DearColleague.us

Letter

Alexandria Ocasio-Cortez

From the office of:

Alexandria Ocasio-Cortez

Sending Office: Honorable Alexandria Ocasio-Cortez
Sent By:
Claudia.PagonMarchena@mail.house.gov

        Request for Signature(s)

Dear Colleague,

As we approach the two-year anniversary of Hurricane María, I invite you to join a letter that Senator Sanders (I-Vt.) and I are sending to Puerto Rico’s unelected Financial Oversight and Management Board (FOMB) in support of a just economic recovery for
the island, guided by democracy and self-determination, and against the austerity that the board is imposing.

We write to obtain answers from the FOMB regarding its continued pursuit of devastating cuts to Puerto Rico’s health, education, and pensions, including the island’s Medicaid program and the University of Puerto Rico, as well as its economic rationale for
doing so. In addition to calling for the reversal of this austerity agenda, we question the FOMB’s projections of growing public funds available to Wall Street creditors, despite Puerto Rico’s anemic economy, made worse by cuts to the public sector. We also
ask for accountability and transparency regarding what appear to be blatant conflicts of interest among members of the board.

We aim to close this letter by close of business, Friday, September 20th. If you would like to join as a signatory or have any questions, please reach out to Claudia.pagonmarchena@mail.house.gov. 

Sincerely,

Alexandria Ocasio-Cortez

Member of Congress

September 18, 2019
 

The Financial Oversight and Management Board for Puerto Rico
P.O. 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 Rosselló to step down. His administration’s corruption and deeply offensive comments toward
women, LGBT 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 Rosselló 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 FOMB’s 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 nearly
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 FOMB’s 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 percent cut to the pensions of retired public servants who paid for these benefits 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 benefits through years of hard work.

The FOMB’s Fiscal Plan also focuses on producing a significant fiscal 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 FOMB’s first Fiscal
Plan was published, despite there being few changes to the board’s underlying assumptions.[7] Unfortunately, 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 FOMB’s
own long-term estimates indicate that Puerto Rico is able to pay.[8] The FOMB’s 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 profits at the expense of ordinary Puerto Ricans.  

Additionally, we are troubled by increasing evidence of the FOMB’s internal mismanagement and conflicts of interest. The FOMB’s own budget, paid for by Puerto Rico’s taxpayers, amounts to more than $300 million a year—an astounding figure for an institution
promoting far-reaching austerity.[10] By comparison, the U.S. Congressional Budget Office’s annual budget for providing economic analysis of the entire United States is $50.7 million. If the CBO’s budget matched the FOMB’s 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 FOMB’s funds go toward fees for lawyers and consultants who are not subject to any disclosure requirements. In what appears to be blatant disregard for conflict-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 officials in banks that underwrote that debt; and currently maintain familial relations to some of the largest financial institutions
in Puerto Rico.[13] Under federal statute, board members are required to provide financial disclosures and reveal any conflicts of interest. However, we are deeply concerned by the apparent failure to comply with the law. The 2017 financial disclosure documents
of Chairman José B. Carrión, 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 conflicts of interest impossible to assess.

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 you provide the undersigned members of Congress with:

A detailed explanation for the increasing fiscal surplus available to creditors despite the absence of significant changes in the FOMB’s economic assumptions, as well as the board’s economic rationale for cuts to health, education, and pensions.

An analysis of the expected impacts of the FOMB’s proposed budget cuts to health and education expenditures on Puerto Rico’s economic growth trajectory, outmigration, and inequality.

All documents related to the FOMB’s consulting arrangements with entities, such as McKinsey & Company and Citigroup Global Markets Inc., who could financially benefit from an eventual debt repayment deal.

Materials related to the FOMB’s policies on conflicts of interest and other internal measures to avoid financial capture by special interests.

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 financial disclosures of each board member, including details of outside compensation.

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]

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,

[Members of Congress]

 

[1] Acevedo, Nicole. 2019. “Census: U.S. Latino population grows while Puerto Rico sees unprecedented drop.” NBC News. June 20. https://www.nbcnews.com/news/latino/census-u-s-latino-population-grows-while-puerto-rico-sees-n1019496

[2] Stein, Jeff. 2019. “Puerto Rico corruption scandal ripples through Washington as White House, Congress call for greater spending scrutiny.” Washington Post. July 11. https://www.washingtonpost.com/business/2019/07/11/puerto-rico-corruption-scandal-ripples-through-washington/

[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. http://cepr.net/images/stories/reports/puerto­rico-2017-07.pdf

[4] Velázquez, Nydia. 2019. “Velázquez, Menendez, Grijalva, Ocasio-Cortez Ask Oversight Board to Reconsider Cuts to Puerto Rico Healthcare, Education.” August 8. https://velazquez.house.gov/media-center/press-releases/velazquez-menendez-grijalva-ocasio-cortez-ask-oversight-board-reconsider

[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. https://drive.google.com/file/d/13wuVn04–JKMEPKu-u-djZJHqTK-55aV/view

Pierog, Karen. 2019. “Puerto Rico oversight board reaches deal over retiree pensions.” Reuters. June 12. https://www.reuters.com/article/us-usa-puertorico/puerto-rico-oversight-board-reaches-deal-over-retiree-pensions-idUSKCN1TD2RZ

[6] Merling, Lara. 2018. “Puerto Rico’s New Fiscal Plan: Certain pain, Uncertain Gain.” The Philly Inquirer. June 20. https://www.inquirer.com/philly/opinion/commentary/hurricane-maria-puerto-rico-recovery-audit-creditors-20180620.html

[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. https://theintercept.com/2018/09/28/puerto-rico-hurricane-maria-recovery-funds/ 

[9] Members of Congress. 2018. “Letter to Members of the Financial Oversight and Management Board for Puerto Rico.” Received by The Honorable José B. Carrión III, Chairman. December 6. https://cpc-grijalva.house.gov/uploads/Bicameral%20letter%20to%20FOMB.pdf

[10] 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://nymag.com/intelligencer/2019/04/mckinsey-in-puerto-rico.html

[11] Weisbrot, Mark. 2019.” Puerto Rico’s Botched Disaster Relief, Unsustainable Debt, and Economic Failure Linked to its Colonial Status. Los Angeles Times. May 30. https://www.latimes.com/sns-tns-bc-puertorico-pro-20190530-story.html

[12] Walsh, Mary Williams. 2018. “McKinsey Advises Puerto Rico on Debt. It May Profit on the Outcome.” The New York Times. September 26. https://www.nytimes.com/2018/09/26/business/mckinsey-puerto-rico.html

[13] Valentín Ortiz, Luis J. 2018. “PUERTO RICO’S FISCAL CONTROL BOARD: PARALLEL GOVERNMENT FULL OF LAWYERS AND CONSULTANTS.” Centro de Periodismo Investigativo. August 1. http://periodismoinvestigativo.com/2018/08/puerto-ricos-fiscal-control-board-parallel-government-full-of-lawyers-and-consultants/

[14] 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. https://oversightboard.pr.gov/documents/

[15] Merling et al. “Life After Debt in Puerto Rico.”  

[16] 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. https://prstudy.publichealth.gwu.edu/

Konyndyk, Jeremy. 2017. “Hurricane Maria killed 64 Puerto Ricans. Another 1,000 died because the disaster response was inadequate.” Washington Post. December 18. https://www.washingtonpost.com/news/monkey-cage/wp/2017/12/18/hurricane-maria-killed-64-puerto-ricans-another-1000-died-because-the-disaster-response-was-inadequate/

Dear Colleague,

As we approach the two-year anniversary of Hurricane María, I invite you to join a letter that Senator Sanders (I-Vt.) and I are sending to Puerto Rico’s unelected Financial Oversight and Management Board (FOMB) in support of a just economic recovery for
the island, guided by democracy and self-determination, and against the austerity that the board is imposing.

We write to obtain answers from the FOMB regarding its continued pursuit of devastating cuts to Puerto Rico’s health, education, and pensions, including the island’s Medicaid program and the University of Puerto Rico, as well as its economic rationale for
doing so. In addition to calling for the reversal of this austerity agenda, we question the FOMB’s projections of growing public funds available to Wall Street creditors, despite Puerto Rico’s anemic economy, made worse by cuts to the public sector. We also
ask for accountability and transparency regarding what appear to be blatant conflicts of interest among members of the board.

We aim to close this letter by close of business, Friday, September 20th.
If you would like to join as a signatory or have any questions, please reach out to Claudia.pagonmarchena@mail.house.gov. 

Sincerely,

Alexandria Ocasio-Cortez

Member of Congress

September 18, 2019
 

The Financial Oversight and Management Board for Puerto Rico
P.O. 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 Rosselló to step down. His administration’s corruption and deeply offensive comments toward
women, LGBT 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 Rosselló 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 FOMB’s 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 nearly 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 FOMB’s 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 percent cut to the pensions of retired public servants who paid for these benefits 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 benefits through years of hard work.

The FOMB’s Fiscal Plan also focuses on producing a significant fiscal 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 FOMB’s first Fiscal Plan was published, despite there being few changes to the board’s underlying assumptions.[7] Unfortunately, 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 FOMB’s own long-term estimates indicate that Puerto Rico is able to pay.[8] The FOMB’s 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 profits at the expense of ordinary Puerto Ricans.  

Additionally, we are troubled by increasing evidence of the FOMB’s internal mismanagement and conflicts of interest. The FOMB’s own budget, paid for by Puerto Rico’s taxpayers, amounts to more than $300 million a year—an astounding figure for an institution
promoting far-reaching austerity.[10] By comparison, the U.S. Congressional Budget Office’s annual budget for providing economic analysis of the entire United States is $50.7 million. If the CBO’s budget matched
the FOMB’s 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 FOMB’s funds go toward fees for lawyers and consultants who are not subject to any disclosure requirements. In what appears to be blatant disregard for conflict-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 officials in banks that underwrote that debt; and currently maintain familial relations to some of the largest financial institutions
in Puerto Rico.[13] Under federal statute, board members are required to provide financial disclosures and reveal any conflicts of interest. However, we are deeply concerned by the apparent failure to comply
with the law. The 2017 financial disclosure documents of Chairman José B. Carrión, 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 conflicts of interest impossible to assess.

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 you provide the undersigned members of Congress with:

  • A detailed explanation for the increasing fiscal surplus available to creditors despite the absence of significant changes in the FOMB’s economic assumptions, as well as the board’s economic rationale for cuts to health, education, and pensions.
  • An analysis of the expected impacts of the FOMB’s proposed budget cuts to health and education expenditures on Puerto Rico’s economic growth trajectory, outmigration, and inequality.
  • All documents related to the FOMB’s consulting arrangements with entities, such as McKinsey & Company and Citigroup Global Markets Inc., who could financially benefit from an eventual debt repayment deal.
  • Materials related to the FOMB’s policies on conflicts of interest and other internal measures to avoid financial capture by special interests.
  • 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 financial disclosures of each board member, including details of outside compensation.

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]

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,

[Members of Congress]

 


[1] Acevedo, Nicole. 2019. “Census: U.S. Latino population grows while Puerto Rico sees unprecedented drop.” NBC News. June 20.

https://www.nbcnews.com/news/latino/census-u-s-latino-population-grows-while-puerto-rico-sees-n1019496

[2] Stein, Jeff. 2019. “Puerto Rico corruption scandal ripples through Washington as White House, Congress call for greater spending scrutiny.” Washington Post. July 11.

https://www.washingtonpost.com/business/2019/07/11/puerto-rico-corruption-scandal-ripples-through-washington/

[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.
http://cepr.net/images/stories/reports/puerto­rico-2017-07.pdf

[4] Velázquez, Nydia. 2019. “Velázquez, Menendez, Grijalva, Ocasio-Cortez Ask Oversight Board to Reconsider Cuts to Puerto Rico Healthcare, Education.” August 8.

https://velazquez.house.gov/media-center/press-releases/velazquez-menendez-grijalva-ocasio-cortez-ask-oversight-board-reconsider

[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.
https://drive.google.com/file/d/13wuVn04–JKMEPKu-u-djZJHqTK-55aV/view

Pierog, Karen. 2019. “Puerto Rico oversight board reaches deal over retiree pensions.” Reuters. June 12.

https://www.reuters.com/article/us-usa-puertorico/puerto-rico-oversight-board-reaches-deal-over-retiree-pensions-idUSKCN1TD2RZ

[6] Merling, Lara. 2018. “Puerto Rico’s New Fiscal Plan: Certain pain, Uncertain Gain.” The Philly Inquirer. June 20.

https://www.inquirer.com/philly/opinion/commentary/hurricane-maria-puerto-rico-recovery-audit-creditors-20180620.html

[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.

https://theintercept.com/2018/09/28/puerto-rico-hurricane-maria-recovery-funds/
 

[9] Members of Congress. 2018. “Letter to Members of the Financial Oversight and Management Board for Puerto Rico.” Received by The Honorable José B. Carrión III, Chairman. December 6.

https://cpc-grijalva.house.gov/uploads/Bicameral%20letter%20to%20FOMB.pdf

[10] 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://nymag.com/intelligencer/2019/04/mckinsey-in-puerto-rico.html

[11] Weisbrot, Mark. 2019.” Puerto Rico’s Botched Disaster Relief, Unsustainable Debt, and Economic Failure Linked to its Colonial Status. Los Angeles Times. May 30. https://www.latimes.com/sns-tns-bc-puertorico-pro-20190530-story.html

[12] Walsh, Mary Williams. 2018. “McKinsey Advises Puerto Rico on Debt. It May Profit on the Outcome.” The New York Times. September 26.
https://www.nytimes.com/2018/09/26/business/mckinsey-puerto-rico.html

[13] Valentín Ortiz, Luis J. 2018. “PUERTO RICO’S FISCAL CONTROL BOARD: PARALLEL GOVERNMENT FULL OF LAWYERS AND CONSULTANTS.” Centro de Periodismo Investigativo. August 1.

http://periodismoinvestigativo.com/2018/08/puerto-ricos-fiscal-control-board-parallel-government-full-of-lawyers-and-consultants/

[14] 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.
https://oversightboard.pr.gov/documents/

[15] Merling et al. “Life After Debt in Puerto Rico.”  

[16] 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.
https://prstudy.publichealth.gwu.edu/

Konyndyk, Jeremy. 2017. “Hurricane Maria killed 64 Puerto Ricans. Another 1,000 died because the disaster response was inadequate.” Washington Post. December 18.

https://www.washingtonpost.com/news/monkey-cage/wp/2017/12/18/hurricane-maria-killed-64-puerto-ricans-another-1000-died-because-the-disaster-response-was-inadequate/

Related Legislative Issues

Selected legislative information:Civil Rights, Economy, Ethics and Standards, Finance, Government, HealthCare, Labor, Natural Resources, Small Business, Taxes

icon eDC logo e-Dear Colleague version 2.0
 
e-Dear Colleagues are intended for internal House use only.