Martha Kopacz, a financial advisor currently employed as a senior managing director at the consulting firm Phoenix Management Services, is a unique among the individuals that I have profiled so far, in that she is likely not in contention for one of the seven seats on the control board. Rather, Kopacz is widely rumored to be interested in, and actively lobbying for, an advisory role to the board, or as executive director of the board. Because the board’s advisors or executive director will no doubt be instrumental in the board’s decisions and actions it takes, I have decided to profile some of the higher-profile candidates for these positions alongside the various candidates for board seats. In addition to her time at Phoenix Management, Kopacz has held notable positions as an adviser to the Nassau County Interim Finance Authority – a New York State-appointed control board in charge of resolving the county’s $300 million deficit – and as a managing director at Alvarez and Marsal, which has counted the Puerto Rican Government amongst its clients. Kopacz also served as an adviser to the Archdiocese of Boston in 2002 (where potential control board candidate, Archbishop of San Juan Roberto Gonzalez Nieves, was the auxiliary bishop under Cardinal Bernard Francis Law), when it filed for bankruptcy as a result of settlements in sexual-abuse-related litigation.
Kopacz is likely counting on two factors in her campaign to win an advisory or formal position to the board from the Obama Administration: 1.) her experience as a paid, expert witness to bankruptcy judge Steven Rhodes (who himself is a potential candidate for a control board seat) during Detroit’s 2014 bankruptcy proceedings, and 2.) her familiarity and involvement as a commentator on our own fiscal crisis over the past two years.
In 2014, she served as a hand-picked, expert witness to Judge Rhodes, when she advocated on behalf of Detroit’s restructuring plan in bankruptcy court, which she termed “feasible.” At the time, this description drew criticism from municipal market research firm Municipal Market Advisors, which said, “The feasibility described to the court by Ms. Kopacz is fragile at best.” Detroit is poised to exit the oversight of its own version of a control board, Michigan’s Financial Review Commission, after it posted its third-straight balanced budget for 2016-2017.
It is clear, however, is that Kopacz’s expert testimony was not cheap, and cost Detroit and its taxpayers a great deal of money. Judge Rhodes ordered the City of Detroit to pay Kopacz and her team over $500,000 following her testimony in June of 2014.
As our own debt crisis has progressed over the last two years, Kopacz has again been a visible player here in Puerto Rico. She has released numerous publications through Phoenix Management, in which she took various stances that could be described as friendly to the Garcia Padilla Administration, including backing the Krueger Report, downplaying the government’s inability to provide timely, audited financial statements, and advocating for the creation of a “comprehensive restructuring” authority for Puerto Rico. In February, she served as an expert witness in the Walmart v. Puerto Rico litigation, during which she asserted her view that “Puerto Rico is insolvent. Whatever debt it chooses to pay is uncertain,” and that a restructuring is “inevitable.”
Many in the Puerto Rican general public would have first heard Kopacz’s name only a few weeks ago, when media outlets reported on her visit to the island, during which she was ostensibly laying the groundwork for a board position. As reported in multiple news outlets, Kopacz came to San Juan for the purported reason of meeting with several non-profits, though she hired a media consultant, former Banco Popular public relations head Jorge Marchand. According to sources, she presented herself as working for the US Treasury in an unofficial capacity during these meetings, and is rumored to have inquired about taking over CitiBank’s San Juan lease at the behest of the Treasury. Moreover, it is no secret that Treasury wants parts of the PR Government to restructure their debts in order to use the savings in debt payment to be used to bolster the retirement funds and thus help its ally Organized Labor. The Treasury was denied a place on the Board for this very reason, and it would be a defeat of Congressional intent to have someone affiliated with the agency serving the board.
In my view, Kopacz’s outspoken stance on restructuring make her an unsuitable fit for any role relating the control board at the outset. Her comments on the matter – including her work as an expert witness – clearly demonstrate that she will enter her work with a predisposed view on how to restructure the debt, despite the fact that this is a determination that the independent control board is tasked to make for itself following a thorough review of available information. Her pursuit of an advisory position would be further complicated if Judge Rhodes or Archbishop Gonzalez Nieves is considered for a board seat, given the previously lucrative relationship she enjoyed with Rhodes during the Detroit bankruptcy and her role advising the Boston Archdiocese bankruptcy in 2002.
Verdict: Red Flag – Kopacz’s outspoken views on the necessary scope of a Puerto Rico restructuring mean that she would not enter her service on the board as a truly independent actor. Her recent trip to Puerto Rico where she reportedly presented herself as a US Treasury intermediary raises further doubts about her independence. She also faces potential conflicts with rumored board candidates.