President Biden signs Puerto Rico Recovery Accuracy in Disclosures Act
President Joe Biden has signed HR 1192, the “Puerto Rico Recovery Accuracy in Disclosures Act of 2021” or “PRRADA”, which requires professionals employed in debt restructuring cases involving Puerto Rico to file verified statements disclosing their connections with the debtor, creditors, and other interested parties before seeking compensation for their services. The President thanked Representatives Velazquez, Briggs, Raskin, Grijalva, Cicilline, Jayapal, Gonzalez-Colon, Soto, and Swalwell and Senators Menendez, Hirono, Blumenthal, Rubio, Stabenow, Wicker, and Wyden for their leadership after signing.
“Now that the House of Representatives has passed this important bipartisan legislation, our fellow citizens in Puerto Rico are one step closer to benefitting from closing an existing loophole that will bring much-needed transparency,” Senator Marco Rubio (R) of Florida said after the House passed the bill.
In 2016, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), an effort to provide the people of Puerto Rico with a standardized bankruptcy process that would allow the island to restructure its debts, pay off creditors, approve crucial infrastructure projects, and promote economic growth and development.
PRRADA will impose robust disclosure requirements on all of the Puerto Rico Financial Oversight and Management Board’s advisers and consultants, closing the loophole in PROMESA that has disadvantaged the people of Puerto Rico in the island’s debt restructuring process. The legislation will also require attorneys, accountants, and all other professionals involved in the debt restructuring to disclose potential conflicts of interest, ensuring that the people of Puerto Rico have access to the same transparency and disclosure practices required by law in US mainland bankruptcy cases.
“This bill will close an unfair loophole in PROMESA that for too long allowed bankruptcy advisers and consultants to get rich off of worsening economic inequalities in Puerto Rico without having to disclose their conflicts of interest with creditors to whom Puerto Rico owed money. The people of Puerto Rico will finally have the long-overdue transparency they deserve in the debt restructuring process,” added Senator Bob Menendez (D) of New Jersey in a statement joined by Representative Nydia Velazquez (D) of New York and Resident Commissioner Jenniffer Gonzalez-Colon of Puerto Rico.
“By applying a robust disclosure requirement to all PROMESA Title III proceedings and eliminating the double standard facing the people of Puerto Rico, this bill will help to restore confidence that the Board’s bankruptcy advisors do not have their ‘thumb on the scale’ to favor certain debts where they have a self-interest. This bipartisan bill ensures the integrity of the PROMESA process and will bring welcome transparency and confidence in the island’s future,” said Velazquez. Gonzalez-Colon called the act “an important piece in the effort to ensure the restructuring process under PROMESA serves Puerto Rico’s interests.”
The enactment into law of PRRADA comes on the heels of a federal judge approving Puerto Rico’s debt restructuring plan, which consolidates around $33 billion in existing claims. After five years of bankruptcy proceedings, PRRADA’s enactment is crucial to ensuring parties related to all consolidations file their disclosures and guarantee any debt restructuring truly serves the best interests of the people of Puerto Rico.