McKinsey: Puerto Rico Bondholder and Fiscal Board’s Lead Adviser

The world’s largest financial consulting firm leads the operations of Puerto Rico’s federally appointed Fiscal Control Board, as evidenced by emails obtained by the Center for Investigative Journalism. McKinsey also owns Puerto Rico bonds and is subject of various investigations, including one commissioned by the entity imposed by the federal PROMESA law.

Puerto Rico Fiscal Board Fights For Secrecy

Puerto Rico’s federally appointed Fiscal Board refused to deliver an unspecified number of communications between the entity and officials of Congress, the White House, Treasury and other federal agencies. As part of an access to information lawsuit brought by the Center of Investigative Journalism (CPI) a year and a half ago, the Board alleges that they are privileged documents and must remain confidential. In a two-page letter dated Nov. 21 and addressed to the CPI’s legal representation, Board lawyers, Proskauer Rose, argue that the disclosure of certain emails and related attachments would affect the island’s economy, capital markets, pending law enforcement investigations and “the ability to perform [the Board’s] statutory duties.”

The entity imposed by the U.S. government through a federal law known as PROMESA only mentions broad justifications and descriptions for the withheld documents, the amount of which remains unknown, as are the names of those who are part of the communications that remain outside the public domain. The CPI lawsuit against the entity aims to obtain access to communications between the seven-member fiscal panel and both federal and local government.

Emails Expose Federal Gov’t Influence Over Puerto Rico’s Fiscal Board

“Started engaging with the creditors yet?,” asked Ted McCann, then adviser to House Speaker Paul Ryan (R-Wisconsin), in a March 21, 2017, email sent to Carlos García, a member of Puerto Rico’s federally appointed Fiscal Control Board. Shortly after, García, a former president of the commonwealth’s Government Development Bank (GDB) and whose appointment to the board was pushed through Ryan’s office, replied:

“Yes, a lot of focus on GO/Cofina controversy. Each group stepping up their rhetoric. Board pressing on for meaningful progress. Challenge is the limited projected Primary surplus available in the first 10 years for debt service.

Los documentos que la Junta quiere ocultar

La Junta de Control Fiscal de Puerto Rico rehusó entregar un sinnúmero de comunicaciones entre la entidad y oficiales del Congreso de Estados Unidos, la Casa Blanca, el Tesoro y otras agencias del Gobierno federal, alegando que son documentos confidenciales, como parte de un pleito de acceso a la información que lleva el Centro de Periodismo Investigativo (CPI) hace un año y medio. En una carta de dos páginas, con fecha del 21 de noviembre y dirigida a la representación legal del CPI, los abogados de la Junta argumentan que la divulgación de ciertos correos y documentos anejos afectaría la economía de la isla, los mercados de capital, investigaciones criminales en curso y “la habilidad de la Junta de ejercer sus poderes estatutarios”. La entidad impuesta mediante la ley PROMESA por el Gobierno de Estados Unidos solamente menciona a grandes rasgos sus justificaciones y provee descripciones generales sobre los documentos retenidos, cuya cantidad es desconocida. Tampoco nombra las personas que forman parte de las comunicaciones que permanecen fuera del dominio público. La demanda que el CPI lleva en contra de la entidad va dirigida a obtener acceso a las comunicaciones entre el ente rector, el Gobierno federal y el Gobierno de Puerto Rico.

Retratada la influencia del Gobierno federal sobre la Junta de Control Fiscal

“¿Ya comenzaron a involucrarse con los acreedores?”, preguntó Ted McCann entonces asesor del presidente de la Cámara, Paul Ryan (R-Wisconsin), a Carlos García, miembro de la Junta de Control Fiscal de Puerto Rico, en un correo electrónico con fecha del martes, 21 de marzo de 2017. Al cabo de unas horas, el expresidente del Banco Gubernamental de Fomento de Puerto Rico (BGF), cuyo nombramiento a la Junta fue impulsado por la oficina de Ryan, contestó:

“Sí, hay mucha atención sobre la controversia GO/Cofina. Cada grupo [de acreedores] está escalando su retórica. La Junta está presionando para que se dé un progreso significativo. El reto es el sobrante limitado [primary surplus] proyectado como disponible para el servicio de la deuda en los primeros 10 años.

Broken island, costly bankruptcy

Puerto Rico’s bankruptcy has cost its people more than $225 million in a year, only in lawyers and financial consultants. The expense in restructuring professional services is projected to surpass $1.2 billion by 2023, including the budget of the island’s federally imposed Fiscal Control Board. I suggested to my editor lines such as these as possible leads for a series of stories over the billing in professional services as part of the Puerto Rico government’s bankruptcy process. I did not succeed. When talking about hundreds of millions of dollars, figures alone fall short in showing the magnitude of the matter.