Last week, ahead of this week\u2019s vote on the PROMESA bailout legislation for Puerto Rico in the U.S. House of Representatives, a commission appointed by Puerto Rico\u2019s government released a preliminary report charging that the Commonwealth violated its Constitution in issuing billions of dollars of its $72 billion debt. \u00a0If the bonds were in fact sold illegally, the report insinuates, then the government shouldn\u2019t have to pay them back.<\/p>\n
In other words, they would punish lenders for the Puerto Rican government\u2019s own mistakes.<\/p>\n
So not only would Puerto Rico\u2019s government get a free pass from its obligations after illegally issuing some of its debt, it would effectively be allowed to stiff good faith bondholders.<\/p>\n
It\u2019s worth emphasizing that the legislative body that created this commission, whose membership includes Puerto Rico legislators with obvious conflicts of interest, authorized the very same bond sales that it now seeks to repudiate.<\/p>\n
That is morally and logically backward, and sounds like a plot characteristic of a lawless dictatorship. \u00a0And for very good reason: \u00a0Shenanigans like this are a tried and true tactic of leftist Latin American countries, rooted in the rhetoric of Cuban Dictator Fidel Castro from 30 years ago<\/a>. \u00a0It has been attempted with varying degrees of success by governments or factions in Brazil, Argentina and Ecuador. \u00a0More recently over in Europe, a similar government-appointed commission made nearly identical claims in Greece<\/a>.<\/p>\n Conspicuously, Puerto Rico\u2019s government has not directed any funding toward this commission that it created a year ago. \u00a0So that raises an obvious question: \u00a0Who is behind this report?<\/p>\n Well, we already know that SEIU was heavily involved in the drafting process, and was one of a number of \u201cstakeholders\u201d to provide \u201cin-kind labor contributions<\/a>.\u201d \u00a0The SEIU, of course, has a vested interest in ensuring that its members receive preferential treatment over good faith bondholders in Puerto Rico, even if Congress has to rewrite the rules to make that possible.<\/p>\n It also has been reported that SEIU has deep ties to <\/a> consulting firms retained by the Garcia Padilla Administration. \u00a0It also is tied directly to the Administration through former president Dennis Rivera, who came under fire earlier this year for running a questionable non-profit in Puerto Rico whose only paid employee is the governor\u2019s brother<\/a>.<\/p>\n What about those \u201cother stakeholders\u201d who contributed?<\/p>\n We can\u2019t know for sure, but there are commonalties between Puerto Rico and other governments that have attempted similar tactics. \u00a0For example, they all had a common ally in Jubilee, the leftist religious organization that has fought to wipe out bondholders in debt disputes across the world, and which has been a staunch advocate before Congress of doing the same to the American savers who lent money to Puerto Rico.<\/p>\n