[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

                               __________
                               
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               Committee on Energy and Natural Resources

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         .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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    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.]

                      APPENDIX MATERIAL SUBMITTED

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