Lawyer Says Puerto Rico Oversight Council Law Firm Had Conflict

A Puerto Rican attorney has filed a motion accusing the local Puerto Rico Board of Supervisors law firm of a conflict of interest related to its representation of four financial firms that acquired a $384 million loan portfolio with an entity under the control of the board.

Attorney Carlos Lamoutte filed the petition against Puerto Rican law firm O’Neill & Borges in the U.S. District Court in Puerto Rico last week. Puerto Rico Bankruptcy Judge Laura Taylor Swain has since set dates in early June for each party to file response documents.

Attorney Carlos Lamoutte said Puerto Rico Board of Supervisors General Counsel Jaime El Koury, pictured, was “covering up” conflicts of interest at the board’s law firm O’Neill & Borges.

Lamoutte said O’Neill & Borges operated contrary to Puerto Rico’s federal Accuracy of Recovery in Disclosures Act, which requires professional parties to bankruptcy to disclose their material interests in it in a statement. disclosure to court. Companies that fail to do so or that have had dealings with parties involved with material interests cannot be paid.

While the law firm represented the board, it also represented four financial companies that acquired a $384 million loan portfolio from the Puerto Rico Economic Development Bank, which was and remains under the control of the board of directors,” says Lamoutte.

In addition, Lamoutte said, the board’s general counsel, Jaime El Koury, and the board’s independent ethics counselor, Andrea Bonime-Blanc, improperly “covered up” the “conflict of insoluble interests”.

“The Supervisory Board believes that Mr. Lamoutte’s motion is without merit and will respond to the arguments in detail in court,” the board said in a statement. Bonime-Blanc did not immediately respond to a request for comment. El Koury declined to comment.

A person external to communications for O’Neill & Borges said that “the firm’s position regarding the motions presented by attorney Lamoutte will be set out in the document that will be presented to the court”.

“Carlos Lamoutte is to be commended for bringing this potential conflict of interest to the Title III Court and the US Administrator,” said Cate Long, director of the Puerto Rico Clearinghouse. “The sale of loans by the Economic Development Bank of Puerto Rico for a fraction of their value has been a highly contentious issue for several years. Hundreds of businessmen whose loans were sold protested the [board] did not review the contract contrary to their practice of reviewing all contracts over $10 million.”

The board and Bonime-Blanc must explain “why they had no control over this transaction,” she said.

In his 18-page motion, Lamoutte is asking for O’Neill & Borges to be permanently disqualified from representing the board and for the firm to forfeit all payments the board has made to him since he was hired in November 2016. State attorneys Proskauer Rose LLP led the board’s work on the bankruptcy, but O’Neill & Borges served as its local law firm on those issues.

PR Recovery and Development JV, Parliament Capital Management, Parliament High Yield Fund and Island Portfolio Services entered into the agreement to purchase the Economic Development Bank’s commercial loan portfolio in September 2018. They were excluded “in bad faith, knowingly and intentionally”. by O’Neill & Borges from its list of material interested parties submitted by the Supervisory Board to the court pursuant to the PRRADA, Lamoutte told Swain.

The sale of the loan is the subject of separate “intense litigation” because the board did not review or approve the contract between the EDB and the four financial parties before it was executed, contrary to board policy, said Lamoutte.

“Even though the Supervisory Board never reviewed or approved the $384,269,047 loan sale agreement prior to its execution, acts contrary to the Supervisory Board contract review policy and past precedents, the Board of Supervisors was continuously advised by [O’Neill & Borges] not to take any enforcement action in relation to the loan sale agreement, for the benefit of the [four financial firms] who are long-time customers of O’Neill & Borges,” said Lamoutte.

The board told The Bond Buyer: “The Economic Development Bank has taken legal action to reverse the sale of the loan portfolio to [one of the four financial firms]. Given the ongoing litigation, the Supervisory Board did not review the contract in accordance with its contract review policy.”