On June 29, 2016, Senator Orin Hatch, Chairman of the Senate Committee on Finance, sent Treasury Secretary Jacob Lew a letter requesting some information and documents. These were:
- Confidentiality agreements with the Territory of Puerto Rico or its political subdivisions;
- Communication between Treasury Department employees and Puerto Rico employees relating to the default on governmental obligations;
- Communications between Treasury Department employees and union officials or other representatives or public employees in Puerto Rico;
- Communications between Treasury Department employees and employees of the advisory firm Millstein & Co.;
- Details of all Executive Branch employees who had substantive communication with Treasury Department employees concerning Puerto Rico’s debt obligations; and
Documents provided to the Treasury Department by Puerto Rico or one of its political subdivisions under a confidentiality agreement.
On July 29, 2016, the Treasury Department answered Senator Hatch’s letter. With the exception of a 4 confidentiality agreements (and there have to be more of them since GO’s and COFINA have been discussed with bondholders and Treasury must want to know about them), no other questions or document requests were provided by Treasury. The letter does not state that the documents do not exist or that they are protected by any privilege. This is a disrespectful flaunt to one of the most powerful and respected members of the Senate.
The real question is what is the Treasury hiding? The simplest thing in the world for an agency is to say, “we searched and found nothing that complies with your request.” But the letter does not say that. It actually ignores the requests. Now the Senate Finance Committee may serve a subpoena and Treasury has to make a formal response. This may be the first shot in a longer and larger struggle to find the truth.
In addition, the letter contains a couple of very important nuggets that reveal the Treasury’s intentions. At page 3, it states:
PROMESA addresses two of the most urgent requirements in our roadmap for legislative action: debt restructuring and fiscal oversight. The law provides a mechanism to facilitate voluntary restructuring and provides an immediate stay on litigation, giving Puerto Rico sufficient breathing space to allow for voluntary negotiations. In addition, the legislation offers a responsible process to ensure the retirement security of the 330,000 citizens in Puerto Rico that depend on their pension benefits.
This shows that debt restructuring is of the utmost importance to Treasury but PR has not met its creditors since mid June although Title VI (voluntary restructuring) of PROMESA is to be used during the stay to enable amicable agreements with them. Moreover, the Board controls whom and when can actually use Title III (bankruptcy), not the PR Government. Finally, there is no process to ensure retirement security to retirees that I know of in PROMESA.