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A federal control board overseeing Puerto Rico’s finances says dozens of municipalities and public corporations have failed to pay or deposit $340 million into a retirement system for government employees, the Associated Press reported. The board said on Tuesday that 66 municipalities including the capital of San Juan and 28 public corporations including the island’s water and sewer authority have accrued that debt. Puerto Rico already faces nearly $50 billion in unfunded pension liabilities as it continues to restructure a portion of its more than $70 billion public debt load. The control board also sued dozens of companies on Tuesday seeking to recover millions of dollars paid to them by the U.S. territory for a variety of services in recent years amid an economic crisis. Those companies include Bristol-Myers Squibb and Evertec Inc. Read more. 

In related news, Senate Republicans said that they would send $300 million more to Puerto Rico in a new offer aimed at breaking a logjam over a multibillion-dollar disaster relief bill that has stalled for months in a fight over aid to the island, the Washington Post reported. A key Democrat reacted positively yesterday, in an optimistic sign for prospects for a deal. But White House officials were still reviewing the proposal, and President Trump, who has resisted sending more money to Puerto Rico, had yet to endorse it. The proposal from Senate Appropriations Committee Chairman Richard C. Shelby (R-Ala.) makes several concessions to Democrats’ demands, after months of wrangling over the disaster bill that would send assistance all over the United States and to Puerto Rico as the island continues its recovery from Hurricane Maria. Most notably, the offer increases spending for Puerto Rico, the issue that has held up the legislation as Trump has opposed Democratic attempts to make it more generous for the U.S. territory. On top of $600 million that was already included for Puerto Rico’s food stamp program, which has been forced to reduce benefits, $300 million would go to the island in the form of Community Development Block Grant assistance. Additionally, the offer includes language to speed access to a $16 billion pot of CDBG money already appropriated by Congress, of which $8.3 billion would go to Puerto Rico. The remainder would go to Texas and other states. Read more. 

Puerto Rico’s federally created financial oversight board yesterday began filing the first round of scores of lawsuits seeking to recover money the bankrupt U.S. commonwealth paid to bondholders, businesses and others, Reuters reported. The board has until the end of this week to file certain claims after the U.S. judge hearing Puerto Rico’s bankruptcy cases declined to extend an expiring two-year statute of limitations. More than 230 complaints were filed in U.S. District Court in Puerto Rico targeting about $4.2 billion in payments made by the island’s government, according to the board. Defendants include pharmaceutical maker Bristol-Myers Squibb Puerto Rico Inc., as well as individuals and local companies that provide educational, health, IT, security, construction and communication services. “The oversight board has a responsibility to the people of Puerto Rico to recover any payments in contravention of bankruptcy or Puerto Rico law made prior to the commonwealth’s bankruptcy,” board executive director Natalie Jaresko said in a statement. The legal actions cover a period dating back as far as four years before Puerto Rico filed for bankruptcy on May 3, 2017, in an effort to restructure about $120 billion of debt and pension obligations.

The White House said yesterday that it will ask the U.S. Senate to confirm the current members of Puerto Rico’s federally created financial oversight board after creditors of the bankrupt island successfully challenged the appointments on constitutional grounds, Reuters reported. The move lifts a cloud over the board as it attempts to restructure Puerto Rico’s core government debt under a form of bankruptcy after winning court approval for deals involving the U.S. commonwealth’s sales tax-backed bonds and Government Development Bank debt. The U.S. Court of Appeals for the First Circuit ruled on Feb. 15 that the board had been unconstitutionally appointed because its seven members are principal U.S. officers and should have been selected by the president “with the advice and consent of the Senate.” The court set a 90-day deadline to allow President Donald Trump and the Senate to constitutionally validate the current members’ appointments or reconstitute the board. The oversight board last week filed a petition to the U.S. Supreme Court in an effort to overturn the ruling. The board also asked the Boston-based court to stay the 90-day deadline. The lawsuit over the board members, which was filed by creditors of the U.S. commonwealth, including Aurelius Investment LLC and bond insurer Assured Guaranty Corp, also sought a dismissal of Puerto Rico’s Title III bankruptcy cases — a move the appeals court rejected. Those plaintiffs yesterday objected to the board’s motion to stay the court’s deadline, saying the move would be “a travesty of both justice and our Constitution,” and that the board failed to establish probability that the Supreme Court would reverse the appeals court ruling.

A U.S. judge yesterday denied a request by Puerto Rico’s federally created financial oversight board to extend a looming deadline to file claims, the latest hurdle for its plan to recoup billions of dollars paid to bondholders of potentially invalid debt issued by the island’s government, Reuters reported. Judge Laura Taylor Swain, who is hearing Puerto Rico’s bankruptcy cases, declined to extend a two-year statute of limitations that runs out on May 2, saying it was “not something I’m persuaded this court is allowed to do.” Edward Weisfelner, a lawyer for the board, said this could mean the board could be forced to file hundreds of lawsuits by that deadline against bondholders in order to preserve its claims. The board, which filed bankruptcy for the U.S. commonwealth in May 2017 in an effort to restructure about $120 billion of debt and pension obligations, had requested more time, arguing that the judge had to rule first on the validity of certain debt before claims against scores of bondholders could be filed. Extending the deadline would have avoided unnecessary and costly litigation, according to the board. Read more. 

In related news, the Financial Oversight and Management Board for Puerto Rico said yesterday that it has requested the U.S. Court of Appeals for the First Circuit to extend the stay of its Feb. 15 ruling — which legitimizes the panel’s efforts “to achieve fiscal responsibility” on the island and that it gain access to the capital markets — pending the board’s petition to the U.S. Supreme Court for review of the case, Caribbean Business reported. The First Circuit had declared the appointment of the board’s members unconstitutional, “a decision that is profoundly wrong and deeply destabilizing,” the fiscal panel said in its petition on Tuesday for a writ of certiorari to the Supreme Court. Absent a further stay, the board would be forced to cease operations May 16. Disrupting its operations “midstream would have immediate and devastating consequences for the Puerto Rican economy and the debt restructuring process that Congress determined was a critical necessity when it enacted PROMESA [Puerto Rico Oversight, Management, and Economic Stability Act] and created the Oversight Board,” the panel said yesterday. The board further stressed it would be “unable to carry out its responsibility of certifying the fiscal year 2020 budgets for the Commonwealth and instrumentalities to ensure that they are compliant with the fiscal plans.” Read more. 

Four of the world’s largest oil suppliers are accused of cheating the Puerto Rico’s electric utility out of more than $1 billion, Bloomberg News reported. A class-action lawsuit alleges Vitol SA, Trafigura AG, the U.S. trading arm of Royal Dutch Shell Plc and Brazilian producer Petrobras conspired to sell substandard oil at inflated prices to the now-bankrupt power authority, known as PREPA. Four years after it was filed, the suit faced a pivotal hearing yesterday in a San Juan courtroom. Plaintiffs say it’s their best shot at restitution for what they call a scheme that paved the way for catastrophe when Hurricane Maria tore through the electrical grid in 2017, plunging the island into darkness for months. They’re seeking at least $3 billion in damages. PREPA lies squarely at the heart of the economic woes that have hung over the commonwealth for a decade. The biggest U.S. public utility, with 1.5 million customers, charges some of the highest electric rates in the country. Yet it’s stuck with aging generating stations that suffer outages at about 12 times the frequency of utilities on the U.S. mainland. The companies paid undisclosed commissions and kickbacks, provided expensive gifts and threw lavish parties to win contracts, the suit said. They delivered “millions of barrels’’ of fuel that violated both environmental and quality standards, according to the suit. Suppliers and authority officials allegedly worked with local laboratories to fake compliance tests, it said. In addition to the oil companies, the lawsuit also names the former chief and deputy head of PREPA’s fuel-procurement office and three laboratories.

Puerto Rico’s federal oversight board is asking the U.S. Supreme Court to overturn a ruling that deemed its members unconstitutionally appointed and opened the door for President Donald Trump to appoint his own nominees to supervise the island’s record bankruptcy, Bloomberg News reported. The board said yesterday that it filed a petition with the High Court challenging a Feb. 15 decision by the U.S. Court of Appeals for the First Circuit that the appointments weren’t constitutional because the U.S. Senate didn’t approve them. That verdict was prompted by a lawsuit from investment firm Aurelius Investment and other creditors. The federal board plans to ask the appeals court to prolong a stay that prevents the ruling from taking effect. The current 90-day stay extends through May 16, said Matthias Rieker, spokesman for the federal board. Trump has yet to seek Senate confirmation for the board’s current members or for new ones, so it’s unclear how he would act if the verdict is allowed to stand. 

A group of public labor unions and other creditors yesterday asked a judge to grant it power to pursue probes into individuals who contributed to Puerto Rico’s fiscal crisis because the U.S. commonwealth’s federally created financial oversight board has failed to do so, Reuters reported. The unsecured creditors' committee, which includes Service Employees International Union, American Federation of Teachers, as well as suppliers and contractors to the Puerto Rican government, said the board recently informed the committee it will not pursue claims against advisers, underwriters and public officials involved in debt sales by the island prior to its May 2017 bankruptcy filing. “The oversight board has alternated between slow-walking a proper investigation into potential causes of action relating to Puerto Rico’s debt issuances, actively obstructing the committee’s own efforts to investigate the debtors’ prior conduct and indebtedness, and simply allowing causes of action to lapse by failing to anticipate and meet statutory deadlines,” the motion stated. The committee asked the judge overseeing the island’s bankruptcy to appoint it as a trustee with the power to investigate past debt issuances, as well as pursue fraud, negligence, and breach of fiduciary duty claims against individuals.

Four banks on Friday fired back at a move by Puerto Rico’s federally created financial oversight board to force them to disclose customer information related to certain debt issued by the bankrupt U.S. commonwealth, Reuters reported. The board on Monday asked the U.S. District Court judge hearing the island’s bankruptcy cases to compel the banks to submit bondholder names and addresses along with related payments the bondholders received between 2013 and 2017 by an April 19 deadline. The Bank of New York Mellon, Bank of America Corp , JP Morgan Chase Bank, and U.S. Bank objected, citing concerns over disclosing confidential customer information, as well as the cost and ability to produce a large amount of information within the tight deadline. “The burden of this deadline is not merely excessive and unreasonable, but in fact it would be impossible to meet, as the requested data, to the extent it exists, is not easily accessible,” an attorney for JP Morgan stated in a letter to the board’s lawyers. In a court filing, Bank of America said there was no certainty it is even the correct entity to produce information to comply with the board’s “over broad and patently burdensome requests.” Read more. 

In related news, federal court decision in Puerto Rico’s record bankruptcy that departs from past precedent in the $3.8 trillion municipal-bond market is threatening to upend the secure reputation for some types of debt, Bloomberg News reported. The legal fight could go all the way up to the U.S. Supreme Court, with the potential to erode the value of billions of dollars in bonds and ripple through a niche that finances roadways, airports and water systems. A federal court decision in Puerto Rico’s record bankruptcy that departs from past precedent in the $3.8 trillion municipal-bond market is threatening to upend the secure reputation for some types of debt. The legal fight could go all the way up to the U.S. Supreme Court, with the potential to erode the value of billions of dollars in bonds and ripple through a niche that finances roadways, airports and water systems. The decision from U.S. District Court Judge Laura Taylor Swain contrasts with how special revenue bonds have been treated in all past municipal bankruptcies under chapter 9 of the Bankruptcy Code, said James Spiotto, who specializes in that kind of restructuring as managing director at Chapman Strategic Advisors. Read more.