Candidate Profile: Ana J. Matosantos

Ana Matosantos is a financial and budget consultant for the left-leaning Public Policy Institute of California. Prior to that, she worked for several years in the public sector, most notably as director of the California Department of Finance under Governors Jerry Brown and Arnold Schwarzenegger from 2009-2013.Ana M Yellow

Matosantos was born in Guaynabo, but has had little to say about PR’s debt crisis to date, and no apparent involvement behind the scenes. Like Patricia Eaves, she is another candidate whose past work is difficult to gain vast insight into, but whose name has gained traction as a board candidate over the last couple of weeks.

When she took office at the California Department of Finance in 2009, the state faced large budget deficits and, in 2010, its credit rating was cut by Standard and Poor’s. Those budget deficits were reduced by the time Matosantos left office in 2013, but California continues to face serious fiscal issues. Overall, it is difficult to get a full view of Matosantos’ work in California without conducting a more thorough review.

One major concern over Matosantos’ appointment was brought to my attention this week: sources close to the board selection process tell me that high level Obama Administration officials – notably Treasury Counselor Antonio Weiss and National Economic Council staffer Jason Miller – are pursuing seemingly innocuous candidates whom the administration feels will be amenable to pushing its agenda on the board. Matosantos’, as a Puerto Rican with no obvious conflicts (and a former appointee of Republican Governor Schwarzenegger), is rumored to be atop of this list.

Obviously, if this is indeed the case, then it raises serious concerns over Treasury Department attempts to stack the board with puppet, non-independent appointees. As I have repeated numerous times, the board must be independent from the influences of the many stakeholders involved in PR’s eventual restructuring – and that includes the Obama Administration and its various political goals.

Verdict: yellow-flag Yellow Flag – This verdict is a bit incomplete, as I will continue to look into Matosantos’ body of work in California. Rumors over whether or not she is part of a Treasury Department scheme aimed at stacking the board, however, are enough to cause concern.

Red Alert: Governor Garcia Padilla Lobbying to Have Richard Ravitch Nominated to the Board

Sources at the Democratic National Convention in Philadelphia tell me that Richard Ravtich met with none other than Governor Alejandro Garcia at the DNC on Tuesday.

I am told that this meeting is part of a coordinated and intensifying effort by Governor Garcia Padilla and his allies to ensure that Ravitch secures a seat on the board, thus giving various PR political actors influence over the board’s operations.

As I have noted in previous CB Watch blog posts and alerts, Ravitch is highly-conflicted and would be a disastrous appointment to the control board. This startling news is reaffirmation that his appointment would completely and utterly undermine the board’s independence.

Candidate Profile: David Walker

David Walker is the senior strategic advisor for the global public sector practice at mega-accounting firm PricewaterhouseCoopers. He is a three-time presidential appointee, having served in the administrations of Presidents Ronald Regan, George H.W. Bush, and Bill Clinton, including as Comptroller General of the United States. In 2014, Walker ran unsuccessfully for lieutenant governor of Connecticut.d walker

Sources tell me that Walker is a leading name amongst congressional Republicans for the board and, like many control board candidates that they are rumored to support, he has been an especially fierce opponent of the federal debt over the last several years. He was selected to lead the Peter G. Peterson Foundation (a prominent group that advocated for fiscal responsibility at a national level) in 2008, and started his own group, the Comeback America Initiative, in 2010 (which folded in 2013). He described the Puerto Rican debt as a “dire warning for our leaders at the federal, state, and local level” in a Washington Times op-ed in April.

In that same op-ed, he endorsed PROMESA as “a solution that would ensure additional transparency and accountability, provide economic incentives to enhance economic growth, facilitate a much-needed transformation of the commonwealth’s government, and include a means to restructure its debt and other unfunded obligations in an comprehensive and equitable manner.” A week after that op-ed published, he tweeted his support for Speaker Ryan and the PROMESA bill, declaring that it was not a “bailout” in response to controversy over the bill in Washington.

Having served 10 years as the United States’ chief auditor (the standard term-length for the comptroller), few people can match Walker’s bona fides in public sector finance, and the fact that he has been appointed by presidents of both parties only serves to underscore the respect that he commands on both sides of the aisle. His notable (but not exceptionally outspoken) support for Speaker Ryan and the PROMESA bill will no doubt endear him to PROMESA supporters, and while creditors that opposed the bill may have resented it at the time, there is little to suggest that he has any conflicted interests that would preclude him from service on the board.

Verdict: green-flag Green Flag – David Walker boasts experience in public sector finance that few can match, and has been involved in debt issues for several years. A Republican, Walker commands respect across the political spectrum, having been appointed by three separate presidents, including a Democrat.



Candidate Profile: Patricia Eaves

Patricia Eaves is the longtime general manager of Sprint Puerto Rico, the telecom giant’s business operation here in PR, a position she has held since the 1990s. She is somewhat of a surprise candidate whose name has come up recently and is rumored to be on one of the lists of potential nominees that will be submitted to President Obama in the coming days and weeks.In truth, it was a bit difficult to evaluate Eaves, because she does not have the widely-publicized financial background of some of the other candidates that we have profiled thus far. On the one hand, that makes her economic acumen and experience somewhat of an unknown. On the other, she has not been a major player in PR’s debt so far and, as such, avoids many of the conflicts that beleaguer some of the more high-profile candidates from the island and others who have been involved in previous major debt crises.patricia eaves red

One thing is certain: in the past several years, as jobs, businesses, and people have fled Puerto Rico and our sinking economy, Eaves’ Sprint operation has been somewhat of an exception. In 2013 the company invested $60 million to build a 4G LTE network on the island and opened several new stores in PR. Last year, Eaves revealed plans to open 25 new stores in PR through 2016. Last year, she won praise from Sprint CEO Marcelo Claure, who said that she deserved merit for leading Sprint PR in tough economic times without necessary support from the company at large.

It is hard to draw a complete verdict on Ms Eaves. It is not clear that she has the necessary background to help reinvigorate Puerto Rico’s economy. Yet, she is one of the foremost businesswomen in Puerto Rico, and has lead Sprint’s effort on the island through our economic downturn. She and her company certainly have a stake in bringing growth back to our economy, and it seems that they plan on being at the forefront of that investment.

Verdict: red-flag Red Flag: In my initial profile I gave Eaves a green flag, but her deep family ties to the PPD show deep conflicts of interest since the Board can alter this government’s decisions and laws. Given the vital importance of Board members being independent,  I am changing my verdict to red. 

Candidate Profile: Lizzie Rosso

Lizzie Rosso is a name I’ve been hearing quite a bit about recently as a potential candidate for the control board. She is the former president of the Economic Development Bank of Puerto Rico under then-Governor Luis Fortuno from 2009-2011, and a former banking executive at both Doral and Banco Popular. Currently she serves as the executive director of the Latin American Business Council and a board member of the Foundation for Puerto Rico.Lizzie

In her time at the EDB, she erased a $16 million deficit and issued millions in loans to keep small businesses and non-profits afloat in the darkest times of the recession, while turning a profit of nearly $10 million.

More recently, Rosso was named to gubernatorial candidate David Bernier’s working group, which is tasked with devising his five-year fiscal plan for PR. This is, for obvious reasons, a major flag with regard to Rosso’s candidacy.

PROMESA clearly does not allow for current or former Puerto Rican elected officials to be appointed to the board, for the sole purpose of keeping the board independent from Puerto Rican politics. No one who has been an advisor to a major candidate for office for 2016 should be considered. In addition, she was involved in bond issues that could be questioned and therefore has a conflict of interest

Verdict: red-flag Red Flag – Lizzie Rosso is a Puerto Rican with more than two decades of experience in the financial sector, and with particular experience in facilitating small business growth in Puerto Rico despite the dire state of our economy. However, her position as an advisor to David Bernier raises serious concerns with regard to her independence from political forces here in Puerto Rico.



Candidate Profile: Simon Johnson

simonjohnson _flagged-images (002)Simon Johnson is the head of the Global Economics and Management Group and a professor of entrepreneurship at the MIT Sloan School of Management, a senior fellow at the Peterson Institute for International Economics, a member of the Federal Deposit Insurance Corporation’s Systemic Resolution Advisory Committee, and a former chief economist at the International Monetary Fund.

Those who have followed the events of the last several months are familiar with Johnson, as he has testified at congressional proceedings related to PR’s debt crisis as well as other fiscal matters. Mr. Johnson has established himself as a go-to expert for federal lawmakers. He has testified multiple times on Puerto Rico, and has been published more than 300 times in the opinion pages of various publications in the past decade. He was a staunch advocate of PROMESA, arguing in a Politico op-ed that it was a good deal for bondholders, and writing off dissenting creditors as a small group of “holdouts.”

Because of this, it is unsurprising that Johnson’s name has been floated around, and, given his experience, it seems likely that he could be a candidate for multiple positions with the board, including as a congressional appointee or as a hired adviser.

However, I have reservations about whether Johnson is truly an independent actor, and whether he can be perceived as one by the people who he will be forced to work with if he is involved with the board.

Without doubt, he was deeply involved in lobbying in favor of PROMESA, and did not hesitate to side with the Treasury and Garcia Padilla’s Administration in their unfavorable depiction of Puerto Rico’s creditors before Congress – painting them as a menacing opponent to Puerto Rico’s best interest. Regardless of how you feel about this narrative, those same creditors will have a seat at the table throughout the control board’s work, and they will no doubt be reluctant to negotiate candidly if they feel that the board is already arrayed against them from the outset. The last thing PR needs is for bondholders to distrust the Board or question its intentions.

Verdict: yellow-flag Yellow Flag – Simon Johnson will likely garner serious consideration for a number of roles with the board thanks to his resume and status as a favored congressional expert in the realm of economic crises. However, his outsized role in lobbying in favor of PROMESA – and against creditors with whom he will be forced to work as a board member – means that his involvement could complicate the board’s work. 

Candidate Profile: Sharon Levine

LevineSharon Levine is a bankruptcy lawyer at Saul Ewing in New Jersey. Hers is a name that has come up only recently, but she is rumored to be favored by the Treasury Department for the board, either as an appointee or in an advisory capacity.

For Puerto Rico’s unions and some politicians on the left, Levine’s involvement in the board would be a major victory. She has represented Unions in multiple bankruptcy cases, including AFSCME during Detroit’s Chapter 9.

Like Dennis Rivera, Levine should be barred from participation with the board at the outset due to her extensive ties to labor unions, who are a major stakeholder in the outcome of Puerto Rico’s restructuring. Unions are not mere clients for Levine – during a 2014 interview with Fox Business, Levine said, “What we saw in Stockton and what we saw in Detroit is that there is a realization, we hope there is a realization, that when you’re dealing with the most vulnerable part of your constituents, which is the retirees, that they should be protected at a level that is perhaps different than an investor that can have some in transportation, and some in municipal, and some someplace else.”

Whether or not you agree with Levine’s view, it is clear that one of the board’s primary responsibilities is to examine PR’s economy and its finances from a completely fresh perspective, and to use that untainted view to implement the most effective policies for bringing growth back to the Commonwealth. Appointing or hiring someone as an advisor to the board who has a clear agenda in the restructuring process is a non-starter.

Verdict: red-flag Red Flag – Sharon Levine has a clear and stated belief that union pension systems should receive preferential treatment to other creditors in the restructuring process. Given that figuring out how to deal with Puerto Rico’s pension system is a central responsibility of the board, it is impossible for the board to maintain its independence if Levine is appointed or hired in an advisory capacity.

Red Alert: US Treasury in Puerto Rico, Conducting Board’s Work

I have been informed that the US Treasury is already conducting the control board’s work in Puerto Rico, with staffers on the ground revising the Fiscal and Economic Growth Plan as Melba Acosta alluded to in interviews earlier this week.

As I have mentioned before, while the board has not yet been appointed, it assumed control over PR the moment that PROMESA was signed into law by President Obama. In the interim, Treasury is temporarily staffing the board and is thus in charge of PR’s finances.

This should be deeply concerning to those who are concerned foremost with the board’s independence, as Treasury will no doubt use this time to lay groundwork for the board in a manner that comports with the Administration’s political goals.

Candidate Profile: Judge Arthur Gonzalez

Judge Arthur Gonzalez is a senior fellow at the New York University Law School and the former chief judge of the United States Bankruptcy Court for the Southern District of New York, a position in which he served from 2010-2012.

arthur gonzalez yellow red

Judge Gonzalez is highly respected in the bankruptcy law community, having forged a long career over the last three decades, which has included two judicial appointments to the bankruptcy court. During that time he has presided over some of the most noteworthy corporate bankruptcy cases in recent memory, including Enron in 2001, WorldCom in 2002, and Chrysler in 2009.

As The New York Times said in a 2011 profile of the judge, “Many judges are lucky to handle just one era-defining case during their tenures on the bench. In his 16 years as a federal bankruptcy judge, Arthur J. Gonzalez has handled three.” This experience is why Judge Gonzalez will likely garner serious consideration for a board seat.

In Enron, during which I had the pleasure of appearing before him, Gonzalez was praised for his handling of the high-profile Chapter 11 that came on the back of Enron’s highly-publicized scandal. The case involved $62 billion in assets, and Gonzalez won plaudits for achieving higher returns to creditors than were expected at the outset, including 93 cents on the dollar for energy traders with guaranteed claims.

He again won nearly universal admiration for his handling of the even-larger WorldCom bankruptcy, which involved over $100 billion in assets and began while Enron proceedings were still ongoing. The company was eventually purchased by telecommunications giant Verizon after it emerged from bankruptcy.

However, in his last major case, Chrysler, has more of a mixed legacy. The 2009 bankruptcy was famously quick – a fact that was praised by some, but derided by creditors who felt they got a raw deal. The main point of contention, of course, was the treatment of Chryslers UAW pensioners – an issue that will again play a major role in Puerto Rico’s restructuring – where union pensions received a better deal than the companies’ secured creditors, which included other pension and retirement funds.

This is widely seen as the precedent that allowed for similar treatment of secured creditors in the General Motors and Detroit bankruptcies and, without doubt, it will loom large here in PR, where creditors have seemingly been pitted against public pension funds by our government and others.

Verdict: yellow-flag red-flagYellow-Red Flag – Judge Gonzalez is immensely experienced and has won praise for his handling of “era-defining” corporate bankruptcy cases. However, Congress should be wary that his appointment is not a political ploy from those who would seek a similar result to the GM case with regard to the treatment union pensions either in practice or perception. If it is, then it will surely serve as a major point of contention amongst stakeholders.



Candidate Profile: Pedro Pierluisi


Following up on my Antonio Weiss post, Pedro Pierluisi is another name that most observers of the Puerto Rico debt situation over the last couple of years will be familiar with and, like Weiss, many will probably be surprised to hear that Pierluisi is actively lobbying for a role with the board either as an appointee or as the board’s executive director.Pedro Pierluisi

Pierluisi is, of course, the outgoing resident commissioner who ran unsuccessfully for his party’s nomination for governor earlier this year. After his own Chapter 9 legislation failed in the House last year, Pierluisi became, along with Governor Garcia Padilla and Weiss, one of the most visible proponents of the PROMESA legislation over the last several months – testifying in multiple hearings, and acting as a key player behind the scenes during the drafting process.

Prior to political life, Pierluisi practiced for 24 years as an attorney, serving as Attorney General of Puerto Rico from 1993-1996, in between stints in the private sector. Given his role in advancing PROMESA, which saw him fight fiercely with some stakeholders, while forming alliances with others, a role on the board, as a consultant to the board, or as executive director seems misguided.

Further, many Puerto Ricans who oppose the board hold Pierluisi responsible for its strength and, regardless of whether those people are correct, his involvement in any capacity would be nothing but divisive on the island.

Even more problematic is his wife’s work as a financial advisor to Wall Street companies, some of which hold PR bonds. This, of course, is a major conflict that should rule Pierluisi out immediately from any involvement in the board.

Additionally, as far as a board seat is concerned, I am of the view that Pierluisi is not even eligible, and that his appointment would be a clear violation of PROMESA, which holds that current and former territorial elected officials are barred from participating. This is intended to make sure that the board is entirely non-political at a local level, which is a key component of the board’s mission. Some have argued that, because Pierluisi served in Congress, he may not be considered a “territorial” official.  But that is mere semantics – Pierluisi served the people of PR, was elected by PR voters, and is a member of a PR political party. Whether or not you subscribe to this loophole, it is clear that his appointment would be a violation of the spirit of this rule. In my view, having missed out on the governorship, this is just Pierluisi looking to continue his rule over PR from another avenue.

Verdict:redflag-icon Red Flag – Pedro Pierluisi has major conflicts of interest through his wife’s financial advisory work that should rule him out from any involvement with the board. His involvement in any capacity would be hugely divisive in Puerto Rico and his role in the politics leading up to the board’s creation would raise questions over his independence. Further, his appointment would undermine the apolitical nature of the board and is a clear violation of PROMESA, as he is a former territorial elected official.

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