Certain bondholders (the “Bondholders”) of the Puerto Rico Electric Power Authority (“PREPA”) today issued the following statement regarding the Financial Oversight and Management Board for Puerto Rico’s (“FOMB”) approval of a $5.9 billion, ten-year temporary power generation contract (the “Power Generation Contract”) between PREPA and Power Expectations, LLC, Enchanted Rock, LLC, and Reyes Contractor, LLC.

For close to a decade, the FOMB has directly overseen PREPA while it has languished in bankruptcy under PROMESA. Notwithstanding this “supervision,” PREPA remains operationally inefficient and continues to experience unjustified power instability. It is time for change.

The FOMB’s approval of the Power Generation Contract raises fundamental questions about its contract review process and commitment to the fiscal oversight of PREPA. The FOMB’s own records show its approval was granted with reservations about Power Expectations’ capacity and experience with large-scale energy projects, and for that reason the FOMB expressly conditioned approval on Enchanted Rock’s participation. Yet when the FOMB received a version bearing the signature of “Jhoby Weaks” purporting to act as Enchanted Rock’s COO of Caribbean Operations, it performed no basic due diligence. A proper review would have shown that the signatory had changed from the Enchanted Rock executive who signed the versions on which the FOMB’s prior approval was based. A simple Google search would have revealed what members of Congress later confirmed: the signatory’s legal name is Jobadiah Sinclair Weeks, an individual who used several aliases and was convicted of securities and tax offenses in connection with a $722 million cryptocurrency mining scheme.

The FOMB’s failures extended beyond the alleged forgery. The required $1.18 billion performance bond was never posted, no contractual milestones were met, and the FOMB took no action until the scandal became public. The FOMB’s own local counsel appears to have represented both the FOMB and Enchanted Rock, raising serious conflict-of-interest questions. The fallout has included a criminal complaint to Puerto Rico’s Department of Justice against the FOMB’s local counsel, a civil suit against PREPA, PREPA’s Executive Director resigning, and an ongoing bicameral legislative investigation. While information continues to emerge, it is becoming clear that this expensive mistake could have been avoided. What remains unclear is whether PREPA will be able to unwind the Power Generation Contract, and how much it would cost PREPA and the Commonwealth to do so.

These failures are the latest in a pattern of the FOMB not meeting its statutory duties toward PREPA. The FOMB and its multibillion-dollar lawyers and consultants have consistently prioritized engaging in wasteful litigation over making the improvements to PREPA’s operations that can only be achieved by resolving its bankruptcy. PREPA’s inability to chart a course toward improved operational performance under the FOMB’s oversight is no surprise to anyone who has engaged with the FOMB. The FOMB is incapable of performing its oversight duties, as evidenced by the Power Generation Contract debacle.

Along with the people of Puerto Rico, the Bondholders are direct stakeholders in PREPA’s success and stand ready to support PREPA’s exit from bankruptcy and make substantial financial commitments to improve PREPA’s operational efficiency. It is time for PREPA to strike a different path forward. FOMB membership should be changed or the FOMB should be disbanded as an impediment to successfully restructuring PREPA.

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