    [Senate Hearing 117-447]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-447

                              PENDING LEGISLATION

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                       on

                                S. 375/H.R. 1192

                                   __________

                                 JULY 29, 2021

                                   __________

           [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources

            Available via the World Wide Web: http://www.govinfo.gov

                             ______

             .S. GOVERNMENT PUBLISHING OFFICE
     45-250           WASHINGTON : 2023

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    JOE MANCHIN III, West Virginia, Chairman
    RON WYDEN, Oregon                    JOHN BARRASSO, Wyoming
    MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
    BERNARD SANDERS, Vermont             MIKE LEE, Utah
    MARTIN HEINRICH, New Mexico          STEVE DAINES, Montana
    MAZIE K. HIRONO, Hawaii              LISA MURKOWSKI, Alaska
    ANGUS S. KING, JR., Maine            JOHN HOEVEN, North Dakota
    CATHERINE CORTEZ MASTO, Nevada       JAMES LANKFORD, Oklahoma
    MARK KELLY, Arizona                  BILL CASSIDY, Louisiana
    JOHN W. HICKENLOOPER, Colorado       CINDY HYDE-SMITH, Mississippi
                                         ROGER MARSHALL, Kansas

                          Renae Black, Staff Director
                          Sam E. Fowler, Chief Counsel
                 Bryan Petit, Senior Professional Staff Member
                 Richard M. Russell, Republican Staff Director
                  Matthew H. Leggett, Republican Chief Counsel
           Brian Clifford, Republican Principal Deputy Staff Director
                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Manchin III, Hon. Joe, Chairman and a U.S. Senator from West
      Virginia.......................................................     1
    Barrasso, Hon. John, Ranking Member and a U.S. Senator from
      Wyoming........................................................     3

                                   WITNESSES

    Menendez, Hon. Robert, a U.S. Senator from New Jersey............     4
    Gonzalez, Hon. Arthur J., Senior Fellow, New York University
      School of Law..................................................     6
    Lubben, Dr. Stephen J., Harvey Washington Wiley Chair in
      Corporate Governance and Business Ethics, Seton Hall University
      School of Law..................................................    12
    Suarez, Anthony, President, Anthony Suarez Law Group, P.A........    19

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Barrasso, Hon. John:
        Opening Statement............................................     3
    Gonzalez, Hon. Arthur J:
        Opening Statement............................................     6
        Written Testimony............................................     8
        Responses to Questions for the Record........................    32
    Lubben, Dr. Stephen J.:
        Opening Statement............................................    12
        Written Testimony............................................    14
    Manchin III, Hon. Joe:
        Opening Statement............................................     1
    Menendez, Hon. Robert:
        Opening Statement............................................     4
    Suarez, Anthony:
        Opening Statement............................................    19
        Written Testimony............................................    21

    ----------
    The text for the bill addressed in this hearing can be found at:
    https://www.congress.gov/bill/117th-congress/senate-bill/375

                              PENDING LEGISLATION

                                  ----------

                            THURSDAY, JULY 29, 2021

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:07 a.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Joe Manchin
    III, Chairman of the Committee, presiding.

              OPENING STATEMENT OF HON. JOE MANCHIN III,
                    U.S. SENATOR FROM WEST VIRGINIA

        The Chairman. The Committee will come to order. The
    Committee is meeting today to consider S. 375, Senator
    Menendez's bill to require greater disclosure by professionals
    involved in the Puerto Rico bankruptcy cases, and H.R. 1192,
    the House companion measure, which the House passed earlier
    this year. I am pleased to welcome our dear friend, Senator
    Menendez, who has joined us this morning to provide a few
    remarks.
        We are also very fortunate to have Judge Arthur Gonzalez
    with us. Early in his career, Judge Gonzalez served as a United
    States Trustee, which for those of us not familiar with
    bankruptcy law, is a Justice Department official who oversees
    the administration of bankruptcy cases. He served for 17 years
    as a bankruptcy judge in the Southern District of New York, and
    for the past five years, he has been a member of the Financial
    Oversight and Management Board for Puerto Rico. Judge Gonzalez
    has not only 30 years of experience with bankruptcy law but
    also firsthand knowledge of the cases that are the focus of the
    bills before us.
        We are also fortunate to have with us today Professor
    Stephen Lubben, who teaches bankruptcy law at the Seton Hall
    University School of Law and is a recognized authority on the
    subject. I also appreciate Anthony Suarez joining us today, who
    is an experienced trial attorney, former Florida State
    legislator, and former President of the Puerto Rico Bar
    Association of Florida. Professor Lubben and Mr. Suarez will
    both be testifying remotely. We are pleased to have their
    testimony.
        I want to take a few minutes to review how we got here
    today because this is a unique and complicated situation, and I
    think it is important that we all start from the same place.
    Five years ago, Congress passed a law known as ``PROMESA'' to
    address Puerto Rico's financial crisis. Puerto Rico was over
    $70 billion in debt at the time and faced another $50 billion
    in unfunded pension liabilities. It could no longer pay its
    debts as they became due. But unlike a municipal government in
    one of the 50 states, Puerto Rico could not declare bankruptcy
    because our bankruptcy laws exclude Puerto Rico from Chapter 9,
    as the municipal bankruptcy provisions in the Bankruptcy Code
    are known.
        To address Puerto Rico's financial crisis, PROMESA created
    the Financial Oversight Board, and it gave the Board sweeping
    powers to help put Puerto Rico's financial affairs in order. It
    also created a new, unique bankruptcy-like procedure by which
    the Oversight Board could come up with plans to restructure
    Puerto Rico's debt, subject to the approval of a district court
    judge designated by Chief Justice Roberts. Four years ago, the
    Oversight Board filed six of these bankruptcy-like cases to
    restructure the debts of the Commonwealth and five of its
    public authorities.
        Considerable progress has been made since then. The
    restructuring plan in one of these cases has already been
    confirmed by the court, the joint plan covering three cases is
    now awaiting approval by the court, and the two remaining cases
    could be completed next year.
        Which brings us to the legislation before us. Puerto Rico's
    bankruptcy cases--like any large corporate bankruptcy case or
    any municipal bankruptcy case--are complicated affairs. They
    require legions of lawyers and accountants and consultants and
    other professionals, all of whom expect to be paid for their
    work. In a corporate bankruptcy, the debtor cannot hire
    professional help without the bankruptcy court's approval, and
    the courts will not approve hiring professionals until they
    disclose any potential conflicts of interest. That is not the
    case with municipal bankruptcies.
        To protect state sovereignty, Chapter 9 lets municipal
    governments hire professionals without court approval and
    without requiring applicants to disclose potential conflicts
    before they are hired. As Puerto Rico is a sovereign territory,
    PROMESA's bankruptcy provisions were modeled after the
    municipal bankruptcy provisions in Chapter 9. The bills before
    us would change that and require professionals retained to work
    on cases under PROMESA to make the same sorts of disclosures
    that professionals must make in corporate bankruptcy cases.
    That strikes me as a sensible thing to do. I suspect we can all
    agree that professionals should disclose potential conflicts.
    That is likely why the House was able to pass the bill
    unanimously.
        I, too, support requiring more disclosure, but I am
    concerned that the way the bill goes about it may have adverse
    effects on the pending cases. I do not think I am alone in
    having these concerns. Robert Keach, former President of the
    American Bankruptcy Institute, warned the House Judiciary
    Committee two years ago that enactment of the bill could be
    highly disruptive of the current proceedings and the
    considerable progress that has been made in the PROMESA cases.
        Similarly, Natalie Jaresko, the Oversight Board's Executive
    Director, warned the House Natural Resources Committee last
    year that the bill was overly expansive and that requiring
    disclosure on the scale proposed would be an impossible
    exercise. These points were not addressed when the House passed
    this bill.
        It is my hope that this can be part of our discussion with
    our witnesses this morning and that it will help us find a way
    to increase disclosure, guard against conflicts of interest--
    which I support--but in a way that is more feasible and will
    not disrupt the pending cases.
        With that, let me turn to Ranking Member Barrasso for his
    opening remarks.

               OPENING STATEMENT OF HON. JOHN BARRASSO,
                       U.S. SENATOR FROM WYOMING

        Senator Barrasso. Thank you very much, Mr. Chairman.
        Today we are here to receive testimony on the Puerto Rico
    Recovery Accuracy in Disclosures Act of 2021, or PRRADA. This
    bill would require professionals hired in debt adjustment cases
    involving Puerto Rico to file disclosure statements outlining
    their connections with debtors, creditors, with the Puerto Rico
    Financial Management Oversight Board, and other interested
    parties. The bill would act retroactively for entities that
    have already completed their work and require those entities to
    file disclosure statements within 60 days.
        The Senate version of this bill has been introduced by
    Senators Menendez and Rubio. The House bill, introduced by
    Representative Velazquez, unanimously passed the House on
    February 24th of this year. Unanimously, Mr. Chairman.
        So first, I want to welcome the witnesses testifying before
    us, and particularly, I want to welcome Mr. Anthony Suarez. He
    has a long and distinguished legal career. He was a member of
    the Florida State Legislature, a United States Delegate to the
    Guatemala Peace Accords in 1996, and President of the Puerto
    Rican Bar Association of New York and of Florida, currently has
    his own law practice, and is also an adjunct professor of law
    at Barry University School of Law in Orlando, Florida. Mr.
    Suarez, thank you for agreeing to testify today.
        Mr. Chairman, Congress passed the Puerto Rico Oversight
    Management and Economic Stability Act in 2016. This was a
    direct result of a worsening fiscal situation in Puerto Rico.
    As a member of this Committee at the time, the legislation
    established an Oversight Board to help manage Puerto Rico's
    fiscal matters as related to financial planning and the budget
    of the island.
        Under this law, the Board has the power to hire
    professionals who could assist in these fiscal matters.
    Advisors to the territory's Oversight Board were excluded from
    the disclosure requirements under PROMESA. The PRRADA bill will
    ensure that some form of financial disclosure is added to
    PROMESA to address this--to ensure transparency for the public.
        Today we will hear testimony as to the benefits and the
    need for this proposed legislation. In my home State of
    Wyoming, a U.S. territory until 1890, our legislature considers
    it a matter of responsibility to our taxpayers to keep our
    fiscal house in order. As a former member of the State
    Legislature, I can speak to this fact. Residents in my state
    expect no less.
        Coal, oil, and natural gas producers provide needed state
    revenue, which funds vital public services, such as schools,
    roadways, and public safety. Despite the Administration's best
    efforts to end American oil, natural gas, and coal production,
    the Wyoming delegation in Congress continues to fight to
    protect these important industries so we can generate the
    revenue to keep our state's fiscal house in order.
        Each state and territory has their own unique fiscal
    challenges, however, there is one thing we can ensure--that we
    may maintain transparency in our fiscal dealings. Fiscal
    disclosure requirements make sense. We have them here in the
    Senate. They should also apply to the financial dealings of
    advisors to Puerto Rico's Oversight Board hired under PROMESA.
        So again, thank you to the witnesses, thank you to Senator
    Menendez and Senator Rubio for introducing the bill, and thank
    you, Mr. Chairman.
        The Chairman. Thank you Senator Barrasso. And next, let me
    welcome our friend, Senator Menendez, for his remarks.

              OPENING STATEMENT OF HON. ROBERT MENENDEZ,
                      U.S. SENATOR FROM NEW JERSEY

        Senator Menendez. Thank you, Mr. Chairman, and Ranking
    Member Barrasso, and distinguished members of the Committee for
    holding this hearing on the Puerto Rico Recovery Accuracy in
    Disclosures Act of 2021, or PRRADA.
        As the lead sponsor of PRRADA, along with Senator Rubio, I
    appreciate the opportunity to speak to you today about what I
    believe is an urgent need to enact this bipartisan and
    bicameral legislation. I also want to thank my colleague,
    Congresswoman Velazquez, for her tireless advocacy for the
    people of Puerto Rico and her leadership on this issue, along
    with my colleagues Senators Rubio, Hirono, Wicker, Blumenthal,
    Wyden, and Stabenow for their co-sponsorship.
        PRRADA is a rather straightforward bill. It would simply
    close a loophole in existing law to ensure that advisors and
    consultants to Puerto Rico's Fiscal Oversight Board follow the
    same transparency and disclosure practices as would be required
    in other U.S. bankruptcy cases.
        As my colleagues will recall, in 2016 Congress passed the
    Puerto Rico Oversight Management and Economic Stability Act--or
    PROMESA--which aimed to create a standardized bankruptcy
    process for Puerto Rico to allow the island to restructure its
    debts while meeting its obligations to creditors and
    maintaining services for the people of the island. PROMESA
    created the Fiscal Oversight and Management Board, or ``La
    Junta'' as it is known on the island, which currently has
    sweeping authority over Puerto Rico's debt restructuring and
    budget.
        Unfortunately, PROMESA did not require the Oversight
    Board's advisors and consultants to disclose conflicts of
    interest with creditors to whom Puerto Rico owes money. By
    failing to hold these advisors and consultants to the same
    transparency standards required on the mainland, PROMESA
    created yet another unjust double standard for the people of
    Puerto Rico.
        I opposed PROMESA because I believed it would not do enough
    to protect the people of Puerto Rico during the debt
    restructuring process. And while I like to be right as much as
    I can, this is one area where I wish I had been wrong. In many
    ways, the Oversight Board has made life on the island harder
    and less fair for so many Puerto Ricans.
        The legislation the Committee is considering today would
    address one key issue created by PROMESA. It would simply hold
    the cadre of vendors and consultants who have profited as a
    result of the law to reasonable transparency standards. PRRADA
    would require advisors and consultants working for the
    Oversight Board to disclose any potential conflicts of
    interest, and to comply with the same robust transparency
    practices that are required for those providing advice on
    bankruptcy cases on the U.S. mainland.
        Puerto Rico has suffered natural disasters and economic
    devastation from Hurricanes Irma and Maria. And during the
    Trump Administration, it is well-documented that relief for
    Puerto Rico was improperly withheld, inadequate, and woefully
    insignificant.
        The American citizens--the American citizens--who call the
    island home, are enduring a debt-restructuring process that is
    deeply unpopular because of the painful cuts that have been
    forced by the Oversight Board so that the island can pay its
    creditors. Think for a moment about the combined weight of
    these issues--natural disaster, economic devastation,
    inadequate relief when it needed it the most.
        So colleagues, please understand in this context how
    extraordinarily unfair it is that we have a system whereby the
    people of Puerto Rico are footing the bill for these
    consultants who are not even required to disclose their own
    conflicts of interest. The Weekly Journal recently reported
    that ``Four years after Puerto Rico filed for bankruptcy under
    Title III of the federal PROMESA law, over $830 million in
    attorney fees have been paid''--$830 million. And yet, the
    island is far from putting an end to the more than $72 billion
    debt restructuring process.
        At a baseline, shouldn't we give the people of the island
    access to this basic level of transparency about the
    consultants and advisors providing input on the restructuring
    process, which would be done in any similar proceeding? Now, I
    know that bankruptcy law can be complicated, but transparency
    should not.
        To me, it is shocking that you can be the referee and the
    coach. We have consultants who have clients as bondholders and
    yet are advising the Board at the same time. How do you play
    referee and coach and get paid for both of them? That is what
    we are trying to create a light on here. I know that there are
    interests involved. But it is the interests of the 3.5 million
    people of Puerto Rico that deserve to be upheld the most.
        This bill pursues fairness and equity for the people of
    Puerto Rico. Let me note that even the member of the PROMESA
    Board testifying today is testifying in support of the goals of
    our bill, and I appreciate that.
        Our colleagues in the House have passed this bill--not once
    but twice--and both times unanimously. I appreciate Mr.
    Chairman and Ranking Member Barrasso for holding this hearing
    and giving this matter attention. I also hope you will act
    swiftly to right this injustice. Thank you again for your
    consideration of this vital legislation.
        The Chairman. Thank you, Senator Menendez. We appreciate
    very much your being here.
        Now we are going to turn to our witnesses, who I introduced
    a moment ago. We are very happy to have you all join us this
    morning and appreciate your expertise. We will begin with Judge
    Gonzalez.
        Mr. Gonzalez. Thank you.
        The Chairman. Thank you, sir. Thank you for being here.

             OPENING STATEMENT OF HON. ARTHUR J. GONZALEZ,
            SENIOR FELLOW, NEW YORK UNIVERSITY SCHOOL OF LAW

        Mr. Gonzalez. Chairman Manchin, Ranking Member Barrasso,
    and members of the Committee, my name is Arthur J. Gonzalez. I
    am a member of the PROMESA Board and a Senior Fellow at New
    York University's School of Law, teaching courses in bankruptcy
    law. I became a Senior Fellow in March 2012 upon my retirement
    as Chief Judge of the United States Bankruptcy Court for the
    Southern District of New York.
        Prior to becoming a bankruptcy judge in 1995, I was United
    States Trustee for Region 2, which includes the states of New
    York, Vermont, and Connecticut. During my early legal career as
    an attorney, I was a District Counsel attorney at the Office of
    Chief Counsel of the Internal Revenue Service. Prior to
    graduating from law school and entering the practice of law, I
    spent 12 years as a teacher in the New York City Public School
    system.
        Thank you for inviting me to testify today before the
    Committee regarding the Puerto Rico Recovery Accuracy in
    Disclosure Act of 2021. My testimony regarding the bill will
    primarily draw from my experience with the interpretation and
    application of Bankruptcy Rule 2014 and the determination of
    disinterestedness under Section 101(14) of the Bankruptcy Code
    and their potential application and impact on the PROMESA Title
    III cases pending in the United States District Court in Puerto
    Rico. Section 2(a) of the bill before this Committee is
    premised in large part upon the disclosure requirements of Rule
    2014.
        As a bankruptcy judge and U.S. Trustee, I gained a great
    deal of experience regarding issues of disclosure and under
    Rule 2014 in the context of large, complex bankruptcy cases--
    often referred to as ``mega'' cases. During my career as a
    bankruptcy judge, I presided over a number of mega cases,
    including Enron, WorldCom, Chrysler, and Sunbeam. Further,
    during my career, I have reviewed--either directly or
    indirectly--well over 1,000 professional persons' retention
    applications. Such review included submissions of verified
    statements under Rule 2014 dealing with disclosures related to
    the retention process.
        My comments and observations regarding PRRADA that I
    believe may aid in its implementation and furtherance of its
    goals are contained in my written statement submitted to this
    Committee. For purposes of my oral testimony this morning, I
    would like to emphasize certain points of my written testimony.
        As an initial matter, I would like to state that as a
    PROMESA Board member, I fully support the Board's purpose to
    the extent of disclosure requirements of Federal Rules of
    Bankruptcy Procedure to professional persons seeking
    compensation under PROMESA sections 316 and 317. This will help
    avoid conflicts of interest and provide greater transparency
    through enhanced disclosure.
        I believe it is essential to the effectiveness of the bill
    that certain sections of the bill be clarified or modified so
    it can be implemented without unnecessary litigation to ensure
    its purpose be accomplished.
        I would now turn to the points in my written testimony that
    I would like to emphasize. First, implementation of the bill
    should be consistent with the application of Rule 2014 as that
    rule is implemented in large bankruptcy cases. In that, an
    ``interested parties list'' should be used to perform the Rule
    2014 connections analysis. If the regular analysis were to be
    required to be done on the more than 165,000 creditors, it
    would be virtually impossible to complete in any relevant
    timeframe and be extraordinarily costly.
        Further, for the on-island firms, the staffing requirement
    for such a massive effort does not exist. An interested party
    process will ensure a timely and effective implementation of
    the bill. Further, an interested parties list analysis would
    yield the results necessary to achieve the goals and purpose of
    the bill.
        Second, the bill should be clarified to provide that any
    action regarding issues raised under the bill are brought
    before the Title III court presiding over the fees and expenses
    sought under PROMESA sections 316 and 317. As I stated in my
    written testimony, I believe that if an issue under the bill
    were to be brought in another district court, such matter would
    be transferred to the Title III court, but nonetheless, I
    believe clarity as to this issue would avoid unnecessary
    litigation. Further, the Board should be clarified as to
    whether a party in interest can raise an issue under the bill
    if the U.S. Trustee has not filed an objection under section
    2(b)(2).
        One aspect of this I did not put in my written testimony--
    and it came to my attention yesterday, as I thought this
    through--is that the bill is not retroactive as to the fees
    incurred and ordered prior to the enactment of the bill. But it
    is retroactive with respect to the look-back for purposes of
    connections.
        The issue I see with that that could be problematic is that
    the interested parties list that is developed now in 2021 would
    not necessarily be the same parties that existed in 2017. So
    when you look back, the list would be a mismatch. Second, the
    professionals in 2017, '18, '19--those firms may well have
    changed--their client base may have changed. So it would be
    difficult and awkward to apply it retroactively. I'm not sure
    it would lead to any greater information, but nonetheless, I
    still think it would be difficult to do it and I would ask the
    Committee to consider the fact that it would be a cumbersome,
    expensive process to attempt to recreate what would've been an
    interested parties list in the four-year history of the case.
        [The prepared statement of Mr. Gonzalez follows:]
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        The Chairman. Thank you, Judge, we appreciate it.
        Mr. Gonzalez. Thank you.
        The Chairman. Next, I will recognize Professor Lubben for
    his statement.

     OPENING STATEMENT OF MR. STEPHEN J. LUBBEN, HARVEY WASHINGTON
    WILEY CHAIR IN CORPORATE GOVERNANCE AND BUSINESS ETHICS, SETON
                     HALL UNIVERSITY SCHOOL OF LAW

        Mr. Lubben. Thank you, Senator Manchin, for inviting me to
    testify today. I appreciate the opportunity to play at least
    some small role in Puerto Rico's restructuring.
        As you noted, we are here today to talk about PRRADA, but
    you can't really talk about PRRADA without talking about
    PROMESA because PRRADA is basically a supplement to PROMESA.
    And PROMESA created a special bankruptcy proceeding that is
    unique to Puerto Rico and its municipal entities. And it is
    unique in other ways, because it draws from both Chapter 11 and
    Chapter 9.
        As you noted in your opening remarks, in Chapter 11
    corporate bankruptcy cases, the courts have a lot of oversight
    over professionals and their fees. The court approves retention
    of the professional, and the court also approves payment of the
    professionals.
        In Chapter 9, on the other hand, there is almost no court
    oversight at all. It is very, very slight. Now, arguably, you
    know--and obviously that is the subject of a different
    committee and a different hearing--arguably Chapter 9 should be
    updated in this regard. But I currently believe the current
    Chapter 9 is kind of a relic of the 1930's, when Congress was
    attempting to develop a municipal bankruptcy system in the face
    of a fairly hostile Supreme Court.
        PROMESA essentially splits the difference between Chapter 9
    and Chapter 11. Retention is fully discretionary. There is no
    court oversight at all over retention of professionals. But
    payment of professionals is subject to court approval. And that
    is more like Chapter 11. In Chapter 11, when the court is
    considering whether or not to pay those professionals, it has
    in front of it--as has been noted--a wide array of disclosure
    information about the professionals. That was triggered by
    retention decision. And then, the disclosure system then flows
    over to the payment issue because bankruptcy courts will then
    deny compensation to professionals that had undisclosed
    conflicts of interest.
        PRRADA essentially establishes a comparable system for the
    Puerto Rican bankruptcy system, and I think that makes a lot of
    sense. I am just going to highlight three reasons why I think
    that makes a lot of sense.
        First of all, under section 316 of PROMESA, the court is
    supposed to award compensation where it is reasonable
    compensation. Well, it seems to me that not having a conflict
    of interest is not an inherent, important factor in deciding
    whether or not the compensation is reasonable. So for that
    reason, it makes a lot of sense to enact PRRADA.
        Second, and this has been mentioned in passing a couple of
    times, ultimately it is the people of Puerto Rico who are
    paying the cost of all these professionals. Somebody who's
    paying the bill, I think, has a right to know this kind of
    information--whether or not a professional that is being paid
    is working under a conflict of interest. So that is the second
    reason why I think it makes a lot of sense to enact PRRADA.
        And third and finally, as has also been mentioned in a
    couple of statements, the people of Puerto Rico are being asked
    to make serious sacrifices as part of the debt restructuring
    process. For example, many former employees of the Puerto Rican
    government are likely facing cuts to their pension payments. In
    that context, I think, again, people have a right to know that
    the debt restructuring process is being run in a transparent
    way, with full disclosure as to whose interests are being
    promoted in the bankruptcy process.
        And indeed, I think this third reason is almost standing
    alone as a reason to pass PRRADA because, basically, what I am
    saying here is that transparency can help promote legitimacy of
    the process. And that is a reason alone to pass PRRADA.
        So I thank you for allowing me to speak today and I look
    forward to answering any questions you have about the bill, as
    well.
        [The prepared statement of Mr. Lubben follows:]
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        [GRAPHIC] [TIFF OMITTED] T5250.009

        The Chairman. Thank you, Professor. And next, we will have
    Mr. Suarez.

               OPENING STATEMENT OF MR. ANTHONY SUAREZ,
               PRESIDENT, ANTHONY SUAREZ LAW GROUP, P.A.

        Mr. Suarez. Thank you, Senator Manchin, and all members of
    the Committee, for inviting me and giving me the opportunity to
    express my point of view on this issue, being down here in the
    trenches.
        My name is Anthony Suarez, and I am President of the Suarez
    Law Group. But I am also the President of the Legal Services
    Clinic of the Puerto Rican Community, a not-for-profit law firm
    that we started after Hurricane Maria.
        And I am, of course, an American citizen of Puerto Rican
    descent. My grandfather migrated to New York in 1920, however,
    I have always maintained a great interest in the island and my
    cultural heritage.
        In that capacity, as was indicated in the introduction, I
    gained election as President of the Puerto Rican Bar
    Association of New York in 1988, and then as President of the
    Puerto Rican Bar Association of Florida 30 years later. As far
    as I know, I'm the only person who has even attempted that one.
    In 1999, I was elected to the Florida House of Representatives,
    and at that time was the only representative of Puerto Rican
    descent in the State of Florida. And I served alongside today's
    United States Senator Marco Rubio, who then was just entering
    the Florida House.
        Now, I have traveled extensively around the island and have
    been invited as a speaker to the Colegio de Abogados de Puerto
    Rico, their Bar Association, to speak to their bar members, to
    speak to the Attorney General and members of the Puerto Rican
    Bar--Puerto Rican Supreme Court in reference to issues
    affecting the Puerto Rican diaspora--those of us who live on
    the mainland.
        And so the question here is about this bill. Well, it
    affects the reputation--the reputation of the Puerto Rican
    Government over the years has been tarnished greatly. This
    affects not only Puerto Ricans on the island, but it affects
    all of us who cherish the island and our relationship with the
    United States body politic. Perception is everything and in
    this process, it is not only urgent that you pass this bill, it
    is irreplaceable--absolutely necessary.
        This bill will be reported widely on the island and around
    the nation. It will enhance the concept that the governmental
    process is open and accessible. As an American citizen who
    served in the United States Army for 18 years, retiring as a
    Captain of Military Intelligence, and as a Florida State
    Representative, I know how important governmental credibility
    is to our system. And today this concept is in dire need of
    attention. The bill will aide in this process.
        On my weekly radio show here, broadcast in central Florida,
    which I have done--it is called ``I Need to Know,'' I have done
    it for over 20 years--the governance of Puerto Rico is a topic
    of discussion every show and it is always a hot debate. And
    this will continue until the island and the U.S. Congress
    finally determine Puerto Rico's ultimate fate.
        However, at the root cause of the controversy is trust in
    the decisions made by their leaders. Nothing is more sacred.
    Nothing is more important than maintaining the trust between a
    citizen and its government and this bill works toward that. We
    have had lots of controversies on my radio show. I have heard
    people talk about fees being paid to persons working with
    PROMESA--huge fees. Meanwhile, as our previous speaker has
    mentioned, the Puerto Rican workers are losing pension plans--
    their pension funding. Their pensions are being cut. Their
    future is being significantly affected. This cannot go on.
        So I urge Congress to pass this bill, to ensure
    transparency, and retain trust for the people. Thank you very
    much.
        [The prepared statement of Mr. Suarez follows:]
        [GRAPHIC] [TIFF OMITTED] T5250.010

        The Chairman. Thank you, sir. Now we will go to our
    questions, and all three of you could answer this.
        The disclosure requirements of Rule 2014 of the Federal
    Rules of Bankruptcy Procedure are tied to hiring, rather than
    paying already hired professionals. These requirements do not
    apply to PROMESA because Congress does not want the bankruptcy
    courts telling sovereign states--and by extension Puerto Rico--
    who they can or cannot hire. Bankruptcy courts do, however,
    have authority to police the payment of professionals in
    municipal bankruptcies. And the Supreme Court has repeatedly
    said that the requirement of compensation paid to professionals
    and municipal bankruptcies must be reasonable and carries with
    it the power and duty to make sure the professionals are not
    only compensated for loyal and disinterested services but are
    untainted by conflicts of interest.
        So the question would be--would the same requirement in
    PROMESA that compensation must be reasonable, coupled with the
    bankruptcy court's broad, equitable power to issue necessary
    orders under the Bankruptcy Code, already provide Judge Swain
    the power she needs to order any additional disclosures she
    thinks appropriate to police conflicts of interest?
        Mr. Gonzalez. May I respond?
        The Chairman. Judge Gonzalez.
        Mr. Gonzalez. Thank you, Mr. Chairman. I think, in terms of
    could Judge Swain do it? Yes, I think she has the authority to
    do it. I think the problem would be, if you do not apply 2014
    through this bill, it wouldn't be as easy to interpret. There
    is case law that has developed under 2014. There is a great
    deal of guidance as to how it plays out. Judge Swain has not
    done it to date.
        So I think it would be easier if it were incorporated into
    the traditional disclosure requirements under 2014, such that
    the parties know how to react to it, how to ask the court for
    variances within that structure. And so in that regard, I think
    it would be helpful.
        Second, although she could do it, what we currently have as
    a conflicts process--it does exist--I will not take the time to
    go through it in detail, but its depository is not the court.
    It is our website. Certain things are there, certain things are
    confidential. So if the depository for this information--as it
    would be under 2014--was made to be the court, it would be
    easier to work with that material.
        The Chairman. Anyone else? Yes, Mr. Lubben. Yes, sir.
        Mr. Lubben. I think I agree with everything that Judge
    Gonzalez has said. I would also add that I think there is
    something to be said for Congress to expressly state that this
    is our policy. Yes, Judge Swain could probably end up in a
    similar location, you know, using her equitable powers. But I
    think there is a lot to be said for Congress weighing in and
    saying ``This is a legislative policy. We want a transparent
    process in the Puerto Rican bankruptcy.''
        The Chairman. Yes, sir. Mr. Suarez.
        Mr. Suarez. I would like to add that Congress has already
    taken the hit for creating PROMESA and creating that
    controversy that Puerto Rico is no longer a sovereign. But now
    PROMESA will take the hit for not being transparent. So it is
    important to disclose, and since we have the responsibility--
    Congress does--you might as well now go full-in and say you
    must require full disclosure so you do not get the black eye
    associated with what you have already done.
        The Chairman. Well, let me ask this. Does the Oversight
    Board in the Commonwealth of Puerto Rico already require
    conflict disclosure before they hire professionals? Are they
    doing that? Judge Gonzalez.
        Mr. Gonzalez. Yes, the process that we have in place, and
    it has evolved over the years, when someone is hired or when
    their contract is renewed, there is a questionnaire that must
    be filled out. That questionnaire generally centers around
    conflict-type questions. Responses are then sent to the Board.
    Explanations, if necessary, are sent to the Board. And a
    declaration is then prepared, attached to the contract, and
    then that contract is on file at our website.
        However, there are two points I would like to raise. First,
    to the extent a party has deemed some information to remain
    confidential and only shared with the Board, the contract that
    would be on file with the declaration would not have that
    information.
        The second point, in terms of that, there are two
    professionals who have had evergreen situations--their contract
    doesn't come up for renewal, so they wouldn't be subject to the
    evolving disclosure process. But in the context of their fee
    applications, their contracts have been attached.
        So again, it just comes back to what I said--the 2014 would
    provide the central location, where it is not the easiest
    database to navigate to find where all this information is
    currently.
        The Chairman. I am going to take a little bit of a liberty
    here and ask one more, since our time--I think we are going to
    be in good shape today.
        If Congress enacts the bill, should it give Judge Swain the
    discretion to consider if applying Rule 2014 to the pending
    PROMESA case would be just impractical and allow her to tailor
    its application if it is infeasible, or it would work an
    injustice?
        Mr. Gonzalez. I do not think it would work an injustice. I
    think it is not retroactive to the fees that have already been
    subject to order of approval. Its relation back, as I explained
    earlier, may be difficult to deal with, but I do not think it
    would be unfair. She certainly could do it and I think the
    implementation of the standard approach to 2014--in large
    cases--she should have the discretion to employ, to ensure that
    it would be an effective process.
        The Chairman. Thank you. Senator Barrasso.
        Senator Barrasso. Well, thank you very much, Mr. Chairman.
    I have a couple of questions for Mr. Suarez and then one
    question for all the witnesses.
        Mr. Suarez, this past Sunday, about 70 years ago, in 1952,
    Puerto Rico became a self-governing Commonwealth of the United
    States. Since that time, the island has faced financial
    difficulties that have required the Congress to provide
    oversight that resulted in the PROMESA law.
        Do the House and Senate PRRADA bills we are discussing here
    today address a need that the PROMESA law does not?
        Mr. Suarez. Could you please repeat that question for me?
    I'm sorry.
        Senator Barrasso. The question is, do the House and Senate
    PRRADA bills that we are discussing here today address a need
    that the PROMESA law does not address?
        Mr. Suarez. Yes. I think it does. And specifically, it
    closes that loophole, as you have discussed, that allows for
    some transparency on these fees. This is a big issue in Puerto
    Rico. You are constantly hearing about teachers being cut and
    sanitation guys losing their pensions, police officers losing
    their pension, whereas huge fees are being paid out to the
    persons, and people do not understand.
        I think this bill does provide for closing of that
    loophole. I think we should be giving the judge the discretion,
    because then it takes it out of the political realm. People
    will perceive it as a judicial decision and it lessens the
    political impact, and thus, I think, the transparency of it and
    acceptability of the bill.
        Senator Barrasso. Well, thank you. And a follow-up on that,
    Mr. Suarez, relating to conflict of interest. So with regard to
    Puerto Rico's Financial Oversight Board, how important do you
    think it is that there are disclosure rules in place to ensure
    that there is not even an appearance of a conflict of interest
    in the advisors that the Board hires?
        Mr. Suarez. I think we have already talked or spoken about
    this in some detail. It is of paramount importance. There is
    absolutely nothing more important than the trust that the
    society has in its governance. Puerto Rico is suffering
    greatly. It has suffered greatly, from both political parties,
    and the people are really, really angry and they are
    frustrated.
        So this bill, what it does is, it gives some transparency
    to it. On the island, it will be translated as an exposure of
    those people who are the elites, or controlling the government,
    and thus it puts a stop, at least the appearance of a stop,
    where now they have to go in front of a judge, and they have to
    disclose those interests so that it just feels better.
        Senator Barrasso. So if I could ask you one question, then
    I am going to ask the other two witnesses to comment on it. And
    the question is this--is there any reason why the bills that we
    are discussing here today would not improve transparency for
    the public and shouldn't be taken up by the Committee in the
    full Senate? Any reason we shouldn't be doing this? Mr. Suarez.
        Mr. Suarez. Oh no, absolutely not. I see no reason. And the
    question of whether the judge would be very costly--the cost of
    not having people believing in their government is 10 times
    higher than the cost, whatever's incurred by requiring
    additional paperwork done in this case. So there is just no
    reason.
        Senator Barrasso. Agreed. Judge.
        Mr. Gonzalez. No, I know of none, Senator.
        Senator Barrasso. And Mr. Lubben.
        Mr. Lubben. Yes, I know of none. I make some very small
    technical changes in my written testimony--you know,
    suggestions for changes.
        Senator Barrasso. Sure.
        Mr. Lubben. But definitely it should be passed.
        Senator Barrasso. Thank you, Mr. Chairman.
        The Chairman. Thank you. Senator Hirono.
        Senator Hirono. Thank you, Mr. Chairman. Thank you for
    holding this hearing. I am a co-sponsor of this bill and I
    think it is a very commonsense approach to the concerns that
    the people of Puerto Rico have as they are footing the bill for
    all of these advisors and consultants involved in these
    bankruptcy proceedings. And at the same time, as their pensions
    are being cut and teachers are being laid off, et cetera, I
    think it makes perfect sense that they should know whether
    there is any conflict involved with the people who are involved
    in these proceedings.
        I am grateful that you are having this hearing so that we
    can address some of the concerns that have been expressed,
    although I have to say that I am not quite understanding why
    these concerns should delay the passage of this measure. I am
    glad that Representative Velazquez has worked so hard on
    helping the people of Puerto Rico, along with, of course, our
    colleague, Senator Menendez--that this bill is now before us.
        I have to say that both Senator Menendez and Mr. Suarez
    have pointed out how important this bill is to the people of
    Puerto Rico. As I said, they are the ones footing the bill.
    They should know if the people they are being asked to foot the
    bill for have any conflicts of interest.
        I do have a few questions. For Professor Lubben, Judge
    Gonzalez, in his statement said that, ``technical application
    of the term `creditor' would render compliance with the statute
    practically impossible and extraordinarily costly.'' And he
    suggests changing the bill text from ``creditor'' to
    ``interested party'', and I would like to know if you share
    this concern that Judge Gonzalez has raised regarding the bill?
    Professor Lubben.
        Mr. Lubben. It is not an unfair concern, but I also do not
    think that the bill necessarily needs to be amended to address
    it. I think, as Judge Gonzalez himself well knows, bankruptcy
    judges--and I would include Judge Swain in this--have a lot of
    experience managing these rules in big Chapter 11 cases and
    figuring out how to make them work in a practical sense.
        So in other words, you know, yes, if you are overly
    literalistic about ``creditor'', yes, it is very broad, but I
    think Judge Swain has the inherent authority to set up some
    ground rules to make this work in a practical sense.
        Senator Hirono. And again, for you, Professor, I believe
    you noted that Chapter 9 should be revisited. And so, this is
    in context of--one of the arguments we have heard against this
    bill is that the Puerto Rican bankruptcy should be treated more
    like a municipal bankruptcy under Chapter 9, where a disclosure
    of this type is not required. So my reaction is, why shouldn't
    we require this kind of disclosure? And as you noted, we should
    probably take a look at Chapter 9 instead. Could you talk a
    little bit more about why, maybe, we should revisit the
    provisions that stop these kinds of disclosures under Chapter
    9?
        Mr. Lubben. Well, again, as I said in my opening remarks, I
    think in some ways, the fact that we do not require the
    disclosures in Chapter 9 is a reflection of a 1930's view of
    what the Supreme Court would allow with regard to municipal
    bankruptcy and the 10th Amendment.
        So there are sort of two responses. Number one, the view of
    the 10th Amendment has changed since the 1930's, and that is
    the reason why Chapter 9 itself should probably be updated.
        And then, you know, without getting too far into
    contentious issues, I think we also have to admit that Puerto
    Rico is not quite in the same position as a state. Note the
    existence of PROMESA itself, right? And the Oversight Board
    itself suggests it is not quite like a state. And so, the
    analogy to Chapter 9--in any event, in this particular case--is
    not particularly apt, I think.
        Senator Hirono. I agree with you. It took a lot for us to
    acknowledge the situation that Puerto Rico was in and that it
    could not get into bankruptcy proceedings, so now that it can.
        So one of the other--if you do not mind, Mr. Chairman?
        The Chairman. Please.
        Senator Hirono. I just have one more question.
        The Chairman. Sure, no problem.
        Senator Hirono. There was a concern raised about the
    jurisdiction provision in the bill, and Judge Gonzalez voiced
    concern that the provision may allow a party to bring action in
    a court other than the district of Puerto Rico. Doesn't PROMESA
    already require that all cases be brought in the district of
    Puerto Rico, Professor Lubben? If that is the case, how would
    cases brought under PRRADA wind up anywhere else?
        Mr. Lubben. Yes, section 306 of PROMESA already has a
    jurisdiction provision. So I get what Judge Gonzalez is saying,
    that the separate jurisdiction provision in PRRADA is, perhaps,
    a little bit redundant, but I do not see that it does any harm
    for the reasoning he actually said in his oral testimony, at
    least as long as the Title III cases are pending. I would
    assume any other district court judge who got a disclosure case
    under PRRADA would immediately transfer it to Judge Swain. So I
    do not see that as a really serious issue. Again, you could
    argue that maybe the jurisdiction clause in PRRADA is a little
    bit redundant, but I do not see that as a fatal flaw.
        Senator Hirono. Thank you. Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator. Senator Marshall.
        Senator Marshall. Yes, thank you so much, Chairman. I just
    have one question for all the witnesses. Will the bills we are
    discussing today improve transparency for the public and should
    they be passed by the Senate? Yes, whoever wants to go first.
    Yes, go ahead.
        Mr. Suarez. We have already addressed this issue and I
    think that it bears repeating. This is essential for the
    purposes of ensuring that PROMESA is ultimately successful.
    Transparency is ``sumamente'', all right? It is absolutely
    essential to have credibility on the island, and actually
    outside of the island, as well.
        Mr. Lubben. As I said in my opening remarks, I think
    transparency can promote legitimacy. So I do think this bill is
    very important.
        Senator Marshall. Thank you. Oh, one more. Go ahead.
        Mr. Gonzalez. Yes. I would agree, but I would ask your
    indulgence if I could say something about fees, because they've
    been raised in this context a number of times. The fees are
    enormous. There is no doubt that $1 billion of fees is an
    enormous amount of money. My own experience in cases--in Enron,
    in 2004 dollars it was $760 million in fees, and ultimately $1
    billion by the time the case was over, and it returned $22
    billion to creditors.
        There are a number of items that impact fees. One is the
    rate, and with respect to us, we have gotten a discount across
    the board on the rates. The other is the complexity of the
    case. This is an extraordinary, complex case that requires the
    best of the best, in terms of advisors.
        The next is a litigious nature. This case has been
    extraordinarily litigious over the last four years, and it is
    the length and time of the case--all of those add up to
    enormous fees.
        Another way to look at the fees, though, is in the context
    of what is accomplished. We have, in a COFINA restructuring,
    there is $17 billion in future payments on the debt that were
    reduced as a result of that restructuring. In the settlements
    that have been reached to date, in the Commonwealth case, and
    hopefully the plan will go effective, billions upon billions of
    dollars in debt has been reduced.
        So yes, it is an enormous amount of money. Yes, disclosure
    should be placed in the structure, so people can know where
    there is money and who it is going to and whether there are
    conflicts or not. But by the same token, in terms of the value
    added, from what has happened by the extraordinary work of
    these professionals, I think that those amounts paid were
    rightful and justifiable, under the circumstances.
        Senator Marshall. So maybe I do have follow-up question,
    then.
        The Chairman. Well, you have plenty of time.
        Senator Marshall. So this legislation, this started back in
    2016--and forgive me if this has already been addressed. What
    is the financial health of Puerto Rico today compared to 2016?
    Which direction are we going? So we are not just throwing good
    money after bad money.
        Mr. Gonzalez. I don't think I could give you a detailed
    answer to that. I believe we are on a road to getting the debt
    restructured. That should stabilize many aspects of the economy
    and ultimately return Puerto Rico to the public debt, short-
    and long-term--as is one of the stated goals in the statute. I
    think there is a great deal more disclosure in dealing with the
    finances of the government that has been achieved over these
    last years. And I think it is moving in the right direction in
    that regard and there is more certainty as to what is going to
    happen. But beyond that, I think I would have to defer to some
    of the financial advisors to give you a more complete answer.
        Senator Marshall. Thank you. Any of the other witnesses
    have any comments? I know it is not your specialty, but--Okay.
        Thank you so much, Chairman, and I yield back.
        The Chairman. Yes. Senator Cortez Masto.
        Senator Cortez Masto. Thank you, Mr. Chairman and Ranking
    Member, for this important conversation. Listen, there is so
    much--and I thank you for the panelists--work that needs to be
    done in Puerto Rico, and for the people there, and looking out
    for the best interests of people of Puerto Rico.
        And so, Judge, let me start with you, because I really
    appreciate the experience and expertise that you bring to this
    hearing, with your focus on bankruptcy law. Can you do me a
    favor? Can you elaborate on how Puerto Rico's bankruptcy
    process differs from the typical process for state and U.S.
    Courts?
        Mr. Gonzalez. Yes. I think one main difference is that the
    Board represents the debtor in the Title III case. I will
    identify the Commonwealth, which is a Title III case. However,
    the government--governor, legislative bodies--is still
    functioning, so you really have two parties there, which adds
    to the expense, in terms of professionals, because you have the
    Board having one set of professionals and the government having
    another.
        In a Chapter 9 case, where a state authorizes a
    municipality to go into bankruptcy, most of the states, to my
    knowledge, put in--for example, in Detroit--an emergency
    manager. That emergency manager literally takes over the
    control of the city for these purposes. And that would differ
    radically with how Puerto Rico--the compromise with Puerto Rico
    continuing its sovereign aspects. It is a government, and at
    the same time is compromising--some oversight in the bill was
    given to the Oversight Board.
        It is more complex, I think, than the typical Chapter 9
    case, in which a municipality goes into insolvency and is
    controlled by either a board or executive manager, or someone
    is put in control of that, that has virtually total control
    over both the administration of the government, as well as the
    insolvency case itself.
        Senator Cortez Masto. And then, for that reason, and you
    just touched on it, Puerto Rico has a role to still provide
    services for its citizens----
        Mr. Gonzalez. Oh, definitely.
        Senator Cortez Masto [continuing]. And it still has to
    carry out the functions of a government as it is going through
    this bankruptcy, correct?
        Mr. Gonzalez. Definitely, yes. And----
        Senator Cortez Masto. Go ahead.
        Mr. Gonzalez [continuing]. Our role is that of oversight,
    but we do not run the government. We look at it from a fiscal
    standpoint and try to put guardrails on that process. But no,
    we do not run the government.
        Senator Cortez Masto. What role--because there is a lot of
    talk about the hiring of professionals, the fees that are
    charged to professionals--what role does the court have in
    determining the reasonableness of those fees?
        Mr. Gonzalez. The court?
        Senator Cortez Masto. Yes.
        Mr. Gonzalez. Is that--I am sorry----
        Senator Cortez Masto. The bankruptcy court.
        Mr. Gonzalez. Well, the district court that is presiding
    over the case has complete discretion in terms of having the
    fees reviewed and awarding what it believes is a reasonable
    amount of consideration under the circumstances.
        There is a fee examiner in place that reviews the fees and
    reports to the court his view on the reasonableness of the fees
    that have been incurred. The court will hold a hearing and hear
    objections, if such were filed, and then make a determination
    of what she believes is reasonable under the circumstances,
    which is a mirror of what happens under the Bankruptcy Code.
    And the Bankruptcy Code, with sections 330 and 331--under
    PROMESA it is sections 316 and 317--control the hearing and the
    awarding of fees.
        Senator Cortez Masto. Thank you. Thank you to the
    panelists. Chairman, I yield the remainder of my time.
        The Chairman. Thank you, Senator. I will have one final
    question, and this could be to all three also.
        As I understand Rule 2014, professionals are required to
    disclose all connections with a debtor, creditors, and other
    parties of interest, as well as their attorneys and
    accountants, in a bankruptcy case. Although not defined in the
    rule in the Bankruptcy Code, the courts have given the term
    ``connections'' a broad meaning, encompassing more than
    conflicting interests.
        As you note in your statement, Judge Gonzalez, bankruptcy
    judges have found it necessary to focus on connections with
    material interested parties, which may be defined by a
    threshold dollar amount in large, complex bankruptcies.
        My question is, is it practicable to require all of the
    professionals retained by the Oversight Board, the Government
    of Puerto Rico, and the creditors' committees, to disclose
    their connections with all 165,000 creditors in these cases. Or
    would it be more feasible to focus on a material interested
    parties list?
        Mr. Gonzalez. In response to that, I agree with Professor
    Lubben that, when I raised the issue, my concern was that the
    judge would--depending on how the bill was written--ultimately,
    there would be an argument that the normal discretion that
    would come under 2014 wouldn't exist. To the extent the judge
    has discretion under 2014, that would normally play out in a
    bankruptcy case, the judge would address that issue.
        In fact, ironically, and this is a technical point--the
    2014 Rule already applies in the Title III cases, in the
    context of the creditors' committee, because under Section
    1103, which deals with the creditors' committee retaining
    professionals, it also sweeps in 2014 and 1103 as part of
    PROMESA. So as a practical matter, I believe the creditors'
    committees' professionals are already complying with 2014, and
    they would be operating under a material interested party list,
    but they would already be utilizing it. And if this bill is
    enacted, I would expect that that would be the similar
    structure that would go forward with respect to this.
        The Chairman. Professor Lubben.
        Mr. Lubben. I agree with what Judge Gonzalez has said. As I
    indicated earlier, I think because the bill expressly
    references 2014, the court would inherently have the same
    discretion to make the system work. And so you wouldn't have to
    necessarily include every creditor who's owed $5, for example,
    on the conflicts list. It could be limited to some sort of
    material dollar amount and that makes it workable. That already
    happens in Chapter 11 cases and I am fairly confident that
    Judge Swain would do something similar in this case, based on
    the language that we have in the pending bill.
        The Chairman. Thank you. Mr. Suarez.
        Mr. Suarez. I agree with Professor Lubben that we should
    have a disclosure of a certain amount so it doesn't get so
    tedious over all of those hundreds of thousands of creditors.
    My concern, Senator, is that, you know, when Judge Gonzalez
    correctly says there is value added--the lawyers have done a
    good job, they deserve what is reasonable. In the law, $500 an
    hour for lawyers could be considered reasonable. A $1 million,
    $2 million, multi-million fee--that is reasonable.
        But in the street--and I have two family members who are
    pensioners in Puerto Rico--one's a teacher, one's a police
    officer. And when a teacher gets a $1,500 a month pension and
    she has no Social Security because of the way Puerto Rico
    operates, right? And then they take 20 percent of her salary
    away--this is huge for them.
        So the perception is very, very important, and I think that
    the more we can stay within reason about it so we do not create
    a bureaucracy unto itself, then it becomes inapplicable, but by
    putting a certain number--a reasonable number, say, okay, you
    have, you know, a conflict of interest which is more than $20,
    $30, $40,000--something like that, then that could do it. But
    it is certainly important that these conflicts be reported as
    fully as practical.
        The Chairman. Thank you. Senator Hirono, do you have any
    more questions? Senator Cortez Masto? You don't? Okay.
        I want to thank all of our witnesses for making this effort
    and for being so helpful to us with the decisions we have to
    make.
        Members will have until close of business tomorrow to
    submit additional questions for the record. The Committee
    stands adjourned.
        [Whereupon, at 11:08 a.m., the hearing was adjourned.]

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