Puerto Rico’s New Governor Helped Plunge the Island Into Crisis

As Pedro Pierluisi attempts to assume the governorship of Puerto Rico, many questions are swirling about the constitutionality of his appointment. Amidst all the confusion of a constitutional crisis, his recent career as a lawyer and lobbyist has not gotten the attention it deserves.

Now, an examination of invoices that came to light during Puerto Rico’s bankruptcy proceedings have allowed the Public Accountability Initiative to begin to map out his work with the law firm O’Neill & Borges since 2017, and the web of conflicts of interest that emerge from it.

Pierluisi is revealed in the newly uncovered documents as a figure whose advocacy for the Puerto Rican people was hopelessly undermined by his financial links with the same corporate interests that fueled Puerto Rico’s plunge into indebtedness and austerity.

These conflicts of interest raise questions about his ethics and judgment as a lobbyist and lawyer, and about his fitness to serve on behalf of the public at all.

As a lawyer and lobbyist at the law firm O’Neill & Borges since 2017, Pierluisi served as counsel to the federal oversight board in Puerto Rico’s bankruptcy process. An examination of the invoices submitted by the firm in the federal court shows that Pierluisi had access to and reviewed crucial documents around fiscal plans and debt restructuring.

At the same time, he served as a lobbyist for companies such as AES, which not only owns the controversial coal-fired plant in Guayama but is also entangled in the bankruptcy process due to its claims against the Puerto Rico Electric Power Authority (PREPA).

Pierluisi assumed the governorship after two weeks of national revolt in which street demonstrations succeeded in forcing out Governor Ricardo Rosselló. The secretary of state is next in line to succeed the governor, but the previous secretary of state had resigned due to his participation in the infamous chat. Rosselló named Pierluisi as secretary of state shortly before leaving office. This appointment and Pierluisi’s assumption of the governorship has been extremely controversials due to conflicting interpretations of the constitution and Act 7 of 1952, a succession law for the position of governor.

Pierluisi’s trajectory cannot be understood without considering his close relationship with O’Neill & Borges. Pierluisi has worked for the firm for more than twelve years, which he joined after being secretary of justice under the administration of Pedro Rosselló. He was in the firm for ten years (1997-2007) until he launched his candidacy to be Puerto Rico’s resident commissioner in Washington. He was commissioner for two terms (2008-2016) until he ran for governor, but was defeated in the PNP primary by Rosselló. He returned to the firm in January 2017, where he was an attorney until days before Rosselló appointed him as secretary of state and to replace him as governor.

O’Neill and Borges: Law Firm Profited on Both Ends of the Debt Crisis

O’Neill & Borges is one of the most prominent law firms in Puerto Rico. Founded in 1962, the firm stands out for its corporate practice. In November 2016, it was hired by the oversight board as one of its legal advisors. The contract was granted despite the conflicts of interest that O’Neill & Borges has due to their role in the creation of the debt. Since they were hired by the oversight board, the firm has been advising regarding the restructuring of the debt.

An examination of the offering statements of bond issuances of the government and its public corporations shows that O’Neill & Borges participated in a total of 35 bond issuances, from 2001 to 2014. In total, these issues totaled over $28 billion. Public documents do not show how much the firm earned for these transactions.

O’Neill & Borges was involved in bond issuances whose legality has been challenged in federal court by the oversight board. In particular, the firm served as an advisor to the banks that underwrote the issuance of $9 billion in Commonwealth bonds that, according to the oversight board itself, violated the constitutional debt limit. In 2008, O’Neill & Borges also served as counsel to the banks on three Employees’ Retirement System (ERS) bond issuances, the legality of which is being challenged in court on the grounds that ERS did not have the legal authorization to issue the bonds.

Despite its involvement in these deals, O’Neill & Borges was not part of the lawsuit filed by the oversight board last May against the banks and law firms that participated in these allegedly illegal transactions. The lawsuit alleged that the defendants “aided and abetted” Puerto Rico’s Government Development Bank in failing to comply with its fiduciary duties, for unjust enrichment, and for breach of contract. The legal action seeks a range of damages, and is part of a larger effort by the oversight board to recover $1 billion in damages.

O’Neill & Borges may have cut the same deal as Popular, which was not sued despite underwriting the bonds. Popular’s CEO confirmed in May, shortly after the lawsuit was filed, that the bank had signed an agreement with the oversight board to avoid the lawsuit and reach an agreement in confidential proceedings.

Pierluisi’s Dual Roles: Lawyer for the Oversight Board, Lobbyist for a Controversial Creditor

Pierluisi’s role as counsel to the oversight board has not been widely reported, and in the days since news of his appointment first broke doubts have been swirling about whether he was involved. But a review of the invoices that O’Neill & Borges has submitted to the federal court erases any doubt. By April 2019, O’Neill & Borges had collected around $1.6 million for providing counsel to the oversight board. Pierluisi himself had billed about $21,000, at a rate of up to $400 an hour. The invoices show the specific work for which Pierluisi charged. He is identified by his initials “PRP” in invoices (Pedro Rafael Pierluisi).

Example of Pierluisi billing the Fiscal board

All these payments come from public funds.

Pierluisi’s work for the oversight board included the restructuring of the power authority, PREPA. Between March and May 2018, he examined documents related to PREPA’s fiscal plan.

Example of Pierluisi’s billing for examining PREPA’s fiscal plan

While Pierluisi was evaluating PREPA’s fiscal plan, he simultaneously served as a lobbyist for AES Puerto Rico, the owner and operator of the coal-fired plant in Guayama. Although Pierluisi’s certificate as a lobbyist, which includes a list of its clients, has no date, the website of the Senate lobbyists register shows that O’Neill & Borges has served as lobbyists for the AES since February 2017, that is, three months after being hired by the oversight board.

For years AES has faced opposition and protests by community and environmental organizations for the disposal of its coal ash. Protests were widespread in Peñuelas, where the community began to block the passage of trucks that unloaded the ashes at a nearby landfill. The more than one hundred arrests and public outrage caused AES to decide to stop depositing coal ash on the site. In March 2018, they began exporting it to Florida.

The coal ash has been exported to the port of Jacksonville, Florida, and is dumped primarily in two landfills, one in Osceola County, Florida, and another in southern Georgia.

Pierluisi had a serious conflict of interest when representing two opposing parties. On the one hand, Pierluisi was a legal advisor of the oversight board, which represents the government of Puerto Rico in bankruptcy cases, including PREPA’s. On the other hand, Pierluisi was a lobbyist for AES, a company that has two claims in court against PREPA.

In other words, AES is a creditor of PREPA.

The claims, filed on May 22, 2018, allege that as of that month PREPA owed AES Puerto Rico $37.7 million and AES Ilumina $3.2 million. AES Ilumina, another subsidiary of AES, owns and operates a photovoltaic panel project that is also in Guayama.

Pierluisi was evaluating PREPA’s fiscal plan one week before AES filed these claims.

Secondly, PREPA, as a debtor in the case of bankruptcy, can reserve the right to cancel any power purchase agreement when submitting its debt adjustment plan. This means that there is a legal possibility that PREPA can cancel the contract with AES, which would put both parties in a legal confrontation. Therefore, Pierluisi had (and O’Neill & Borges has) a serious conflict of interest by representing these conflicting parties at the same time.

AES is currently negotiating with the government a new contract to, among other things, transition from coal to gas. If Pierluisi manages to remain governor, he would be the highest authority that could approve this contract, a serious conflict of interest.

Pierluisi also reviewed litigation strategies in the case of bankruptcy of the central government and its fiscal plans. In the same way, he examined the agreement of COFINA, which eventually served as the basis for the debt adjustment plan approved by Judge Swain last February and that binds the government of Puerto Rico to paying the debt for the next forty years with the collections of the sales and use tax, the highest of any territory in the US.

Additionally, Pierluisi invoiced for evaluating aspects of the so-called labor reform. The date of this service is March 16, 2018, a period that coincides with the discussion of the second labor reform. The proposal of the oversight board consisted, among other things, of eliminating the Christmas bonus, of reducing sick days and holidays, and of repealing Act 80 of 1976, which protected workers from possible unjustified dismissals. Eventually Rosselló and the Board reached an agreement, eliminating Law 80 and preserving the Christmas bonus.

Pierluisi billed $869 for just over two hours of work on these issues.

On at least two occasions (p. 72 y p. 69) Pierluisi billed for communications with the chief of staff of the oversight board, Rosemarie ‘Mai’ Vizcarrondo. Vizcarrondo was the district director of Pierluisi’s office for eight years when he was a resident commissioner in Washington. In April 2017, she became chief of staff of the oversight board, for which she earns $120,000 annually. Vizcarrondo is the niece of Richard Carrión, executive chairman of the board of directors of Popular Inc. Pierluisi is also the brother-in-law of Jose Carrión III, the chairman of the oversight board.

Pierluisi and Vizcarrondo were recently involved in a dispute regarding the Viewpoint at Roosevelt housing project, the only project approved by the oversight board under Title V of PROMESA. Title V authorizes the classification of construction projects as critical so that the granting of permits is expedited.

Example of billing of communication with Mai Vizcarrondo, the oversight board’s chief of staff and former district director of Pierluisi’s office in Washington.

From the beginning, Viewpoint at Roosevelt was full of irregularities around permits and lease payments. Despite this, the oversight board, through its revitalization coordinator, Noel Zamot, classified the project as a critical one under Title V. This caused the House of Representatives to open an investigation. From this investigation, and from a report published by Valeria Collazo, it was discovered that O’Neill & Borges were lawyers for Viewpoint at Roosevelt and that Pierluisi served as a lobbyist for the project. It was also announced that the construction company that would develop the project is Desarrollos Metropolitanos, whose president is José R. Vizcarrondo, former member of the board of directors of Popular Inc. and brother of Mai Vizcarrondo.

Pierluisi allegedly lobbied in the legislature to stop the investigation. When confronted at the hearing last Friday, he denied the facts.

Pierluisi’s many conflicts of interest represent the continuity of all the corruption that the Rosselló administration was implicated in. Though he may succeed in becoming governor, someone so focused on leveraging his political relationships for profit, rather than serving the people of Puerto Rico, is not fit to serve in the position.