Documents
Congressional Letter to Financial Oversight Board
Sep. 24, 2019
Congress of the ??niteh ?tatm
Washington, 2362: 20510
September 24, 2019
The Financial Oversight and Management Board for Puerto Rico
PO. Box 192018
San Juan, Puerto Rico 00919-2018
Dear members of the Financial Oversight and Management Board:
We write to you in support of the hundreds of thousands of Puerto Ricans who took to the streets
to demand accountability from their government and compelled Governor Rossello to step down.
His administration?s corruption and deeply offensive comments toward women, people,
people of color, and victims of Hurricane Maria were unacceptable, and we are encouraged by
his resignation.
It is clear, however, that this historic and inspiring mobilization goes far beyond one individual.
The people of Puerto Rico seek democratic control over their future, and called not only for the
resignation of Governor Rossell? but for the end of the Financial Oversight and Management
Board?s (FOMB) control over the economic decisions of the island. We agree with the demands
of the Puerto Rican people who came into the streets: Puerto Rico must no longer be treated as a
colony.
During this moment of popular struggle for responsive and legitimate governance, we urge you
to reverse the crippling austerity imposed on Puerto Rico. At a minimum, the uncertain process
of succession and the fragility of Puerto Rico?s political institutions must not be exploited to
strengthen the unelected power over the day-to-day lives of the people of Puerto Rico.
We remind you that more than half a million residents have left the island since 2010, and the
pace of emigration has only increased since Hurricane Maria.1 Thirty thousand Puerto Ricans
still live under the post-hurricane blue tarp tents provided two years ago.2 The island has already
suffered a lost decade with no economic growth.3 Despite inadequate federal assistance and dire
unmet needs throughout the island, the most recent Fiscal Plan insists on cutting Puerto
Rico?s public health and education programs. This includes hundreds of millions of dollars in
proposed cuts to Medicaid and to the University of Puerto Rico.4 The FOMB also proposed a 10
Acevedo, Nicole. 2019. ?Census: U.S. Latino population grows while Puerto Rico sees unprecedented drop.? NBC News. June 20.
Imps \mu com/nous
7? Stein, Jeff. 2019. ?Puerto Rico corruption scandal ripples through Washington as White House, Congress call for greater spending scrutiny." Washington
Post. July 11. 1111115 com
3 Merling, Lara, Kevin Cashman, Jake Johnston, and Mark Weisbrot. 2017. "Life After Debt in Puerto Rico: How Many More Lost Decades?" Washington,
DC: Center for Economic and Policy Research. July. *ccpr Iictxiinugcs/slor ics. 7?07 pdl?
4 Velazquez, Nydia. 2019. ?Velazquez, Menendez, Grijalva, Ocasio-Cortez Ask Oversight Board to Reconsider Cuts to Puerto Rico Healthcare,
Education.? August 8. clu/quc/ house gm u?oczisIn?mrtu?nxk-m
1
Congress of the ??niteh ?tatm
Washington, 2362: 20510
September 24, 2019
The Financial Oversight and Management Board for Puerto Rico
PO. Box 192018
San Juan, Puerto Rico 00919-2018
Dear members of the Financial Oversight and Management Board:
We write to you in support of the hundreds of thousands of Puerto Ricans who took to the streets
to demand accountability from their government and compelled Governor Rossello to step down.
His administration?s corruption and deeply offensive comments toward women, people,
people of color, and victims of Hurricane Maria were unacceptable, and we are encouraged by
his resignation.
It is clear, however, that this historic and inspiring mobilization goes far beyond one individual.
The people of Puerto Rico seek democratic control over their future, and called not only for the
resignation of Governor Rossell? but for the end of the Financial Oversight and Management
Board?s (FOMB) control over the economic decisions of the island. We agree with the demands
of the Puerto Rican people who came into the streets: Puerto Rico must no longer be treated as a
colony.
During this moment of popular struggle for responsive and legitimate governance, we urge you
to reverse the crippling austerity imposed on Puerto Rico. At a minimum, the uncertain process
of succession and the fragility of Puerto Rico?s political institutions must not be exploited to
strengthen the unelected power over the day-to-day lives of the people of Puerto Rico.
We remind you that more than half a million residents have left the island since 2010, and the
pace of emigration has only increased since Hurricane Maria.1 Thirty thousand Puerto Ricans
still live under the post-hurricane blue tarp tents provided two years ago.2 The island has already
suffered a lost decade with no economic growth.3 Despite inadequate federal assistance and dire
unmet needs throughout the island, the most recent Fiscal Plan insists on cutting Puerto
Rico?s public health and education programs. This includes hundreds of millions of dollars in
proposed cuts to Medicaid and to the University of Puerto Rico.4 The FOMB also proposed a 10
Acevedo, Nicole. 2019. ?Census: U.S. Latino population grows while Puerto Rico sees unprecedented drop.? NBC News. June 20.
Imps \mu com/nous
7? Stein, Jeff. 2019. ?Puerto Rico corruption scandal ripples through Washington as White House, Congress call for greater spending scrutiny." Washington
Post. July 11. 1111115 com
3 Merling, Lara, Kevin Cashman, Jake Johnston, and Mark Weisbrot. 2017. "Life After Debt in Puerto Rico: How Many More Lost Decades?" Washington,
DC: Center for Economic and Policy Research. July. *ccpr Iictxiinugcs/slor ics. 7?07 pdl?
4 Velazquez, Nydia. 2019. ?Velazquez, Menendez, Grijalva, Ocasio-Cortez Ask Oversight Board to Reconsider Cuts to Puerto Rico Healthcare,
Education.? August 8. clu/quc/ house gm u?oczisIn?mrtu?nxk-m
1
percent cut to the pensions of retired public servants who paid for these bene?ts through years of
hard work, and secured a tentative agreement of 8.5 percent in cuts.5 It is unacceptable to reduce
the retirement security of those who paid for these bene?ts through years of hard work.
The Fiscal Plan also focuses on producing a signi?cant ?scal surplus, prioritizing the
demands of Wall Street vulture funds over the needs of the Puerto Rican people.6 The anticipated
surplus has more than doubled since the ?rst Fiscal Plan was published, despite there
being few changes to the board?s underlying assumptions.7 Rather than being used for social or
public investment to alleviate the suffering on the ground and boost the island?s sagging
economy, the surplus is likely to end up in the hands of hedge funds and bankers in order to
repay debt that was, in large part, bought on the secondary market for a fraction of their value at
maturity.
The terms of the deal with creditors are far more generous than what the own long?term
estimates indicate that Puerto Rico is able to pay.8 The unrealistic predictions and debt-
restructuring proposals will only serve to undermine the future of Puerto Rico?s economy.9
Greedy vulture funds should not be allowed to reap huge pro?ts at the expense of ordinary
Puerto Ricans.
Additionally, we are troubled by increasing evidence of the internal mismanagement
and con?icts of interest. The own budget, paid for by Puerto Rico?s taxpayers, amounts
to $300 million a year?an astounding ?gure for an institution promoting far-reaching
austerity. 10 By comparison, the US. Congressional Budget Of?ce?s annual budget for providing
economic analysis of the entire United States is $50.7 million. If the budget matched the
as a share of the economy it is tasked with analyzing, it would receive $85 billion
annually.11
We understand that the vast majority of the funds go toward fees for lawyers and
consultants who are not subject to any disclosure requirements. In what appears to be blatant
disregard for con?ict-of?interest norms, McKinsey Company, which has received more than
$50 million in advisory fees from the FOMB, is also a holder of Puerto Rican debt and stands to
make millions on any potential restructuring deal for investors.12
FOMB members are reported to have been involved in government institutions that contracted
billions of dollars of debt; served as of?cials in banks that underwrote that debt; and currently
5 Financial Oversight and Management Board for Puerto Rico. 2019. "2019 Fiscal Plan for Puerto Rico: Restoring Growth and Prosperity." San Juan, PR:
Financial Oversight and Management Board for Puerto Rico. May. 3?
Pierog, Karen. 2019. ?Puerto Rico oversight board reaches deal over retiree pensions.? Reuters. June 12. littpy/x?u my
ISKCN
6 Merling, Lara. 2018. "Puerto Rico's New Fiscal Plan: Certain pain, Uncertain Gain.? The Philly Inquirer. June 20.
blips/Arno 806201111111
7 FOMB. "2019 Fiscal Plan for Puerto Rico."
8 Aronoff, Kate. 2018. ?Vulture Funds Stand to Make Millions in Wake of Hurricane Maria," The Intercept. September 28.
8.41908 4mm
9 Members of Congress. 2018. ?Letter to Members of the Financial Oversight and Management Board for Puerto Rico.? Received by The Honorable Jose?
B. Carrion Chairman. December 6.
?0 Rice, Andrew. 2019. ?The McKinsey Way to Save an Island Why is a bankrupt Puerto Rico spending more than a billion dollars on expert advice?? New
York Magazine. April 17. http://n} mug
Weisbrot, Mark. 2019.? Puerto Rico?s Botched Disaster Relief, Unsustainable Debt, and Economic Failure Linked to its Colonial Status. Los Angeles
Times. May 30.
?2 Walsh, Mary Williams. 2018. ?McKinsey Advises Puerto Rico on Debt. It May Pro?t on the Outcome.? The New York Times. September 26.
percent cut to the pensions of retired public servants who paid for these bene?ts through years of
hard work, and secured a tentative agreement of 8.5 percent in cuts.5 It is unacceptable to reduce
the retirement security of those who paid for these bene?ts through years of hard work.
The Fiscal Plan also focuses on producing a signi?cant ?scal surplus, prioritizing the
demands of Wall Street vulture funds over the needs of the Puerto Rican people.6 The anticipated
surplus has more than doubled since the ?rst Fiscal Plan was published, despite there
being few changes to the board?s underlying assumptions.7 Rather than being used for social or
public investment to alleviate the suffering on the ground and boost the island?s sagging
economy, the surplus is likely to end up in the hands of hedge funds and bankers in order to
repay debt that was, in large part, bought on the secondary market for a fraction of their value at
maturity.
The terms of the deal with creditors are far more generous than what the own long?term
estimates indicate that Puerto Rico is able to pay.8 The unrealistic predictions and debt-
restructuring proposals will only serve to undermine the future of Puerto Rico?s economy.9
Greedy vulture funds should not be allowed to reap huge pro?ts at the expense of ordinary
Puerto Ricans.
Additionally, we are troubled by increasing evidence of the internal mismanagement
and con?icts of interest. The own budget, paid for by Puerto Rico?s taxpayers, amounts
to $300 million a year?an astounding ?gure for an institution promoting far-reaching
austerity. 10 By comparison, the US. Congressional Budget Of?ce?s annual budget for providing
economic analysis of the entire United States is $50.7 million. If the budget matched the
as a share of the economy it is tasked with analyzing, it would receive $85 billion
annually.11
We understand that the vast majority of the funds go toward fees for lawyers and
consultants who are not subject to any disclosure requirements. In what appears to be blatant
disregard for con?ict-of?interest norms, McKinsey Company, which has received more than
$50 million in advisory fees from the FOMB, is also a holder of Puerto Rican debt and stands to
make millions on any potential restructuring deal for investors.12
FOMB members are reported to have been involved in government institutions that contracted
billions of dollars of debt; served as of?cials in banks that underwrote that debt; and currently
5 Financial Oversight and Management Board for Puerto Rico. 2019. "2019 Fiscal Plan for Puerto Rico: Restoring Growth and Prosperity." San Juan, PR:
Financial Oversight and Management Board for Puerto Rico. May. 3?
Pierog, Karen. 2019. ?Puerto Rico oversight board reaches deal over retiree pensions.? Reuters. June 12. littpy/x?u my
ISKCN
6 Merling, Lara. 2018. "Puerto Rico's New Fiscal Plan: Certain pain, Uncertain Gain.? The Philly Inquirer. June 20.
blips/Arno 806201111111
7 FOMB. "2019 Fiscal Plan for Puerto Rico."
8 Aronoff, Kate. 2018. ?Vulture Funds Stand to Make Millions in Wake of Hurricane Maria," The Intercept. September 28.
8.41908 4mm
9 Members of Congress. 2018. ?Letter to Members of the Financial Oversight and Management Board for Puerto Rico.? Received by The Honorable Jose?
B. Carrion Chairman. December 6.
?0 Rice, Andrew. 2019. ?The McKinsey Way to Save an Island Why is a bankrupt Puerto Rico spending more than a billion dollars on expert advice?? New
York Magazine. April 17. http://n} mug
Weisbrot, Mark. 2019.? Puerto Rico?s Botched Disaster Relief, Unsustainable Debt, and Economic Failure Linked to its Colonial Status. Los Angeles
Times. May 30.
?2 Walsh, Mary Williams. 2018. ?McKinsey Advises Puerto Rico on Debt. It May Pro?t on the Outcome.? The New York Times. September 26.
maintain familial relations to some of the largest ?nancial institutions in Puerto Rico.13 Under
federal statute, board members are required to provide ?nancial disclosures and reveal any
con?icts of interest. However, we are deeply concerned by the apparent failure to comply with
the law. The 2017 ?nancial disclosure documents of Chairman os? B. Carrion, for example, list
not a single dollar amount he received from third parties as compensation. Board member Carlos
M. Garcia similarly failed to disclose compensation amounts.14 These incomplete disclosures
make the full scope of possible con?icts of interest impossible to assess.
Additionally, as the Puerto Rican people seek to compel transparency and accountability from
decision makers, we believe the FOMB should heed this call. We ask that by October 7, 2019,
you provide the undersigned members of Congress with:
A detailed explanation for the increasing ?scal surplus available to creditors despite the
absence of signi?cant changes in the economic assumptions, as well as the
board?s economic rationale for cuts to health, education, and pensions.
0 An analysis of the expected impacts of the proposed budget cuts to health and
education expenditures on Puerto Rico?s economic growth trajectory, outmigration, and
inequality.
0 All documents related to the consulting arrangements with entities, such as
McKinsey Company and Citigroup Global Markets Inc., who could ?nancially bene?t
from an eventual debt repayment deal.
0 Materials related to the policies on con?icts of interest and other internal
measures to avoid ?nancial capture by special interests.
0 A full accounting of each member?s professional or familial ties to any institutions and
persons who hold Puerto Rico?s debt or maintain contracts with the FOMB, and thorough
?nancial disclosures of each board member, including details of outside compensation.
We ask that until an independent investigation about con?icts of interest is completed and all
FOMB members are cleared of any con?icts of interest, debt payments and negotiations on debt
repayments be paused.
For far too long, the federal government has treated the American citizens of Puerto Rico
unfairly.15 Puerto Rico has suffered from decades of economic neglect, crushing debt,
devastating austerity, a catastrophic hurricane and humanitarian crisis that led to some 3,000
estimated deaths, many of which were avoidable?a result of the inadequate federal emergency
response.16
13 Valentin Ortiz, Luis J. 2018. FISCAL CONTROL BOARD: PARALLEL GOVERNMENT FULL OF LAWYERS AND
Centro de Periodismo Investigative. August 1.
'4 Financial Oversight and Management Board for Puerto Rico. 2019. "Documents: Financial Disclosures.? San Juan, PR: Financial Oversight and
Management Board for Puerto Rico. Retrieved August 7. littsz/m crsightbourtl.pngov/documems/
?5 Merling et a1. ?Life After Debt in Puerto Rico.?
?6 Milken Institute School of Public Health. 2018. ?Milken Institute School of Public Health Study, a collaboration with the University of Puerto Rico, to
Estimate the Excess Deaths from Hurricane Maria in Puerto Rico.? Washington, DC: George Washington University. September.
ctln/
Jeremy. 2017. ?Hurricane Maria killed 64 Puerto Ricans. Another 1,000 died because the disaster response was inadequate.? Washington Post.
December 18. 7/l 2_/l 8,0111rricuncfmaria?l5]
maintain familial relations to some of the largest ?nancial institutions in Puerto Rico.13 Under
federal statute, board members are required to provide ?nancial disclosures and reveal any
con?icts of interest. However, we are deeply concerned by the apparent failure to comply with
the law. The 2017 ?nancial disclosure documents of Chairman os? B. Carrion, for example, list
not a single dollar amount he received from third parties as compensation. Board member Carlos
M. Garcia similarly failed to disclose compensation amounts.14 These incomplete disclosures
make the full scope of possible con?icts of interest impossible to assess.
Additionally, as the Puerto Rican people seek to compel transparency and accountability from
decision makers, we believe the FOMB should heed this call. We ask that by October 7, 2019,
you provide the undersigned members of Congress with:
A detailed explanation for the increasing ?scal surplus available to creditors despite the
absence of signi?cant changes in the economic assumptions, as well as the
board?s economic rationale for cuts to health, education, and pensions.
0 An analysis of the expected impacts of the proposed budget cuts to health and
education expenditures on Puerto Rico?s economic growth trajectory, outmigration, and
inequality.
0 All documents related to the consulting arrangements with entities, such as
McKinsey Company and Citigroup Global Markets Inc., who could ?nancially bene?t
from an eventual debt repayment deal.
0 Materials related to the policies on con?icts of interest and other internal
measures to avoid ?nancial capture by special interests.
0 A full accounting of each member?s professional or familial ties to any institutions and
persons who hold Puerto Rico?s debt or maintain contracts with the FOMB, and thorough
?nancial disclosures of each board member, including details of outside compensation.
We ask that until an independent investigation about con?icts of interest is completed and all
FOMB members are cleared of any con?icts of interest, debt payments and negotiations on debt
repayments be paused.
For far too long, the federal government has treated the American citizens of Puerto Rico
unfairly.15 Puerto Rico has suffered from decades of economic neglect, crushing debt,
devastating austerity, a catastrophic hurricane and humanitarian crisis that led to some 3,000
estimated deaths, many of which were avoidable?a result of the inadequate federal emergency
response.16
13 Valentin Ortiz, Luis J. 2018. FISCAL CONTROL BOARD: PARALLEL GOVERNMENT FULL OF LAWYERS AND
Centro de Periodismo Investigative. August 1.
'4 Financial Oversight and Management Board for Puerto Rico. 2019. "Documents: Financial Disclosures.? San Juan, PR: Financial Oversight and
Management Board for Puerto Rico. Retrieved August 7. littsz/m crsightbourtl.pngov/documems/
?5 Merling et a1. ?Life After Debt in Puerto Rico.?
?6 Milken Institute School of Public Health. 2018. ?Milken Institute School of Public Health Study, a collaboration with the University of Puerto Rico, to
Estimate the Excess Deaths from Hurricane Maria in Puerto Rico.? Washington, DC: George Washington University. September.
ctln/
Jeremy. 2017. ?Hurricane Maria killed 64 Puerto Ricans. Another 1,000 died because the disaster response was inadequate.? Washington Post.
December 18. 7/l 2_/l 8,0111rricuncfmaria?l5]
The people of Puerto Rico have spoken. They reject austerity and call for democratic
governance, broadly shared economic growth, and self-determination aspirations
fundamentally at odds with both the policy prescriptions and the internal functioning of the
FOMB. We thank you in advance for your prompt and detailed response to our inquiries, and
consideration of our call for the immediate reversal of austerity and cuts to social and public
spending on the island.
Sincerely,
Bernar?d Sanders Alexandria Ocasio-Cortez
United States Senator Member of Congress
?9
Mark Pocan Pramila ayapal
Member of Congress Member of Congress
A,
Eliza th Warren rey . Merkley
Unit States Senator United States Senator
Edward J. key Richard Blumenthal
United States Senator United States Senator
Kirsten Gillibrand Cory Booker
United States Senator United States Senator
The people of Puerto Rico have spoken. They reject austerity and call for democratic
governance, broadly shared economic growth, and self-determination aspirations
fundamentally at odds with both the policy prescriptions and the internal functioning of the
FOMB. We thank you in advance for your prompt and detailed response to our inquiries, and
consideration of our call for the immediate reversal of austerity and cuts to social and public
spending on the island.
Sincerely,
Bernar?d Sanders Alexandria Ocasio-Cortez
United States Senator Member of Congress
?9
Mark Pocan Pramila ayapal
Member of Congress Member of Congress
A,
Eliza th Warren rey . Merkley
Unit States Senator United States Senator
Edward J. key Richard Blumenthal
United States Senator United States Senator
Kirsten Gillibrand Cory Booker
United States Senator United States Senator
Robert Menendeb Adriano Espaillat
United States Senator Member of Congress
WW
Jes?s G. ?Ch?y? arcia
Member of Congress
Robert Menendeb Adriano Espaillat
United States Senator Member of Congress
WW
Jes?s G. ?Ch?y? arcia
Member of Congress