It was the morning of November 18 when federal Judge Laura Taylor Swain asked several times if anyone had come to the offices of Piloto 151 in Hato Rey to participate in the hearing. A dozen people with masks waited outside, but the official from the federal court in Puerto Rico who was there told the judge that no one had arrived. People were told to go back home.
Carmen López was furious when she left, with the lawyer who was there and with the government of Puerto Rico, which, she claims, owes her money. She worked as a public school principal and claims that the Department of Education never paid her salary increases that she should have received since at least the 1980s.
In June 2018, Carmen claimed that money as part of Puerto Rico’s bankruptcy case under Title III of the federal PROMESA law. Two and a half years later, she received a notice to go to a hearing on the case, which she went to on November 18 because she wanted to know the status of her claim.
“It was improvised, disrespectful, a waste of time. To go there and get nothing done, sadly, wasn’t right,” she said while struggling with the idea of having gone there for nothing. The only information Carmen got, she said, was a phone number that she knew already. “So those who came from far away, from other towns further than Gurabo, which is where I came from, [were told]: ‘Ah, no, no, no … you have to go home.’ That you have to go home? What is this?” she said.
More than 170,000 claims were filed in the bankruptcy proceeding, of which nearly 53,000 were related to salaries of public employees, such as Carmen’s, according to court documents. About 43,000 were for pension payments. In other words, more than half of the claims came from government employees and retirees.
In the past year and a half, more than 60,000 of these claims have been disallowed and eliminated from the process, mostly due to technical deficiencies (such as incorrectly identifying the debtor government agency, for example) or for not providing enough evidence. Another 15,000 were transferred to several government agencies, where they are pending resolution in an administrative process of which few details are available.
The attorneys for the Fiscal Control Board and the government asked Carmen for additional documents and information to support her claim. “How are we going to get the evidence if the Department [of Education] is not working?,” she questioned. The process of solving these claims takes place amid the coronavirus pandemic, and before that, during the earthquakes at the beginning of 2020.
“That’s the problem I have with this: there’s an information system. Put that information system to work, find out what they owe us and pay us, because this is a waste of time,” she said.
At the time, Carmen didn’t know that six different claims, all under her name, had been rejected months ago for lack of evidence, according to a registry service that gathers information on claims filed in the bankruptcy proceeding.
This is how thousands of Puerto Ricans are finding their way through the largest government bankruptcy in U.S. history: blindly, in English and without lawyers.
The journey began for them two and a half years ago, with an endless line.
The line that formed on June 28, 2018 began at the security post at the entrance of the federal court in Hato Rey and stretched along the sidewalk of Chardón Avenue. A video on Facebook shows a journalist walking this line, while saying that they are public servants demanding salaries that were promised but never granted, that they have been in line for an hour, that it has to do with the PROMESA law.
That day was the deadline to file claims in the Puerto Rico bankruptcy case. The scene was similar at other drop-off centers that were opened in San Juan, Caguas, Añasco and Ponce: very long lines of people over 60 years old, many unaware about what they had to do with their papers.
“In my case it was in Caguas […] terrible. We got wet and sunburned,” Carmen recalled. She decided to file a claim after hearing rumors that the government had a debt with certain public employees for decades. Several of her colleagues told her that she could be one of those people, so she stood in line and filed her claim in the bankruptcy case.
The debts relate to laws signed decades ago and that mostly granted wage increases that, according to many, never happened. For example, there is the “Romerazo,” a 1979 law signed by then-Gov. Carlos Romeró Barceló, which changed the salary scales for public employees which meant a paycheck increase for many of them. There is also Act 96 of 2002, by former Gov. Sila María Calderón, which granted a $100 monthly pay raise to public employees.
By claiming these debts through the Title III case under PROMESA, thousands of former public employees like Carmen became creditors of the government. The word creditor comes from the Latin credere, which means to lend. The first thing that comes to mind in Puerto Rico’s case is Wall Street and the mutual funds that bought the island’s bonds.
But a creditor is anyone to whom the government owes money, and this also includes people who claim tax refunds, civil claims, services rendered, pension benefits or salaries. Attorney Jessica Méndez Colberg calls them social creditors: public employees, retirees and people who come from vulnerable sectors and who lack the resources to hire lawyers to assist them in a process full of deadlines, in English and with strict compliance rules.
“They were really long lines of elderly people, many of them retired from any one of the agencies,” said Méndez Colberg, who saw the line that formed in Ponce, since the drop-off center was right behind her office.
“Watching that line of people who don’t even truly understand what was going to happen with that document that they’re submitting, standing in these lines under the sun, it’s heartbreaking,” the attorney added.
She said that after filing their claims, these people began to receive letters from the court outlining everything related to the case and, on some occasions, to their claims.
Mariluz Collazo stood in line in Ponce and a few months later, she received a hefty manual by mail with information on her claim and the same phone number that Carmen had already memorized: the one that appears in the letters to get assistance on the case.
“In my house I have a box full of all the documents that they send us,” said Mariluz, a retired teacher from Patillas who claimed salary increases granted under Act 96 from former Gov. Calderón that she never received.
Information about the bankruptcy case comes via letters sent by Prime Clerk, a U.S. based company that operates as a messenger of the federal court. Using technical and legal language, sometimes these letters notify deadlines, hearings and judge decisions, other times they require some type of action in response.
Mariluz refers to them as “verdicts” and the number of letters she has received has led her to believe that her claim was on the right track. It is amazing how they spend so much money on paper for nothing, she muses.
But the letters don’t always bring good news.
A year ago, when hundreds of earthquakes rattled the island, thousands of social creditors received a notification that the lawyers for the Board and the government had objected to their claims. They were required to provide more information and evidence to support their claims, or the court would disallow them.
These notifications continued to arrive in the mail over the past year as the island faced a pandemic. So far, more than 100,000 claims have been objected to because they were duplicates, because they were filed against the wrong debtor, because they were satisfied, because the debt doesn’t exist, or because there was insufficient evidence, among other reasons.
In Mariluz’s case, her claim was objected to because it was deficient as it “fails to provide any basis or supporting documentation” to assert a claim against the government. She had until January 2020 to provide more evidence or her claim would be canceled. Mariluz said that one of her former colleagues, who also received this notification, called the Board’s lawyers to ask for help with the process.
“She spoke to [one of] them and then she said to him: ‘Do you think it’s worth doing all this letter-writing exercise?’ He said, ‘Doñita, do what I tell you, write what I tell you. That money is there.’ And that’s when we got motivated. She told another teacher, the other teacher called me, and that’s when we wrote the letters,” she said.
Mariluz then wrote a letter similar to her friend’s, answering the Board’s objection to her claim. She included information about her 31 years of public service, identified a debt of $75,000 under Act 96 of 2002 and sent her letter before the deadline.
“When they told me, I wasn’t able to type it [on a computer] or do anything decent. I hand wrote the letter, and I had to do it three times,” she said, in reference to the two copies she wrote by hand for the Board’s attorneys in New York and Puerto Rico.
In the bankruptcy case docket, there are hundreds of letters like Mariluz’s. Many are handwritten, accompanied by employment certifications, letters from supervisors attesting to their work, tax returns and all kinds of evidence from former government employees.
Months after the deadline to submit evidence, the court is still getting letters from retirees with information and documents related to claims that, in some cases, have already been disallowed.
Not everyone responded. Cases like that of Mariluz and her friend, who did not accept the initial objection, are a minority. For example, between December 2019 and July 2020 the Board objected to almost 91,000 claims. Out of this number, there was a response to only about 4,000, just over 4%.
Attorney Méndez Colberg believes that many people have been unable to defend themselves in this process because they lack legal representation. “You can simply skip over a deadline,” she said.
There are also people who filed their claim but never got the notice by mail. At least 3,000 claims had problems with their mailing address, court documents show. These claims were disallowed and removed from the process.
Once the Board asks to disallow a claim, Judge Swain has the final word. So far, the court has given way to the Board’s objections, disallowing more than 60,000 claims.
After some delays in the calendar due to the pandemic, Judge Swain began the process of addressing and disallowing tens of thousands of claims last year, sometimes during hearings such as the one Carmen López attended.
A request for a reaction from the Board was not answered as of press time.
Felix Vega doesn’t know much English. His wife, Leticia Flores, is the one who helps him with his claim. When they confirmed his participation in the November 18 hearing, they specified that they needed an interpreter.
The federal court remains closed due to the pandemic. Hearings that took place over the past year have been conducted remotely, through videoconferencing, with the judge and the majority of the attorneys calling in from New York.
The November 18 hearing was even more different. The day’s agenda included hearing claims from social creditors. So, several private rooms at Piloto 151, a coworking space in Hato Rey, were leased to carry out these “satellite,” or remote, hearings. The idea was that Puerto Rico residents would have a place from which to participate in the process and speak with Swain, if necessary.
But neither Carmen, nor Félix, nor any of the people who went to those offices were able to speak to the judge since, according to the staff who met them, none of them were supposed to participate that day.
“We weren’t on the list of the people they summoned,” said Leticia, after leaving the Hato Rey building with her husband. There was a “communication error,” she thought.
Ángel Marrero, a retired teacher, also arrived there that morning after receiving the same letter that Leticia and Carmen’s husband received. “We were told … that this is in stages. Today it was for participants in stage A. I’m in stage B, for example. It means that it wasn’t my turn,” he said, convinced that he was the one who made a mistake.
Just over 200 claims have been selected for discussion in court, less than 1% of the total claims that the Board contested. So far, four satellite hearings have taken place (October 29, November 18 and 20, and January 14).
Parallel to the hearings with Swain, more than 15,000 claims have been channeled to government agencies, through an administrative process called “administrative claim reconciliation.” It is the stage B to which Ángel Marrero referred.
The Fiscal Agency and Financial Advisory Authority (AAFAF, in Spanish) told the Center for Investigative Journalism (CPI, in Spanish) in a written statement that once the Board’s attorneys transfers a claim to this process, “the government entity evaluates and makes an initial determination, which is subject to appeal.”
If the decision is that any payment is made in favor of the claimant, the payments will be made according to what the court dictates “or in the manner that was agreed with the claimant, as the case may be.” Once this happens, the claim will be updated as resolved.
The claims handled at the agencies
–Claims in which the claimant states they are entitled to a retirement pension; qualify for benefits under a retirement program; and/or that the amount of the pension was wrongly calculated: they are remitted and managed by the Retirement Systems Administration.
–Claims in which a right to a tax refund and/or tax credits is claimed: they are sent and handled by the Treasury Department.
–Claims by public employees that seek salaries and benefits owed to public employees: they are referred to the agencies that employ the worker to move ahead with the administrative process.
–Complaints and grievances claim in which the applicant supports their right or benefit in a collective agreement: they are sent to the agencies that employ the worker to move ahead with the administrative process.
So far, only just over 3,000 of these cases have been resolved, while the rest remain pending resolution, amid the pandemic, in agencies such as the Department of Education and the Retirement Systems Administration (ASR, in Spanish), among others.
“In numerical terms, most of the claims that have been submitted to the procedure are those related to pensions, which are handled by the Retirement Systems Administration, in coordination with AAFAF and in consultation with the Board,” the fiscal agency stated. It added that the ASR “had to request additional information from the claimants to be able to address and identify the appropriate administrative process for them.”
Requests for interviews submitted to the ASR and the Department of Education — the agencies with the most pending cases according to a report from last December — were not responded to as of press time. The CPI contacted the Fiscal Control Board, but it also failed to grant an interview to explain and give details of the process.
Like Ángel, Mariluz Collazo is on list B. After sending her letter at the beginning of the year, her claim went to the administrative reconciliation process that is carried out in the agencies. But beyond a notification saying that her claim was in that process, she has not received any other information and does not know what she has to do to keep her claim alive.
“I feel that what they do is drag it out so that people get discouraged,” said Mariluz. For her and thousands of people, this stage represents the last chance to collect through the bankruptcy case and its resolution is in the hands of the same government agencies that have taken decades to recognize and pay these debts.
In the case of Leticia’s husband, Félix Vega, his claim is on another list that includes the claims that will be disallowed and excluded from the bankruptcy case, with the judge’s approval. As of January 2021, there were more than 60,000 of those.
Two and a half years after those very long lines under the sun, the bankruptcy proceeding continues to be a crusade for thousands of social creditors. “Many of my colleagues, government employees who are older than me, with health conditions, may die and never know. Do you understand?,” Mariluz said.
“Sometimes I think that we’re not going to see it, […] that this is going to stay on paper,” she added.
Even so, Mariluz is going for it. She says those in the same boat as her help each other. With a little more optimism, she said: “That was the beauty of it when the letters arrived. Everyone started calling. For example, there were people who called me, and I called someone else. […] Human beings are supportive, and I think that we’ve been supportive in this mess.”
First installment of the Puerto Rico’s Bankruptcy Letters series.
¡APOYA AL CENTRO DE PERIODISMO INVESTIGATIVO!
Necesitamos tu apoyo para seguir haciendo y ampliando nuestro trabajo.