New York Lawmakers Seek Probe Of Puerto Rico Bondholders-- 2nd Update
05 August 2020 - 8:07PM
Dow Jones News
By Natalie Andrews and Andrew Scurria
Five New York-based members of Congress are asking their state's
attorney general to probe whether investment firms that own
billions of dollars in Puerto Rico bonds concealed aspects of their
investments to manipulate prices and profit unfairly.
In a letter sent Wednesday, the Democratic lawmakers, led by
Reps. Alexandria Ocasio-Cortez and Nydia Velázquez, asked New York
Attorney General Letitia James to investigate allegations of
insider trading utilizing the Martin Act, a broad antifraud statute
commonly used to pursue financial crime, or other similar laws.
"Although hedge funds have secured generous settlements and made
billions off this crisis, it now appears that their greed may have
driven some New York financial institutions to take illegal
actions," said Ms. Ocasio-Cortez, a critic of the management of
Puerto Rico's debt crisis.
Ms. James' office didn't immediately respond to a request for
comment on the letter.
The letter concerns allegations that a bondholder committee took
public positions that drove down the price of certain debt
securities while its members bought them at discounted prices and
negotiated a restructuring proposal that improved how they would be
repaid.
The lawmakers said those bond trades may have been made without
proper disclosure of the "true economic interests" of bondholders,
including Aristeia Capital LLC and Taconic Capital Advisors LP.
Puerto Rico's financial oversight board, which is steering the
bankruptcy and leading negotiations, declined to comment.
A spokesman for the bondholder committee said its members
"adhered to and respected all elements of the mediation protocol
and trading restrictions during the period in which they were
negotiating."
"As creditors with long-term investments in Puerto Rico, our
members have consistently engaged in a constructive, transparent
manner with the oversight board to facilitate the Commonwealth's
timely emergence from bankruptcy and economic recovery," the
spokesman said.
The New York attorney general recently attempted to use the
Martin Act in a case against Exxon Mobil Corp., alleging that the
oil giant misled investors about how it accounts for the impact of
climate change on its operations by using internal estimates that
differed from its public statements.
New York State Supreme Court Justice Barry Ostrager ruled in
December last year that the attorney general's office didn't prove
that the company had violated the law. Lawyers for Exxon said the
company had done nothing wrong.
Wednesday's letter said the Martin Act could be used to
investigate possible wrongdoing by Puerto Rico bondholders "and
ensure the integrity of the municipal bond markets."
Write to Natalie Andrews at Natalie.Andrews@wsj.com and Andrew
Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
August 05, 2020 13:52 ET (17:52 GMT)
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