Letter Requesting a Transparent FOMB Nomination Process

The Honorable Mitch McConnell The Honorable Nancy Pelosi
Majority Leader Speaker of the House
United States Senate United States House of Representatives
Washington, DC 20510 Washington, DC 20515

The Honorable Charles E. Schumer The Honorable Kevin McCarthy
Minority Leader Minority Leader
United States Senate United States House of Representatives
Washington, DC 20510 Washington, DC 20515

Re: Request for a Transparent Nomination Process of New Members of the Fiscal Oversight and Management Board (FOMB) for Puerto Rico

Dear Speaker Pelosi, Minority Leader McCarthy, Majority Leader McConnell, and Minority Leader Schumer:

We write to you as organizations in Puerto Rico and stateside that are deeply concerned about upcoming vacancies at the Fiscal Oversight and Management Board (FOMB) and the impact that a rushed and secretive appointments process would have on the people of Puerto Rico. Given the sweeping authority that this board has over the territory and the serious questions raised by the actions of the current members of the FOMB, we request that Congress pursue a transparent and open FOMB nomination process that ensures that any new member is able to be thoroughly vetted before taking over the role.

Congress, through the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), made the FOMB the fiscal trustee of the Government of Puerto Rico. Over the last few years, the FOMB has forced brutal austerity measures that have further weakened health, educational, and other public infrastructures. Austerity measures have included cuts to Medicaid, cuts to funds for public schools including the University of Puerto Rico, cuts to compensation for public employees, and cuts to municipalities struggling in the wake of natural disasters. These measures have not been successful in paving the way for long-term economic recovery and fiscal health for Puerto Rico; instead, they have resulted in the people of Puerto Rico living in greater precarity during a pandemic, and recurring natural and manmade disasters, with no end in sight.

Moreover, research has revealed that the current members of the board are plagued by conflicts of interest that may have undermined their ability to act in the best interest of the people of Puerto Rico:

Two members of the FOMB, José R. González and Carlos M. García, are former Santander executives who both served as heads of Puerto Rico’s Government Development Bank (GDB). Together, these men built Santander Securities, the bank’s municipal bond business, which was a leading bond underwriter during the growth in Puerto Rican public debt. A 2016 report estimated “Santander has participated in the underwriting of $61 billion in Puerto Rican bonds, and as part of these bond issues, $1.1 billion was paid to Santander and others in issuance fees.” As Puerto Rico was falling deeper into debt, Santander used an unscrupulous revolving door scheme to peddle risky financial products like capital appreciation bonds and interest rate swap agreements, designed to maximize profits, all while the people of Puerto Rico suffered. While Santander faces claims from the FOMB for its role in underwriting billions in illegally issued debt, Carlos García faced no consequences for overseeing these transactions during his tenure at both Santander and the GDB.
The Chairman of the FOMB, José B. Carrión, has numerous familial and business ties that represent potential conflicts of interest in his oversight role and fiduciary duties. Concerns over these conflicts arise, for instance, when the FOMB signs off on debt restructuring deals that grant immunity to, or fail to pursue claims against, current or former employees of Mr. Carrión's firm while they served as officers and directors of the GDB. The Carrión family business, namely Popular Inc., has also escaped liability in the FOMB's last-minute attempt to recover fraudulent transfers from a long list of underwriters in over $12 billion of bonds potentially issued illegally.
José R. González was also director of OFG Bancorp, parent company of Oriental Bank and Oriental Financial Services, the bank's municipal bond subsidiary. Oriental likewise escaped liability in the FOMB's last-minute blitz of avoidance actions against underwriters of billions in potentially illegal debt during González's tenure.

As Supreme Court Justice Sonia Sotomayor recently stated in an opinion concerning the appointment of FOMB members, these individuals, “tasked with determining the financial fate of a self-governing Territory, exist in a twilight zone of accountability, neither selected by Puerto Rico itself nor subject to the strictures of the Appointments Clause.” We cannot allow individuals who will be empowered, as Justice Sotomayor stated, with a “freewheeling exercise of control” over the people of Puerto Rico, to be appointed in a rushed and secretive manner.

For these reasons, we request that Congress move forward with a transparent and open FOMB nomination process that ensures that any new member is able to be thoroughly vetted before taking on the role. Thank you in advance for your support.

Sincerely,