commonwealth must give the Oversight Board immediate and unfettered access to the Commonwealth’s financial officials and advisors; (iii) the Commonwealth must provide the Oversight Board with proposed cash management guidelines and procedures, including for its prioritization of payments, no later than October 30, 2016; (iv) the Commonwealth must immediately begin rolling production of the information requested by the Oversight Board on October 5 and 20, 2016, with such production to be completed no later than October 30, 2016; and (v) the Commonwealth must provide the Oversight Board with an information production protocol that will establish procedures and timetables for requesting and producing information, sharing information and maintaining its confidentiality as appropriate, and resolving any disputes over the production of information. Page 11 of the filing.

The Board also asks that the Governor refrain from issuing any more executive orders.

As you may notice, the Board has already sought some of this information from PR. The question is why ask for a Court order? Simple, Section 104(k) allows the Board to “seek judicial enforcement of its authority to carry out its responsibilities under this Act.” By asking and obtaining an order from Federal Court forcing PR to hand over the information requested on the time table requested, the Board ensures compliance by PR under penalty of civil contempt. Federal Judges in PR are not shy in enforcing their orders with the threat and sometimes the imprisonment of recalcitrant officials as Judge Fuste and Gelpí have shown.

Finally, the Board mentions that it will “endeavor to open a dialogue with the Commonwealth and all creditors, including the Plaintiffs in these actions and in the other actions pending against the Commonwealth, its instrumentalities, and their officials,” (see page 24) and requests a hearing within 30 days for the parties to report on their progress. This may be an acknowledgement by the Board that PR has not been negotiating with its creditors as it has claimed. Regardless, plaintiffs have until October 28 to oppose the Board’s petition. Moreover, this shows that, contrary to what some have claimed, the Board did not come simply to be a collection agency.

Judge Besosa will undoubtedly grant the Board’s intervention and likely grant the order as to the Government’s reporting. Whether he will leave the stay in place is another matter. As he himself said during the first day of stay hearings, if he decides the Moratorium issue, the cases go away, regardless of the result. Let’s see what happens.