Finra fined UBS AG's Puerto Rican unit $7.5 million and ordered it to pay $11 million in restitution to clients on Tuesday for allowing customers to borrow against risky Puerto Rican securities. UBS allowed customers to borrow against accounts largely consisting of Puerto Rican closed-end funds. In August 2013, a market shock caused the value of these assets to plummet, forcing UBS's customers to incur significant losses to meet the bank's margin calls. Also on Tuesday, the Securities and Exchange Commission charged UBS Puerto Rico for failing to supervise a former broker. A UBS spokeswoman could not be reached for comment. The fines come as Puerto Rican officials press U.S. senators to allow the U.S. commonwealth to access Chapter 9 of the bankruptcy code. The island's governor said in June that the island wouldn't be able to manage its heavy debt burden.
ByAdinolfi
UBS Puerto Rico unit pays $18.5 million in Finra settlement
Wednesday, September 30, 2015
UPDATE 2-UBS to pay $33.5 million for Puerto Rico fund abuses
A unit of UBS AG on Tuesday agreed to pay almost $34 million to settle charges from two U.S. regulators that it failed to supervise the sale of Puerto Rican closed-end mutual funds it sponsored to clients in the U.S. territory.
The U.S. Securities and Exchange Commission also said it sued a former financial adviser at UBS Financial Services Inc of Puerto Rico, claiming he misled investors who bought $50 million of shares in the funds, which invested heavily in Puerto Rico municipal bonds.
Without admitting or denying guilt, the UBS unit agreed to pay the Financial Industry Regulatory Authority $7.5 million for failing to have systems that monitored whether sales were suitable to customers' risk objectives and goals. FINRA said it also ordered the Puerto Rican unit to pay about $11 million in restitution to 165 customers who lost money on the funds.
FINRA, Wall Street's industry-funded watchdog, said that UBS failed to monitor the combination of leverage and concentrations of the funds in customers' accounts.
Simultaneously, the U.S. SEC said it will collect $15 million in disgorgement, interest and penalties from UBS of Puerto Rico that will be put into a fund for investors it had harmed.
UBS spokeswoman Karina Byrne said the bank is pleased to have resolved the regulatory matters, which were initiated in early 2014.
"We remain dedicated to serving our (Puerto Rico) customers during this difficult economic time for the Commonwealth," she wrote in an e-mail.
The SEC said former branch manager Ramiro L. Colon III agreed to pay a $25,000 penalty and be suspended from a supervisory role for one year.
The SEC also said it filed a federal complaint in Puerto Rico against former broker Jose Ramirez, 56, accusing him of convincing clients to borrow money from UBS Bank USA, in Utah, to finance purchases of the non-exchange traded closed-end mutual funds. It alleges that Ramirez earned at least $2.8 million for funds clients bought with their credit lines but evaded detection for the practice by having them transfer money to an outside bank before purchasing the funds.
FINRA said Ramirez misled investors about the safety of the strategy by failing to disclose that UBS could make margin calls and sell some of their portfolio at a loss if their collateral fell. It also said he allowed their accounts to become too highly concentrated in Puerto Rican securities.
The Puerto Rican bond market declined in 2013, leading to at least $37 million in margin calls for Ramirez's clients.
Guillermo Ramos-Luiña, a lawyer for Ramirez, declined comment.
UBS's Byrne declined to comment on the suit against Ramirez, who was fired in January 2014.
UBS is still defending itself against hundreds of arbitration claims that clients filed with FINRA, which collectively seek more than $900 million in damages.
Some of the funds lost half to nearly two-thirds of their value between March 2011 and October 2013, amid fears about defaults in Puerto Rico's debt.
The case is Securities and Exchange Commission v. Ramirez, U.S. District Court, District of Puerto Rico, No. 15-02365. (Reporting by Nate Raymond and Suzanne Barlyn in New York, additional reporting by Jed Horowitz; editing by David Gregorio and Diane Craft)
(Changes headline; adds information on UBS settlement with regulators and on the SEC lawsuit)
By Nate Raymond and Suzanne Barlyn
UPDATE 2-UBS to pay $33.5 million for Puerto Rico fund abuses
The U.S. Securities and Exchange Commission also said it sued a former financial adviser at UBS Financial Services Inc of Puerto Rico, claiming he misled investors who bought $50 million of shares in the funds, which invested heavily in Puerto Rico municipal bonds.
Without admitting or denying guilt, the UBS unit agreed to pay the Financial Industry Regulatory Authority $7.5 million for failing to have systems that monitored whether sales were suitable to customers' risk objectives and goals. FINRA said it also ordered the Puerto Rican unit to pay about $11 million in restitution to 165 customers who lost money on the funds.
FINRA, Wall Street's industry-funded watchdog, said that UBS failed to monitor the combination of leverage and concentrations of the funds in customers' accounts.
Simultaneously, the U.S. SEC said it will collect $15 million in disgorgement, interest and penalties from UBS of Puerto Rico that will be put into a fund for investors it had harmed.
UBS spokeswoman Karina Byrne said the bank is pleased to have resolved the regulatory matters, which were initiated in early 2014.
"We remain dedicated to serving our (Puerto Rico) customers during this difficult economic time for the Commonwealth," she wrote in an e-mail.
The SEC said former branch manager Ramiro L. Colon III agreed to pay a $25,000 penalty and be suspended from a supervisory role for one year.
The SEC also said it filed a federal complaint in Puerto Rico against former broker Jose Ramirez, 56, accusing him of convincing clients to borrow money from UBS Bank USA, in Utah, to finance purchases of the non-exchange traded closed-end mutual funds. It alleges that Ramirez earned at least $2.8 million for funds clients bought with their credit lines but evaded detection for the practice by having them transfer money to an outside bank before purchasing the funds.
FINRA said Ramirez misled investors about the safety of the strategy by failing to disclose that UBS could make margin calls and sell some of their portfolio at a loss if their collateral fell. It also said he allowed their accounts to become too highly concentrated in Puerto Rican securities.
The Puerto Rican bond market declined in 2013, leading to at least $37 million in margin calls for Ramirez's clients.
Guillermo Ramos-Luiña, a lawyer for Ramirez, declined comment.
UBS's Byrne declined to comment on the suit against Ramirez, who was fired in January 2014.
UBS is still defending itself against hundreds of arbitration claims that clients filed with FINRA, which collectively seek more than $900 million in damages.
Some of the funds lost half to nearly two-thirds of their value between March 2011 and October 2013, amid fears about defaults in Puerto Rico's debt.
The case is Securities and Exchange Commission v. Ramirez, U.S. District Court, District of Puerto Rico, No. 15-02365. (Reporting by Nate Raymond and Suzanne Barlyn in New York, additional reporting by Jed Horowitz; editing by David Gregorio and Diane Craft)
(Changes headline; adds information on UBS settlement with regulators and on the SEC lawsuit)
By Nate Raymond and Suzanne Barlyn
UPDATE 2-UBS to pay $33.5 million for Puerto Rico fund abuses
UBS Unit to Pay $34 Million in Settlements Over Puerto Rico Bond Funds
A unit of UBS Group AG agreed to pay roughly $34 million in settlements with U.S. regulators regarding the sale of Puerto Rico bond funds that plunged in value in recent years.
Tuesday’s settlements come as Puerto Rico’s financial crisis is drawing increased scrutiny from U.S. lawmakers and regulators. A measure to establish more robust federal oversight over Puerto Rico’s mutual-fund industry was introduced in Congress last weekand a Senate committee held a hearing on Puerto Rico’s financial problems on Tuesday.
UBS Financial Services Inc. of Puerto Rico agreed to pay $15 million to settle charges from the Securities and Exchange Commission, which said the unit failed to supervise a former broker who had customers invest borrowed money in the bond funds. The SEC said the money will be placed into a fund for investors who had losses.
The Financial Industry Regulatory Authority, which oversees securities firms, also said the UBS unit would pay a $7.5 million fine for failure to supervise, and $11 million in restitution to 165 customers who had losses on their funds.
The settlements are in line with other recent enforcement action by the SEC, which has focused on supervisory failures, said Elaine Greenberg, partner in the securities litigation, investigations and enforcement practice at Orrick Herrington & Sutcliffe LLP.
The SEC is “continuing to pursue actions against broker-dealer firms with regards to their policies and procedures, and whether or not those policies and procedures are reasonably designed to prevent and detect violations of federal securities law,” Ms. Greenberg said. She previously was head of the SEC’s specialized unit on municipal securities and public pensions.
A UBS spokeswoman said: “We’re pleased to have resolved these matters with the SEC and Finra with respect to separate inquiries initiated in early 2014. We remain dedicated to serving our customers during this difficult economic time for the commonwealth.”
Separately, the SEC said it sued the former broker, Jose Ramirez Jr., in federal court. It alleges Mr. Ramirez increased his compensation by at least $2.8 million by having customers improperly borrow money to invest in the Puerto Rico bond funds.
In addition, a former branch manager, Ramiro L. Colon III, agreed to pay a $25,000 penalty and be suspended from supervisory roles for a year. Mr. Colon is currently employed by UBS in Miami, according to his broker records.
An attorney for Mr. Ramirez, who was fired by UBS in early 2014, said he was examining the lawsuit and had no further comment.
Hundreds of investors who owned the bond funds sold by UBS have filed legal claims with Finra seeking to recoup their losses. UBS has settled some of the cases, at times for millions of dollars. In cases that made it to a hearing, Finra arbitrators have awarded damages in six of them and found in favor of UBS in two cases, according to UBS.
The funds were popular among island residents in part due to generous tax advantages. Many investors say they invested in the funds because their UBS brokers told them the funds, which were heavily invested in Puerto Rico municipal securities, were safe.
Puerto Rico has been facing a sluggish economy and high unemployment for years, and officials under Gov. Alejandro Garcia Padilla are seeking to restructure the island’s $72 billion debt load. Mr. Garcia Padilla has called the island’s debt unpayable, and many Puerto Rico bonds are trading well below face value.
—Aaron Kuriloff contributed to this article.
Settlements stem from former broker who had customers invest borrowed money in the funds
ByMike Cherney
UBS Unit to Pay $34 Million in Settlements Over Puerto Rico Bond Funds
Tuesday, September 29, 2015
Moodys Weak economy and upcoming legal battles increase asset risk at Puerto Ricos banks
Puerto Rico's banks can withstand the island's defaults, but the weak economy and upcoming legal battles will expose them to greater asset risk, said Moody's Investors Service.
In a new report, Moody's said Puerto Rico's continuing economic contraction and fiscal crisis could lead to deteriorating asset quality at the island's banks. Moody's analysts said the banks' consolidated non-performing assets are already extremely high relative to their total gross loans and other real estate owned - currently, 8.7% at Banco Popular de Puerto Rico, 10.3% at Banco Santander Puerto Rico, and 12.4% at FirstBank Puerto Rico.
In a new report, Moody's said Puerto Rico's continuing economic contraction and fiscal crisis could lead to deteriorating asset quality at the island's banks. Moody's analysts said the banks' consolidated non-performing assets are already extremely high relative to their total gross loans and other real estate owned - currently, 8.7% at Banco Popular de Puerto Rico, 10.3% at Banco Santander Puerto Rico, and 12.4% at FirstBank Puerto Rico.
"Despite their best efforts, the banks in Puerto Rico are still holding a significant number of problem loans in their portfolios," said Moody's Vice President Joseph Pucella. "The longer the island stays in this recession, the higher the chances are that its banks will experience further asset quality deterioration."
On 1 September, Moody's downgraded the standalone baseline credit assessments (BCA) of Banco Santander Puerto Rico (issuer rating Baa2 stable, BCA ba3), Banco Popular de Puerto Rico (issuer rating B2 negative, BCA b1) and FirstBank Puerto Rico (issuer rating Caa1 negative, b3). Moody's said the negative outlooks for Popular and FirstBank reflected their vulnerability to further economic deterioration. While Santander's Puerto Rico unit also shares that vulnerability, the bank's outlook remains stable, benefitting from its connection with Santander's US affiliate, which has a stable outlook.
Though the island's public sector defaults will force its banks to incur sizeable losses, Moody's said these losses will be manageable given their strong capital levels. However, Puerto Rico's attempts to restructure its public debt could bring further challenges for its banks.
While Puerto Rico's recently announced debt restructuring proposal aims to pay down the island's public debt in an orderly fashion and limit damage to the economy, Moody's said the potential for protracted litigation and a deepening recession could have negative credit implications for the island's banks.
"Even with this proposal on the table, it's going to be difficult for Puerto Rico to avoid a long legal battle," said Moody's Vice President Joseph Pucella. "Should the island's financial turmoil spark a deeper recession and higher unemployment, we expect the banks will start taking bigger hits."
Puerto Rico Should Adopt Enterprise Zones, Not Austerity Tax Hikes
Puerto Rico is on the verge of a debt-driven collapse in many of its basic governmental structures. This problem is made worse by the fact that Puerto Rican municipalities, unlike mainland cities and counties, have no ability to restructure using federal bankruptcy law.
But Puerto Rico's problems go even deeper. If these issues are to be avoided in the future, the island must transform from a black hole of capital to a magnet for capital.
Some think the solution lies in tax increases. That would be like giving poison to a dying man.
The best way to fix what ails San Juan is to turn the entire island of Puerto Rico into an enterprise zone.
Initially conceived by the late, great Jack Kemp, enterprise zones are pockets of pro-growth nirvana (especially on tax policy) strategically placed inside economic disaster areas.
What might some elements of a Puerto Rican enterprise zone look like?
Business tax rates. The United States has the highest business tax rates in the developed world (35 percent for corporations, and as high as 43.4 percent for unincorporated firms). There's no reason this shouldn't be 15 percent or even lower in Puerto Rico.
Personal tax rates. You can't have Puerto Rican businesses without Puerto Rican jobs. So the best workers should be attracted to the island by a low tax rate on wages (15 percent or less), a FICA tax holiday, or both.
Capital gains. We want to encourage capital into Puerto Rico, and that means investing in start up ventures and other ownership ventures. To encourage this, Puerto Rico should be a capital gains tax free zone. Even more to the point, there should be no "death tax" in Puerto Rico.
Business fixed investment. Capital investment in Puerto Rico also means buying the hard assets which become the capital stock a growing economy needs. That's why Puerto Rico ought to benefit from 100 percent full business expensing for all the computers, machinery, and buildings investors want to deploy. This would move Puerto Rico away from the slow-deduction "depreciation" regime it labors under today.
If this enterprise zone concept, or anything close to it, was put into place, Puerto Rico would become THE place to do business in America.
It may be in the Caribbean, but it would sure start to look and feel a lot like Hong Kong.
Puerto Rico Should Adopt Enterprise Zones, Not Austerity Tax Hikes
No federal financial control board for Puerto Rico
The Senate Committee on Finance will hold hearings on Puerto Rico at the end of September. The subject of a financial control board will be on the table. Rep. Jeff Duncan (R-S.C.), Puerto Rico bondholders and the economists on their payroll are clamoring for a federal financial control board (FFCB). It probably won't happen because it would not be in the interest of the other stakeholders. A local financial control board would be more in line with the interest of Puerto Rico residents and the federal government.
The Puerto Rico pro-statehood movement is against an FFCB. Favoring the FFCB would mean accepting that Puerto Ricans cannot deal with their own issues. This is not the sort of calling card you want if you plan to demand statehood from Congress and obtain two senators and five congressmen who would delve into the issues of the nation as a whole. To the extent that the statehood movement expects to win the 2016 elections, an FFCB would mean that they do not trust themselves as a government without federal tutelage. A study on Puerto Rico's current fiscal challenges by the Congressional Research Service states: "The independence of U.S. state governments to set their own fiscal paths has thus been linked to an expectation that those governments take responsibility for their finances."
The pro-commonwealth movement is also against an FFCB because this would be a federal intervention that would shatter the idea that the commonwealth is a sui generis bilateral compact. Instead, the commonwealth would look like one of the "home rule" arrangements that the British Empire structured for its colonies. And what the metropolis gives, the metropolis can take away.
Meanwhile, the federal government does not cherish the unenviable position that an FFCB would put it into. An FFCB was successful for the District Columbia, but this effort included a bailout in which the federal government assumed some of the D.C.'s liabilities related to pensions and judicial obligations, and also increased the federal Medicaid contribution. Moreover, Puerto Rico is a more complex situation that requires much more than a good handle on tax revenues and government expenditures. Puerto Rico needs economic growth and debt discounts so that its debt load becomes manageable.
The federal government could pursue two courses of actions with a Puerto Rico FFCB. One would be to squeeze island residents until they are bled dry. There are precedents for this: The U.S. invaded Haiti in 1915 and took over customs in order to collect debt for American banks. However, such brazen imperialism is now out of fashion and impractical, particularly if pursued against fellow U.S. citizens who can move at will to the continental U.S.
The other course of action for the FFCB would be to negotiate with the largest financial institutions in the United States and obtain discounts in Puerto Rico debt that are fair to all stakeholders and would make the debt sustainable. This was the role played by the state of Michigan with respect to Detroit's debt. Michigan steered the city of Detroit through the Chapter 9 bankruptcy process and deep discounts to creditors.
It is probable that the federal government would rather leave the business of negotiating debt discounts to the Puerto Rico government. To the extent possible, the federal government should leave to a court the determination that the debt discounts required would share the burden fairly between creditors and residents.
A local Puerto Rico financial control board has many shortcomings, particularly how it would guarantee continuity across different government administrations. Theoretically, the law creating the local financial control board could be repealed. However, the pitfalls of a federal FCB are even larger. The island does not need an FFCB; it needs the tools to deal with the crisis, such as extending to Puerto Rico the provisions of Chapter 9 of the Bankruptcy Code available to the 50 states. And Puerto Rico needs to be allowed to deal with its own problems.
Feliciano is an economist and president of Advantage Business Consulting.
By Vicente Feliciano
No federal financial control board for Puerto Rico
The Puerto Rico pro-statehood movement is against an FFCB. Favoring the FFCB would mean accepting that Puerto Ricans cannot deal with their own issues. This is not the sort of calling card you want if you plan to demand statehood from Congress and obtain two senators and five congressmen who would delve into the issues of the nation as a whole. To the extent that the statehood movement expects to win the 2016 elections, an FFCB would mean that they do not trust themselves as a government without federal tutelage. A study on Puerto Rico's current fiscal challenges by the Congressional Research Service states: "The independence of U.S. state governments to set their own fiscal paths has thus been linked to an expectation that those governments take responsibility for their finances."
The pro-commonwealth movement is also against an FFCB because this would be a federal intervention that would shatter the idea that the commonwealth is a sui generis bilateral compact. Instead, the commonwealth would look like one of the "home rule" arrangements that the British Empire structured for its colonies. And what the metropolis gives, the metropolis can take away.
Meanwhile, the federal government does not cherish the unenviable position that an FFCB would put it into. An FFCB was successful for the District Columbia, but this effort included a bailout in which the federal government assumed some of the D.C.'s liabilities related to pensions and judicial obligations, and also increased the federal Medicaid contribution. Moreover, Puerto Rico is a more complex situation that requires much more than a good handle on tax revenues and government expenditures. Puerto Rico needs economic growth and debt discounts so that its debt load becomes manageable.
The federal government could pursue two courses of actions with a Puerto Rico FFCB. One would be to squeeze island residents until they are bled dry. There are precedents for this: The U.S. invaded Haiti in 1915 and took over customs in order to collect debt for American banks. However, such brazen imperialism is now out of fashion and impractical, particularly if pursued against fellow U.S. citizens who can move at will to the continental U.S.
The other course of action for the FFCB would be to negotiate with the largest financial institutions in the United States and obtain discounts in Puerto Rico debt that are fair to all stakeholders and would make the debt sustainable. This was the role played by the state of Michigan with respect to Detroit's debt. Michigan steered the city of Detroit through the Chapter 9 bankruptcy process and deep discounts to creditors.
It is probable that the federal government would rather leave the business of negotiating debt discounts to the Puerto Rico government. To the extent possible, the federal government should leave to a court the determination that the debt discounts required would share the burden fairly between creditors and residents.
A local Puerto Rico financial control board has many shortcomings, particularly how it would guarantee continuity across different government administrations. Theoretically, the law creating the local financial control board could be repealed. However, the pitfalls of a federal FCB are even larger. The island does not need an FFCB; it needs the tools to deal with the crisis, such as extending to Puerto Rico the provisions of Chapter 9 of the Bankruptcy Code available to the 50 states. And Puerto Rico needs to be allowed to deal with its own problems.
Feliciano is an economist and president of Advantage Business Consulting.
By Vicente Feliciano
No federal financial control board for Puerto Rico
Saturday, September 26, 2015
Meet Puerto Rico to pursue $150M in group biz
Meet Puerto Rico, the organization in charge of bringing groups and conventions to the island will purse $150 million a year in economic benefits related to meetings and conventions for Puerto Rico through 2017, reaching for a 30 percent increase in market share by the end of the two-year period, organization President Milton Segarra said Thursday.
“Our vision continues to position Puerto Rico as one of the preferred group and convention destinations of the Americas,” said Segarra. “Our mission is to be a leading Destination Marketing Organization (DMO), promoting our unique group and convention experiences, through branding, selling and services.”
Segarra unveiled the two-year blueprint during Meet Puerto Rico’s annual meeting.
To generate further demand, Segarra said the implementation of a new sales and business model will focus on increasing citywide and convention center bookings, sales team expansion into new markets and industries as well as increased participation in trade shows, client events and sales missions.
Key branding programs to extend the brand include deploying a global consistent message, leverage social media and other technologies to increase awareness, drive website visits and generate engagement by developing relevant content and leveraging third party information, he said.
“These integrated branding programs will be complemented by aggressive public relations social media programs and input from the Customer Advisory Board (CAB),” he said.
Meet Puerto Rico will launch the redesigned Ambassadors Program as well as partner locally with organizations focused on economic development for Puerto Rico. An expanded member engagement program will include evolving the Member Affairs Department composition to include stakeholders, MPR Supporters and students. An updated members section on the website will provide tools to help members with their daily outreach and education, he added.
“Meet Puerto Rico is a positive disruptor in the industry. We are always seeking new and innovative ways to keep Meet Puerto Rico in front of the trends impacting planners — and ultimately bookings to Puerto Rico,” said Segarra. “We are confident that with our new two-year innovative and strategic plan, we will continue along the same aggressive growth we have shown this past year.”
Under the fully launched new business program, the Brand Sales teams have solicited new accounts for the destination, conducted sales calls and appointments with key clients and generated leads for the destination, he said.
Meet Puerto Rico began the first quarter of the fiscal year 2015-16 on strong footing with more than 40 new bookings secured, representing more than 30,000 room nights for years 2015 through 2018. Groups range from multinational companies to medical, educational conferences and sporting events, among others.
“Our new strategic plan responds to our need of engaging all the tourism industry, stakeholders and our community in vitalizing Puerto Rico as a leading and innovative destination,” said Peter Hopgood, chairman of the Meet Puerto Rico Board of Directors.
“I am positive that the success of this collaborative plan will be reflected directly in the growth of the island’s economy,” Hopgood said.
Meet Puerto Rico to pursue $150M in group biz
“Our vision continues to position Puerto Rico as one of the preferred group and convention destinations of the Americas,” said Segarra. “Our mission is to be a leading Destination Marketing Organization (DMO), promoting our unique group and convention experiences, through branding, selling and services.”
Segarra unveiled the two-year blueprint during Meet Puerto Rico’s annual meeting.
To generate further demand, Segarra said the implementation of a new sales and business model will focus on increasing citywide and convention center bookings, sales team expansion into new markets and industries as well as increased participation in trade shows, client events and sales missions.
Key branding programs to extend the brand include deploying a global consistent message, leverage social media and other technologies to increase awareness, drive website visits and generate engagement by developing relevant content and leveraging third party information, he said.
“These integrated branding programs will be complemented by aggressive public relations social media programs and input from the Customer Advisory Board (CAB),” he said.
Meet Puerto Rico will launch the redesigned Ambassadors Program as well as partner locally with organizations focused on economic development for Puerto Rico. An expanded member engagement program will include evolving the Member Affairs Department composition to include stakeholders, MPR Supporters and students. An updated members section on the website will provide tools to help members with their daily outreach and education, he added.
“Meet Puerto Rico is a positive disruptor in the industry. We are always seeking new and innovative ways to keep Meet Puerto Rico in front of the trends impacting planners — and ultimately bookings to Puerto Rico,” said Segarra. “We are confident that with our new two-year innovative and strategic plan, we will continue along the same aggressive growth we have shown this past year.”
Under the fully launched new business program, the Brand Sales teams have solicited new accounts for the destination, conducted sales calls and appointments with key clients and generated leads for the destination, he said.
Meet Puerto Rico began the first quarter of the fiscal year 2015-16 on strong footing with more than 40 new bookings secured, representing more than 30,000 room nights for years 2015 through 2018. Groups range from multinational companies to medical, educational conferences and sporting events, among others.
“Our new strategic plan responds to our need of engaging all the tourism industry, stakeholders and our community in vitalizing Puerto Rico as a leading and innovative destination,” said Peter Hopgood, chairman of the Meet Puerto Rico Board of Directors.
“I am positive that the success of this collaborative plan will be reflected directly in the growth of the island’s economy,” Hopgood said.
Meet Puerto Rico to pursue $150M in group biz
Sheraton casino to close in Puerto Rico's historic district
Another casino is closing in Puerto Rico as the U.S. territory struggles through nine years of economic stagnation.
A spokeswoman for Starwood Hotels & Resorts said Friday that the Sheraton Old San Juan Hotel & Casino will be sold to an affiliate of Tishman Hotel Corporation. The hotel is located in the historic district of Puerto Rico's capital.
Officials said the casino will be turned into retail space. They said leases are being negotiated and that details will be released soon.
Starwood said the casino will be closed to ensure the hotel's financial stability. It would be the eighth casino to close in Puerto Rico in the past five years.
The company did not say how many employees would be affected by the sale.
Sheraton casino to close in Puerto Rico's historic district
Puerto Rico working group plans to file control board bill in two weeks
A Puerto Rico working group, composed of top government officials, plans to officially file legislation to create a financial control board in about two weeks, said Victor Suarez, the governor's chief of staff.
The financial control board, a key recommendation from a fiscal and economic growth plan released in September, would have oversight over most government entities.
There is a draft of the legislation "already, although there are legal (analyses) and other issues still pending," Suarez said after a meeting with lawmakers late Thursday, during which the group presented an overview of the legislation.
"We are talking of about two weeks to present it," Suarez said. "We expect to begin formal negotiations with creditors in October, and we should be presenting the legislation at the beginning of October."
Puerto Rico, which has a total of $72 billion in debt, is gearing up for debt restructuring talks. Debt negotiations may begin while the bill moves through the legislative process, said Melba Acosta, president of the Government Development Bank.
Acosta had said earlier that she expected to begin debt restructuring talks in mid-October. Puerto Rico is seeking a single, comprehensive exchange transaction.
The control board would have five members who would serve for staggered four-year terms, according to the fiscal and economic growth plan.
"There are some names that have been mentioned, but no determination as to who would be the members has been made," Suarez said. "The governor will be naming the members, and the Senate would confirm them, although the latter aspect is still under discussion."
The members must have at least 15 years of experience in the financial world or related areas, and cannot have been public employees during the last five years, said Puerto Rico Justice Secretary Cesar Miranda, a member of the working group.
"There could be recommendations from the federal government," Miranda said. "Creditors should be at least allowed to consent that the members being appointed are people with integrity."
Puerto Rico Governor Alejandro Garcia Padilla shocked investors in June when he said the island's debt was unpayable, and the U.S. commonwealth in August skipped most of the payment on a bond. (Reporting by a contributor in San Juan; writing by Jessica DiNapoli; Editing by Christian Plumb)
Puerto Rico working group plans to file control board bill in two weeks
The financial control board, a key recommendation from a fiscal and economic growth plan released in September, would have oversight over most government entities.
There is a draft of the legislation "already, although there are legal (analyses) and other issues still pending," Suarez said after a meeting with lawmakers late Thursday, during which the group presented an overview of the legislation.
"We are talking of about two weeks to present it," Suarez said. "We expect to begin formal negotiations with creditors in October, and we should be presenting the legislation at the beginning of October."
Puerto Rico, which has a total of $72 billion in debt, is gearing up for debt restructuring talks. Debt negotiations may begin while the bill moves through the legislative process, said Melba Acosta, president of the Government Development Bank.
Acosta had said earlier that she expected to begin debt restructuring talks in mid-October. Puerto Rico is seeking a single, comprehensive exchange transaction.
The control board would have five members who would serve for staggered four-year terms, according to the fiscal and economic growth plan.
"There are some names that have been mentioned, but no determination as to who would be the members has been made," Suarez said. "The governor will be naming the members, and the Senate would confirm them, although the latter aspect is still under discussion."
The members must have at least 15 years of experience in the financial world or related areas, and cannot have been public employees during the last five years, said Puerto Rico Justice Secretary Cesar Miranda, a member of the working group.
"There could be recommendations from the federal government," Miranda said. "Creditors should be at least allowed to consent that the members being appointed are people with integrity."
Puerto Rico Governor Alejandro Garcia Padilla shocked investors in June when he said the island's debt was unpayable, and the U.S. commonwealth in August skipped most of the payment on a bond. (Reporting by a contributor in San Juan; writing by Jessica DiNapoli; Editing by Christian Plumb)
Puerto Rico working group plans to file control board bill in two weeks
Puerto Rico Sends Reassurance as Debt Talks Poised to Begin
Puerto Rico’s pledge to take the constitutional priority of its general-obligation bonds in consideration is seen as a message that the commonwealth is willing to work with investors as debt restructuring talks begin.
“It’s an important step for them just to reinforce that there are rules and that they know that there are rules and that they’re going to be trying to work around them with bondholders,” said Matt Fabian, a partner at Concord, Massachusetts-based Municipal Market Analytics. “Maybe that works, maybe it doesn’t.”
Administration officials tasked with reducing the island’s debt load or suspending debt-service payments met Thursday with Governor Alejandro Garcia Padilla and lawmakers to develop guidelines for a potential voluntary exchange of existing debt for new bonds with possible security improvements, according to a document released late Thursday. Those principles include seeking to take into account the priorities of the debt that creditors hold.
Puerto Rico has $13 billion of general-obligation debt outstanding, which the island’s constitution stipulates must be repaid first. Other securities are backed by specific revenues and lack that protection. Acknowledging that it would seek to respect the constitutional priority of its general obligations may help Puerto Rico in the future when it looks to borrow through the capital markets, said Fabian.
Puerto Rico’s government and its advisers said on Sept. 9 that a proposal to pare the commonwealth’s debt would be released in a few weeks. The government plans to start meeting with investors by mid-October to begin negotiations.
Puerto Rico has already initiated talks with advisers to bondholders of Government Development Bank debt, seeking to potentially exchange those obligations for new securities. About $336 million of GDB debt matures Dec. 1.
Here’s a list of the island’s biggest bond issuers, how much long-term debt they have, and when major monthly payments are due, according to data compiled by Bloomberg.
General-obligations: $13 billion. The debt backed by the commonwealth’s full faith and credit. The island’s constitution says general obligations must be repaid before other expenses. Puerto Rico owes $357 million of interest in January and an additional $805 million of principal and interest is due July 1.
Puerto Rico Sales Tax Financing Corp.: $15.2 billion. The bonds, known by the Spanish acronym Cofinas, are repaid from dedicated sales-tax revenue. A $6.2 billion portion of the debt, called senior-lien, is repaid first. The remaining $9 billion, called subordinate-lien, get second dibs. After paying $12.5 million of principal and interest in August, $1.2 million of interest is due in November, February and again in May.
Puerto Rico Electric Power Authority: $8.3 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility owes $196 million of interest in January and $420 million of principal and interest July 1.
Puerto Rico Government Development Bank: $5.1 billion. The GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. The GDB is seeking to restructure its obligations through a debt exchange. The bank owes $354 million in December and $422 million in May.
Puerto Rico Highways & Transportation Authority: $4.7 billion. The highway agency repays its debt with gas-tax revenue. It owes $106 million of interest in January and $220.7 million of principal and interest in July.
Puerto Rico Public Buildings Authority: $4.1 billion. The PBA bonds are repaid with lease revenue from public agencies and departments of the commonwealth. The agency owes $102.4 million of interest in January and $207.6 million of principal and interest in July.
Puerto Rico Aqueduct & Sewer Authority: $4 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $86.5 million of interest in January and $135.1 million of principal and interest in July.
Puerto Rico Pension-Obligation Bonds: $2.9 billion. The taxable debt was sold to bolster the island’s main pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The next maturity is July 2023 and the system pays $13.9 million of interest every month in this budget year.
Puerto Rico Infrastructure Financing Authority: $1.9 billion. Called Prifa, the agency has sold the island’s rum-tax bonds. These are securities repaid from federal excise taxes on rum made in Puerto Rico. Prifa owes $37.2 million of interest in January and $77.8 million of principal and interest in July.
Puerto Rico Public Finance Corp.: $1.09 billion. The PFC bonds are repaid with money appropriated by the legislature. The agency defaulted on its Aug. 3 and Sept. 1 debt-service payments because the legislature failed to allocate the funds. It owes interest every month, the largest being a $24 million payment in February.
Michelle Kaske
Puerto Rico Sends Reassurance as Debt Talks Poised to Begin
“It’s an important step for them just to reinforce that there are rules and that they know that there are rules and that they’re going to be trying to work around them with bondholders,” said Matt Fabian, a partner at Concord, Massachusetts-based Municipal Market Analytics. “Maybe that works, maybe it doesn’t.”
Administration officials tasked with reducing the island’s debt load or suspending debt-service payments met Thursday with Governor Alejandro Garcia Padilla and lawmakers to develop guidelines for a potential voluntary exchange of existing debt for new bonds with possible security improvements, according to a document released late Thursday. Those principles include seeking to take into account the priorities of the debt that creditors hold.
Puerto Rico’s government and its advisers said on Sept. 9 that a proposal to pare the commonwealth’s debt would be released in a few weeks. The government plans to start meeting with investors by mid-October to begin negotiations.
Puerto Rico has already initiated talks with advisers to bondholders of Government Development Bank debt, seeking to potentially exchange those obligations for new securities. About $336 million of GDB debt matures Dec. 1.
Here’s a list of the island’s biggest bond issuers, how much long-term debt they have, and when major monthly payments are due, according to data compiled by Bloomberg.
Puerto Rico Sales Tax Financing Corp.: $15.2 billion. The bonds, known by the Spanish acronym Cofinas, are repaid from dedicated sales-tax revenue. A $6.2 billion portion of the debt, called senior-lien, is repaid first. The remaining $9 billion, called subordinate-lien, get second dibs. After paying $12.5 million of principal and interest in August, $1.2 million of interest is due in November, February and again in May.
Puerto Rico Electric Power Authority: $8.3 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility owes $196 million of interest in January and $420 million of principal and interest July 1.
Puerto Rico Government Development Bank: $5.1 billion. The GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. The GDB is seeking to restructure its obligations through a debt exchange. The bank owes $354 million in December and $422 million in May.
Puerto Rico Highways & Transportation Authority: $4.7 billion. The highway agency repays its debt with gas-tax revenue. It owes $106 million of interest in January and $220.7 million of principal and interest in July.
Puerto Rico Public Buildings Authority: $4.1 billion. The PBA bonds are repaid with lease revenue from public agencies and departments of the commonwealth. The agency owes $102.4 million of interest in January and $207.6 million of principal and interest in July.
Puerto Rico Aqueduct & Sewer Authority: $4 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $86.5 million of interest in January and $135.1 million of principal and interest in July.
Puerto Rico Pension-Obligation Bonds: $2.9 billion. The taxable debt was sold to bolster the island’s main pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The next maturity is July 2023 and the system pays $13.9 million of interest every month in this budget year.
Puerto Rico Infrastructure Financing Authority: $1.9 billion. Called Prifa, the agency has sold the island’s rum-tax bonds. These are securities repaid from federal excise taxes on rum made in Puerto Rico. Prifa owes $37.2 million of interest in January and $77.8 million of principal and interest in July.
Puerto Rico Public Finance Corp.: $1.09 billion. The PFC bonds are repaid with money appropriated by the legislature. The agency defaulted on its Aug. 3 and Sept. 1 debt-service payments because the legislature failed to allocate the funds. It owes interest every month, the largest being a $24 million payment in February.
Michelle Kaske
Puerto Rico Sends Reassurance as Debt Talks Poised to Begin
Friday, September 25, 2015
Bill Proposed to Give Regulatory Protection to Puerto Rico Mutual Fund Investors
Seventy-five years ago, when the federal government set out to regulate mutual funds, investment firms in Puerto Rico were deemed too far off the beaten track to merit scrutiny. So mutual funds on the island, and other United States territories, were excluded from regulation under the Investment Company Act of 1940.
Now, Puerto Rico’s economy is teetering, investors in its bonds have suffered big losses and at least one member of Congress says the 75-year-old exclusion has outlasted its shelf life. On Friday, Nydia M. Velázquez, Democrat of New York, is expected to introduce an amendment to the 1940 act that would give mutual fund investors in Puerto Rico the same regulatory protection that their counterparts have on the United States mainland.
The bill, if it becomes law, will not replace the money the investors have lost, but it will bar some of the activities that led to their losses — activities that are already illegal on the mainland.
Mutual funds cater to individual investors who want professionally managed investments. The 1940 act protects them by barring those professional investors from engaging in certain kinds of transactions that suggest self-dealing, among other things. But because of the exclusion, such transactions are still legal in Puerto Rico.
A transaction from 2008 shows the repercussions. UBS, a major provider of financial services on the island, advised Puerto Rico’s pension fund for government employees and was hired to take an unusual $2.9 billion bond deal to market. The pension fund had a big shortfall, and officials hoped to borrow the money and invest on behalf of the retirees. The deal was expected to be successful as long as the investment rate of return was higher than Puerto Rico’s borrowing rate.
But UBS had difficulty selling the bonds in the tough market conditions of 2008. UBS ended up packaging about half of the issue in its own family of closed-end mutual funds, which were marketed to wealthy Puerto Ricans as a good, tax-sheltered source of retirement income.
The interest on pension obligation bonds is not exempt from federal income taxes, because the Internal Revenue Service considers these securities speculative. But residents of Puerto Rico do not pay federal income taxes, and the Puerto Rican government exempted the bonds from its own estate and gift taxes.
On the mainland, a bank underwriting a municipal bond issue would run afoul of the 1940 act if it packaged the bonds in mutual funds and sold them. But affiliated transactions are allowed in Puerto Rico.
“This practice constitutes a flagrant conflict of interest, and it must stop,” Ms. Velázquez said. Her bill will be co-sponsored by Representative Maxine Waters, Democrat of California, who is the ranking member of the House Financial Services Committee. Chances of passage are unclear because of widely divergent views on what should be done to address Puerto Rico’s debt crisis. The Senate Committee on Finance has scheduled a hearing for Tuesday on some of the issues.
Puerto Ricans who invested in the affected mutual funds have filed more than 800 arbitration claims against UBS with the Financial Industry Regulatory Authority, known as Finra, a self-regulatory body. They are seeking more than $1.1 billion, basing their claims on regulations that are not part of the 1940 act’s exclusion for territories.
The Securities and Exchange Commission has also penalized UBS under other laws and collected a $26.6 million settlement for distribution to the harmed investors.
But Ms. Velázquez said that without an amendment, such things could happen again.
“This archaic exemption is long overdue for repeal,” she said.
A version of this article appears in print on September 25, 2015, on page B3 of the New York edition with the headline: Bill Proposed to Give Regulatory Protection to Puerto Rico Mutual Fund Investors . Order Reprints| Today's Paper|Subscribe
Bill Proposed to Give Regulatory Protection to Puerto Rico Mutual Fund Investors
Now, Puerto Rico’s economy is teetering, investors in its bonds have suffered big losses and at least one member of Congress says the 75-year-old exclusion has outlasted its shelf life. On Friday, Nydia M. Velázquez, Democrat of New York, is expected to introduce an amendment to the 1940 act that would give mutual fund investors in Puerto Rico the same regulatory protection that their counterparts have on the United States mainland.
The bill, if it becomes law, will not replace the money the investors have lost, but it will bar some of the activities that led to their losses — activities that are already illegal on the mainland.
Mutual funds cater to individual investors who want professionally managed investments. The 1940 act protects them by barring those professional investors from engaging in certain kinds of transactions that suggest self-dealing, among other things. But because of the exclusion, such transactions are still legal in Puerto Rico.
A transaction from 2008 shows the repercussions. UBS, a major provider of financial services on the island, advised Puerto Rico’s pension fund for government employees and was hired to take an unusual $2.9 billion bond deal to market. The pension fund had a big shortfall, and officials hoped to borrow the money and invest on behalf of the retirees. The deal was expected to be successful as long as the investment rate of return was higher than Puerto Rico’s borrowing rate.
But UBS had difficulty selling the bonds in the tough market conditions of 2008. UBS ended up packaging about half of the issue in its own family of closed-end mutual funds, which were marketed to wealthy Puerto Ricans as a good, tax-sheltered source of retirement income.
The interest on pension obligation bonds is not exempt from federal income taxes, because the Internal Revenue Service considers these securities speculative. But residents of Puerto Rico do not pay federal income taxes, and the Puerto Rican government exempted the bonds from its own estate and gift taxes.
On the mainland, a bank underwriting a municipal bond issue would run afoul of the 1940 act if it packaged the bonds in mutual funds and sold them. But affiliated transactions are allowed in Puerto Rico.
“This practice constitutes a flagrant conflict of interest, and it must stop,” Ms. Velázquez said. Her bill will be co-sponsored by Representative Maxine Waters, Democrat of California, who is the ranking member of the House Financial Services Committee. Chances of passage are unclear because of widely divergent views on what should be done to address Puerto Rico’s debt crisis. The Senate Committee on Finance has scheduled a hearing for Tuesday on some of the issues.
Puerto Ricans who invested in the affected mutual funds have filed more than 800 arbitration claims against UBS with the Financial Industry Regulatory Authority, known as Finra, a self-regulatory body. They are seeking more than $1.1 billion, basing their claims on regulations that are not part of the 1940 act’s exclusion for territories.
The Securities and Exchange Commission has also penalized UBS under other laws and collected a $26.6 million settlement for distribution to the harmed investors.
But Ms. Velázquez said that without an amendment, such things could happen again.
“This archaic exemption is long overdue for repeal,” she said.
A version of this article appears in print on September 25, 2015, on page B3 of the New York edition with the headline: Bill Proposed to Give Regulatory Protection to Puerto Rico Mutual Fund Investors . Order Reprints| Today's Paper|Subscribe
Bill Proposed to Give Regulatory Protection to Puerto Rico Mutual Fund Investors
Thursday, September 24, 2015
Pope Francis Expected To Push Obama On Puerto Rico
In early public comments this morning, Pope Francis highlighted immigration and climate change in public comments with President Obama, emphasizing building bridges and bringing a message of hope. In private meetings in the White House this morning, however, the papal delegation is additionally expected to deliver an economic message specifically targeting “vulture Hedge Funds” and the credit situation on the island of Puerto Rico, ValueWalk has learned.
LeCompte expects Pope Francis to advocate Obama to make Puerto Rico a high priority and advocate an economic growth plan that caters to the residents of the island, improving the economy for the long term and thwarting efforts from hedge funds who purchased the government debt after the bankruptcy and who he says are attempting to scuttle efforts to re-organize the island commonwealth’s finances.
“The Pope is bringing good news for business, good news for most investors and certainly good news for the people of Puerto Rico,” LeCompte said. “He is bringing bad news for the narrow group of hedge funds whose desire is to derail economic progress.”
In addition to Pope Francis meeting with President Obama, Vatican Secretary State Cardinal Pietro Parolin and Cardinal Peter Turkson will be meeting with Secretary of State John Kerry and will be encouraging him on Puerto Rico as well. “They want the White House to act on behalf of the people of Puerto Rico, and act now,” LeCompte said.
"The Pope believes we need a transparent and sustainable global economy," LeCompte said. “He will push this economic message in all three of his U.S. stops and it will remain a high priority throughout his tenure.” Pope Francis previously met with LeCompte regarding Argentina and its debt problems with hedge funds, an issue in which he is said to have a personal interest due to his experiences as a Cardinal in the region.
Pope Francis Expected To Push Obama On Puerto Rico
Pope Francis brings good news for business, bad news for certain hedge funds
As Pope Francis begins the first leg of a three-city U.S. tour, he will carry a message to President Obama regarding hedge funds involved in the Puerto Rican debt dispute, expressing appreciation for previous support on economic issues while urging the President to take a larger leadership role, according to Eric LeCompte, executive director at Jubliee USA, who is in the White House this morning.LeCompte expects Pope Francis to advocate Obama to make Puerto Rico a high priority and advocate an economic growth plan that caters to the residents of the island, improving the economy for the long term and thwarting efforts from hedge funds who purchased the government debt after the bankruptcy and who he says are attempting to scuttle efforts to re-organize the island commonwealth’s finances.
“The Pope is bringing good news for business, good news for most investors and certainly good news for the people of Puerto Rico,” LeCompte said. “He is bringing bad news for the narrow group of hedge funds whose desire is to derail economic progress.”
In addition to Pope Francis meeting with President Obama, Vatican Secretary State Cardinal Pietro Parolin and Cardinal Peter Turkson will be meeting with Secretary of State John Kerry and will be encouraging him on Puerto Rico as well. “They want the White House to act on behalf of the people of Puerto Rico, and act now,” LeCompte said.
Pope Francis will tout his economic message at ever stop in his three-city U.S. tour
LeCompte noted that Pope Francis is one of the most economically and technically engaged in the history of the Vatican, and in particular he has taken on economic issues that he sees as critical to the well-being of society. In addition to the Puerto Rico issue, Pope Francis has worked with LeCompte and supports an organized global bankruptcy process for sovereign nations, has taken a hard stand against corporations who avoid paying tax in the regions in which they prosper."The Pope believes we need a transparent and sustainable global economy," LeCompte said. “He will push this economic message in all three of his U.S. stops and it will remain a high priority throughout his tenure.” Pope Francis previously met with LeCompte regarding Argentina and its debt problems with hedge funds, an issue in which he is said to have a personal interest due to his experiences as a Cardinal in the region.
Pope Francis Expected To Push Obama On Puerto Rico
Russia Wants Texas and Puerto Rico to Secede [Video]
It’s an open secret that the current Kremlin coterie has an obsession with “sovereignty.” Moscow may push the oddest version of sovereignty in the international arena. Not only was the country the progenitor of the notion of “sovereign democracy”—the ability to entrench autocracy, disguised as democracy, without foreign interference or pushback—but Moscow’s also lobbed recognitions of sovereignty far more frequently than any of its nearest competitors.
Are you a Georgian seaside region tired of Tbilisi’s demands? Are you a forested stretch of eastern Moldova, grating under Chisinau’s Western approach? Are you a landlocked Caucasian enclave, heaving with an independent streak? Then here you are, Abkhazia, Transdnistria, South Ossetia—here’s the recognition you wanted, courtesy of your patrons in Moscow. Here’s the independence, here’s the special status, you desired. Don’t worry about Western opposition, about the Westphalian order propping the decades-long streak of peace. If you want recognition, Moscow can provide it in droves.
Of course, there’s a double standard to Moscow’s call to break away. While these enclaves wishing recognition find a Kremlin ready to help, the sovereignty card becomes unplayable the moment they appear within Russia’s borders.
On Sunday, the Anti-Globalization Movement of Russia hosted the first “Dialog of Nations” conference in Moscow. Seeking to represent the “many small nations that have historical experience of political independence” and who “think about their revival”—and including a shot of shredding the U.S. flag — the conference was helmed by Alexander Ionov, a supporter of Western secession with ties to both a fundamentalistOrthodox party, Rodina, and Russia’s Anti-Maidan movement, a well-spring of pro-Moscow voices seeking to combat anti-Putinist ferment in Russia.
The conference hosted separatists from multiple Western nations—Ireland, Italy, Spain—in addition to a Western Sahara contingent. The greatest plurality of representatives, however, came from the United States. Russia has prior cultivated relations with separatists in Texas—who are currently attempting toland the question of secession on Texas’s GOP ballot—but Ionov and his organization have since expanded their reach among American separatists. (Ionov also lists the UK’s Stop the War Coalition, linked to Labour leader Jeremy Corbyn, as one of his group’s foremost partners; a representative from Stop the War denied the partnership, saying they have “never had any dealings with it.”)
While the Texas contingent slotted for the conference did not arrive, and while no Native American representatives originally planned ended up showing—although Ionov met with a Native American representative earlier this summer—the meeting saw leaders of independence movements from Hawaii, Puerto Rico, and the “Uhuru” black nationalist movements in attendance.
Out of Hawaii, Lanny Sinkin, representing the “Independent and Sovereign Nation State of Hawaii,” lobbied for the return of the erstwhile Hawaiian monarchy. (The proposed king, as it is, happens to be a felon with some 13 years behind bars.) Out of Puerto Rico, Ramon Nenadich, who had prior threatened to investigate the United States for “crimes of war and genocide … in its occupation of Puerto Rico,” staked his case. (Nenadich has his work cut out for him—in 2012, 61 percent of Puerto Rico’s populace opted for statehood, and only 5 percent sided with independence.) And representing the Uhuru movement, Chairman Omali Yeshitela called on Russia to push the claim before the United Nations that the United States had committed genocide against African-Americans. “We’ve come to Moscow because it gives us an opportunity to break out of the encirclement that has been imposed on the struggle of African people in the United States,” Yeshitela said, before busting out Moscow-inspired rhetoric about U.S. bases “encircl[ing]” Russia and a “U.S. coup in Ukraine.”
Suffice it to say, the conference has thus far failed to galvanize any overwhelming separatist sentiment out of Honolulu, San Juan, or Austin. But outright secession isn’t Moscow’s immediate goal.
“The separatist conference in Moscow is part of the wider Kremlin strategy to undermine the West through supporting movements and organizations that aim at destabilizing state structures,” Anton Shekhovtsov, a researcher on Moscow’s links to far-right movements, told The Daily Beast. “This strategy is anything but new—the Soviet Union adopted the same tactics during the Cold War.”
Further, when Yeshitela, nominally representing the U.S.’s African-American population, claims that “Russia is under assault right now by the U.S. and imperialist powers,” Moscow’s domestic propaganda engine has further fodder to push its message.
Still, while the conference pushed nominal support for international secession movements, its crass geopoliticking shone through. You can tell the conference was a farce not simply because of who attended, but because of who wasn’t even invited. No representatives from East Turkestan or Tibet. None from West Papuaor Baluchistan. This dearth helps highlight the second parameter for Russia’s willingness to recognize claims to sovereignty: Such secession movement, if it wants Russia’s support, exist in the West, or in those nations—say, Morocco—that remain firmly ensconced in the West’s camp. There’s no sense, from Moscow’s perspective, in supporting movements under the thumb of nations Russia could theoretically woo. In its lack of support for Karakalpak (an Uzbek ethnic group prone to restiveness) or Kashmiri movements, in its avoidance of touching the topics of Cabindan or Anjouan separatists, we can witness the fallacies—further hangover from Soviet declamations—within these claims of supporting sovereignty and secession.
And, of course, there’s no sense in looking for any Russian representatives in the conference. None from Tatarstan or Siberia. None from the Crimean Tatar population the Russian government so readily represses. None from Chechnya—odd, considering the pair of wars fought within recent memory to combat Chechen secession. The conference hosted none who would, in any way, call into question the territorial integrity of Russia. Such call would find any individual liable for a prompt, years-long prison sentence.
Russia Wants Texas and Puerto Rico to Secede
Puerto Rico power company reaches deal with fuel line lenders on $700 million in expired debt
Puerto Rico's troubled power company says it has reached a deal to restructure about $700 million in expired debt with fuel line lenders.
The Electric Energy Authority said Tuesday that lenders have two options: converting credit agreements into long-term loans or exchanging all or part of expired bonds into new bonds worth 85 percent of the existing value.
Chief Restructuring Officer Lisa Donahue said the company is still negotiating with monoline bond insurers.
The company owes about $9 billion. It reached a deal earlier this month with some creditors to reduce principal owed in exchange for new securities worth 85 percent of the existing bonds.
Puerto Rico is struggling through nine years of economic stagnation. The governor has said the $72 billion public debt load is unpayable and needs restructuring.
Puerto Rico power company reaches deal with fuel line lenders on $700 million in expired debt
The Electric Energy Authority said Tuesday that lenders have two options: converting credit agreements into long-term loans or exchanging all or part of expired bonds into new bonds worth 85 percent of the existing value.
Chief Restructuring Officer Lisa Donahue said the company is still negotiating with monoline bond insurers.
The company owes about $9 billion. It reached a deal earlier this month with some creditors to reduce principal owed in exchange for new securities worth 85 percent of the existing bonds.
Puerto Rico is struggling through nine years of economic stagnation. The governor has said the $72 billion public debt load is unpayable and needs restructuring.
Puerto Rico power company reaches deal with fuel line lenders on $700 million in expired debt
Protesters call for Treasury official to leave role in Puerto Rico debt crisis
Senior Treasury department adviser Antonio Weiss should remove himself from the US response to the Puerto Rico debt crisis because of his former employers’ work in the country, a coalition of progressive groups said on Thursday.
Weiss, an adviser to the treasury secretary, Jacob Lew, left his former employer, leading financial advisory firm Lazard, with a $21m exit package. The company has traded extensively in Puerto Rico bonds and has marketed investments in debt to hedge funds.
“So it has a direct financial stake in the outcome and what Treasury’s response is, because obviously a lot of the bondholders want to push all the pain of the resolution of the crisis on to the people of Puerto Rico to get the maximum financial gain out of it,” said Kurt Walters, a campaign manager at Rootstrikers, which signed the letter and released a 21-page report that outlines Weiss and Lazard’s ties to the debt crisis.
Puerto Rico is facing $72bn in debt after suffering from years of government mismanagement of finances, including high-risk investments by Wall Street firms. Those same firms have been on a buying frenzy during the crisis, buying up land and debt in an attempt to make money off a crisis that has left residents with a disintegrating infrastructure.
Before taking on a key role in the response to the Puerto Rico debt crisis, Weiss was tapped for the third most important post in the Treasury Department. But he was blocked from getting the job by lawmakers including Senator Elizabeth Warren, who accused Weiss of being too close to Wall Street. Activists including Rootstrikers also fought the appointment.
Walters said that the concerns raised during the appointment process in December 2014 and January 2015 are now coming to bear. “We’re seeing that he is so deeply conflicted when it comes to the Puerto Rico debt crisis that it really is improper to have someone with so many apparent conflicts of interests be managing the Treasury Department’s response to the crisis,” Walters said.The coalition’s myriad concerns about Weiss’s potential conflict of interest were exacerbated in June, when a former investment banker at Lazard, Stephen Campbell, was brought on to the Treasury’s Puerto Rico debt crisis team.
“There are other people in the Treasury that don’t have these deeply conflicted ties to not only a big financial institution, but one has a direct stake in the outcome of the Puerto Rico debt crisis,” Walters said.
The letter calling for Weiss’s recusal was signed by 13 organizations including Rootstrikers, the Center for Popular Democracy, Democracy for America, New York Communities for Change, Presente.org and Strong Economy for All Coalition.
“Given their complicity in marketing Puerto Rico’s debts to Wall Street vultures, the Treasury should make sure there are no conflict and no perception of conflict regarding Antonio Weiss’s potential ties and allegiances to his former employer,” the letter reads. “Weiss should recuse himself based on Lazard’s debt marketing alone.”
A member of a labor union shouts slogans while holding a Puerto Rico flag during a protest in San Juan earlier this month. Photograph: Alvin Baez/Reuters
Antonio Weiss accused of conflict of interest in letter signed by 21 groups
Weiss received $21m payoff from Wall Street firm with Puerto Rico interests
Protesters call for Treasury official to leave role in Puerto Rico debt crisis
Weiss, an adviser to the treasury secretary, Jacob Lew, left his former employer, leading financial advisory firm Lazard, with a $21m exit package. The company has traded extensively in Puerto Rico bonds and has marketed investments in debt to hedge funds.
“So it has a direct financial stake in the outcome and what Treasury’s response is, because obviously a lot of the bondholders want to push all the pain of the resolution of the crisis on to the people of Puerto Rico to get the maximum financial gain out of it,” said Kurt Walters, a campaign manager at Rootstrikers, which signed the letter and released a 21-page report that outlines Weiss and Lazard’s ties to the debt crisis.
Puerto Rico is facing $72bn in debt after suffering from years of government mismanagement of finances, including high-risk investments by Wall Street firms. Those same firms have been on a buying frenzy during the crisis, buying up land and debt in an attempt to make money off a crisis that has left residents with a disintegrating infrastructure.
Before taking on a key role in the response to the Puerto Rico debt crisis, Weiss was tapped for the third most important post in the Treasury Department. But he was blocked from getting the job by lawmakers including Senator Elizabeth Warren, who accused Weiss of being too close to Wall Street. Activists including Rootstrikers also fought the appointment.
Walters said that the concerns raised during the appointment process in December 2014 and January 2015 are now coming to bear. “We’re seeing that he is so deeply conflicted when it comes to the Puerto Rico debt crisis that it really is improper to have someone with so many apparent conflicts of interests be managing the Treasury Department’s response to the crisis,” Walters said.The coalition’s myriad concerns about Weiss’s potential conflict of interest were exacerbated in June, when a former investment banker at Lazard, Stephen Campbell, was brought on to the Treasury’s Puerto Rico debt crisis team.
“There are other people in the Treasury that don’t have these deeply conflicted ties to not only a big financial institution, but one has a direct stake in the outcome of the Puerto Rico debt crisis,” Walters said.
The letter calling for Weiss’s recusal was signed by 13 organizations including Rootstrikers, the Center for Popular Democracy, Democracy for America, New York Communities for Change, Presente.org and Strong Economy for All Coalition.
“Given their complicity in marketing Puerto Rico’s debts to Wall Street vultures, the Treasury should make sure there are no conflict and no perception of conflict regarding Antonio Weiss’s potential ties and allegiances to his former employer,” the letter reads. “Weiss should recuse himself based on Lazard’s debt marketing alone.”
Protesters call for Treasury official to leave role in Puerto Rico debt crisis
Wednesday, September 23, 2015
Crisis-hit Puerto Rico takes up VAT route to shore up revenues
The debt-ridden Island Puerto Rico has opted for value-added tax (VAT) as a measure to enhance revenues for the government. The new VAT structure will come into force starting1 April 2016.
VAT will replace the existing the 10.5 percent commonwealth tax in the Puerto Rico territory. The move is viewed as a pre-ground clearance for the multi-billion stimulus plan for the island economy with $72-billion debt burden.
This is for the first time VAT will be introduced on the Island. Barring the US and Saudi Arabia, VAT is being implemented in most of the world. As part of the new tax structure, the VAT will be levied on imports of the manufacturing industry in the Island.
So far, importing raw materials, etc, by manufacturing industry is exempt from tax. The manufacturing sector contributes about 46 percent to the Island's gross domestic product (GDP).
Spain ceded the island to the US under the terms of the Treaty of Paris in 1898. The Puerto Rico is an unincorporated territory of the US and operates under a local constitution and citizens elect a governor.
Alejandro Garcia Padilla is the 11th governor of Commonwealth of Puerto Rico. Padilla has prepared a revival plan to restructure $47bn of the total $72-bn debt to be executed under an independent financial control board. The VAT implementation is a step towards this.
The financial crisis-hit island economy is aiming for a stimulus plan to revive the economy. As part of this, it's decided to implement VAT. Economists hold views that will it be a harbinger of other measures to landfall on the island. It depends upon how the things shape up in Puerto Rico in the days to come.
From April next year onwards, Puerto Rico will have 10.5 percent VAT in place. Under Puerto Rico's VAT law, there's provision of zero tax on many goods including raw materials, equipment, machinery, etc, being imported by the manufacturing industry.
In general, there should be a tax on import goods used in manufacturing industry in the VAT structure. The Island's VAT is a bit different from general tax structure making a kind of hybrid of traditional and VAT structures.
This customized VAT has been designed to protect the manufacturing industry, which is lifeblood of the Island economy. The special status is being given to the manufacturing industry as part of Puerto Rico's tax laws.
All eyes on how the implementation of VAT takes place in Puerto Rico, which exempted the manufacturing industry from tax on imports. The Island has been very cautious that it ensures manufacturing industry is not burdened while facilitating the tax structure to make way for the $1.5bn revival plan.
The US territory island recorded growth in general fund revenues by $109.4million in August to $550mn. The rise in foreign excise tax and sales tax propelled the revenues to soar during the last month. Sales and Use tax revenues reached to $190.7mn in August registering a rise of $22.2mn beating the forecast.
Alejandro Garcia, the governor of Puerto Rico, promulgated in May a new law on sales tax hike increasing from seven percent to 11.5 percent. The new tax rate includes 10.5 percent state rate and one percent municipal rate.
After a series of prolonged brainstorming sessions, Puerto Rico has opted for sales tax increase. This move mainly aimed at generating more revenues for the government to bring the economy out of the crisis. The new sales tax is considered to be highest in any state in the US.
The tax hike is expected to generate $1.2bn in revenues and giving much-needed support to the economy, which has been facing recession for the past eight years. The public debt amounted to $72bn. If stimulus plan is accorded, Puerto Rico can access financial markets to raise $2.95bn by issuing bonds.
Crisis-hit Puerto Rico takes up VAT route to shore up revenues : Regions
VAT will replace the existing the 10.5 percent commonwealth tax in the Puerto Rico territory. The move is viewed as a pre-ground clearance for the multi-billion stimulus plan for the island economy with $72-billion debt burden.
This is for the first time VAT will be introduced on the Island. Barring the US and Saudi Arabia, VAT is being implemented in most of the world. As part of the new tax structure, the VAT will be levied on imports of the manufacturing industry in the Island.
So far, importing raw materials, etc, by manufacturing industry is exempt from tax. The manufacturing sector contributes about 46 percent to the Island's gross domestic product (GDP).
Spain ceded the island to the US under the terms of the Treaty of Paris in 1898. The Puerto Rico is an unincorporated territory of the US and operates under a local constitution and citizens elect a governor.
Alejandro Garcia Padilla is the 11th governor of Commonwealth of Puerto Rico. Padilla has prepared a revival plan to restructure $47bn of the total $72-bn debt to be executed under an independent financial control board. The VAT implementation is a step towards this.
The financial crisis-hit island economy is aiming for a stimulus plan to revive the economy. As part of this, it's decided to implement VAT. Economists hold views that will it be a harbinger of other measures to landfall on the island. It depends upon how the things shape up in Puerto Rico in the days to come.
From April next year onwards, Puerto Rico will have 10.5 percent VAT in place. Under Puerto Rico's VAT law, there's provision of zero tax on many goods including raw materials, equipment, machinery, etc, being imported by the manufacturing industry.
In general, there should be a tax on import goods used in manufacturing industry in the VAT structure. The Island's VAT is a bit different from general tax structure making a kind of hybrid of traditional and VAT structures.
This customized VAT has been designed to protect the manufacturing industry, which is lifeblood of the Island economy. The special status is being given to the manufacturing industry as part of Puerto Rico's tax laws.
All eyes on how the implementation of VAT takes place in Puerto Rico, which exempted the manufacturing industry from tax on imports. The Island has been very cautious that it ensures manufacturing industry is not burdened while facilitating the tax structure to make way for the $1.5bn revival plan.
The US territory island recorded growth in general fund revenues by $109.4million in August to $550mn. The rise in foreign excise tax and sales tax propelled the revenues to soar during the last month. Sales and Use tax revenues reached to $190.7mn in August registering a rise of $22.2mn beating the forecast.
Alejandro Garcia, the governor of Puerto Rico, promulgated in May a new law on sales tax hike increasing from seven percent to 11.5 percent. The new tax rate includes 10.5 percent state rate and one percent municipal rate.
After a series of prolonged brainstorming sessions, Puerto Rico has opted for sales tax increase. This move mainly aimed at generating more revenues for the government to bring the economy out of the crisis. The new sales tax is considered to be highest in any state in the US.
The tax hike is expected to generate $1.2bn in revenues and giving much-needed support to the economy, which has been facing recession for the past eight years. The public debt amounted to $72bn. If stimulus plan is accorded, Puerto Rico can access financial markets to raise $2.95bn by issuing bonds.
Crisis-hit Puerto Rico takes up VAT route to shore up revenues : Regions
How UBS Spread The Pain Of Puerto Rico's Debt Crisis To Clients
UBS had a good thing going in Puerto Rico. The Swiss bank served as an advisor to the commonwealth’s Employees Retirement System, led the underwriting of a $2.9 billion bond issue for the pension agency in 2008, and then stuffed half of those bonds into a family of closed-end mutual funds it sold exclusively to customers on the island. It collected fees at every step.
Now, with the U.S. territory in the downward spiral of a government debt crisis, it’s all coming apart for UBS, long the biggest retail brokerage on the island. After UBS helped the government dig itself into a deeper hole and put island customers on the hook for the losses that followed, its Puerto Rico saga has become a cautionary tale of how risks can multiply.
Angry customers have filed hundreds of arbitration claims with the Financial Industry Regulatory Authority. They’re seeking more than $1.1 billion in damages from UBS after huge losses in the tax-free bond funds, sold as high-income investments that would preserve their capital, and in the bonds themselves. Three of UBS Puerto Rico’s five offices have closed since 2010, and nearly 60 of the unit’s 140 financial advisers have departed. The bank’s retail brokerage market share on the island has dropped to 33 percent from 48 percent over that period.
Retiree Juan Burgos Rosado was 66 in December 2011, when he opened an account with UBS. A month earlier, he had taken a fall from a tall ladder, ending his career rehabbing real estate. Rosado was “the quintessential conservative investor,” according to the arbitration panel that heard his case. UBS advised him to move $325,000 from a maturing certificate of deposit into its high-income funds. Rosado invested a further $200,000 in 2012, when he sold a house, and $600,000 more in January 2013, when another CD matured. He tried to sell the funds later that year as they plunged in value. His statements showed they were still worth $450,000, but UBS offered him just $90,000. While most closed-end funds are listed on an exchange, these were not, so clients depended on bids and offers from UBS Puerto Rico to get in or out.
Rosado didn’t sell; he went to arbitration and won. In May, the arbitrators wrote in their decision that Rosado was “grossly over-concentrated” in the bond funds, which were unsuitable for a senior with no investing experience. UBS was ordered to pay Rosado $1 million, including $602,000 in damages. With six other arbitration cases decided on the merits so far this year, one of which went in favor of the bank, UBS has been ordered to pay out a total of more than $7 million.
The bank was disappointed in the outcome of Rosado’s case, says UBS spokesman Gregg Rosenberg. The claims arbitrated so far are not indicative of how other claims might be decided, says Rosenberg, who’s based in New York. “For more than 20 years, investors in UBS’s Puerto Rico municipal bonds and closed-end funds received excellent returns.” Losses beginning in mid-2013 occurred amid general weakness in municipal bond markets and Puerto Rican debt, the bank says. The funds, which have declined as much as 75 percent from their initial prices, have continued to pay dividends.
How UBS Spread The Pain Of Puerto Rico's Debt Crisis To Clients
Now, with the U.S. territory in the downward spiral of a government debt crisis, it’s all coming apart for UBS, long the biggest retail brokerage on the island. After UBS helped the government dig itself into a deeper hole and put island customers on the hook for the losses that followed, its Puerto Rico saga has become a cautionary tale of how risks can multiply.
Angry customers have filed hundreds of arbitration claims with the Financial Industry Regulatory Authority. They’re seeking more than $1.1 billion in damages from UBS after huge losses in the tax-free bond funds, sold as high-income investments that would preserve their capital, and in the bonds themselves. Three of UBS Puerto Rico’s five offices have closed since 2010, and nearly 60 of the unit’s 140 financial advisers have departed. The bank’s retail brokerage market share on the island has dropped to 33 percent from 48 percent over that period.
Retiree Juan Burgos Rosado was 66 in December 2011, when he opened an account with UBS. A month earlier, he had taken a fall from a tall ladder, ending his career rehabbing real estate. Rosado was “the quintessential conservative investor,” according to the arbitration panel that heard his case. UBS advised him to move $325,000 from a maturing certificate of deposit into its high-income funds. Rosado invested a further $200,000 in 2012, when he sold a house, and $600,000 more in January 2013, when another CD matured. He tried to sell the funds later that year as they plunged in value. His statements showed they were still worth $450,000, but UBS offered him just $90,000. While most closed-end funds are listed on an exchange, these were not, so clients depended on bids and offers from UBS Puerto Rico to get in or out.
Rosado didn’t sell; he went to arbitration and won. In May, the arbitrators wrote in their decision that Rosado was “grossly over-concentrated” in the bond funds, which were unsuitable for a senior with no investing experience. UBS was ordered to pay Rosado $1 million, including $602,000 in damages. With six other arbitration cases decided on the merits so far this year, one of which went in favor of the bank, UBS has been ordered to pay out a total of more than $7 million.
The bank was disappointed in the outcome of Rosado’s case, says UBS spokesman Gregg Rosenberg. The claims arbitrated so far are not indicative of how other claims might be decided, says Rosenberg, who’s based in New York. “For more than 20 years, investors in UBS’s Puerto Rico municipal bonds and closed-end funds received excellent returns.” Losses beginning in mid-2013 occurred amid general weakness in municipal bond markets and Puerto Rican debt, the bank says. The funds, which have declined as much as 75 percent from their initial prices, have continued to pay dividends.
How UBS Spread The Pain Of Puerto Rico's Debt Crisis To Clients
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