Committee’s Informative Motion Regarding Kobre & Kim Final Report

On August 20, 2018, the Oversight Board’s investigator, Kobre & Kim, released its Final Report with respect to the factors contributing to Puerto Rico’s fiscal crisis, as well as Puerto Rico’s issuance of debt (the Final Report can be viewed here).

The Committee appreciates the efforts undertaken by the investigator and is continuing to review the final report and, consistent with the court’s “exit plan” order, is actively requesting access to third-party documents collected by the investigator.  However, the Committee is concerned about the possibility that parties may claim that the Final Report “uncovered everything” and that such parties would seek to use the Final Report to prevent further inquiry or as evidence to support the release of claims.

Given its concerns, on September 5, 2018, the Committee filed an Informative Motion regarding the Kobre & Kim Report.  The Informative Motion points out, among other things, that:

  • The Final Report does not address the merits of any claims, including avoidance actions, whether Puerto Rico’s constitutional debt limit was exceeded, or claims against private financial institutions.
  • The general approach of the Final Report is to exonerate potentially culpable parties, including by volunteering conclusions and presumptions that give the impression that there was no wrongdoing.
  • Despite the Final Report’s efforts to exonerate, it still identifies highly troubling conduct by the leadership of GDB, including with respect to swap transactions, GDB’s role as the government’s fiscal agent, the $3.5 billion GO bond offering in March 2014 (though the report does not address potential claims of the Debtors that could have arisen from the circumstances of the GO bond offering).
  • Ultimately, the Final Report is of limited utility because it is impossible for any interested party to follow up on the investigator’s efforts.  For example, the names of interviewees are not provided and interviews were not transcribed (or taken under oath), and the report largely fails to provide citations to documents relied upon by the investigator.

The Committee believes that the findings in Final Report remain subject to further inquiry, and  much more work remains necessary to obtain full transparency in these Title III cases.