1 2 October 9-11, 2015 Marine Diver Self-winding movement. Water-resistant to 300m. 18 ct rose gold case. Also available in stainless steel. U LY S S E - N A R D I N. C O M The San Juan Daily Star
2 GOOD MORNING The San Juan Daily Star, the only paper with 3 October 9-11, 2015 News Service in English in Puerto Rico, publishes 7 days a week, with a Monday, Tuesday, Wednesday and Thursday edi on, along with a Weekend Edi on to cover Friday, Saturday and Sunday. So that our employees can enjoy Columbus Day weekend, the STAR will not publish on Monday, Oct.12. Gov t Says 8 Gap Could Force Electricity Rate Hike Local Mainland Business Interna onal Viewpoint Lo ery Winners Entertainment INDEX No cias en Español Legal No ces Sports Games Horoscope Cartoons By EVA LLORENS VELEZ Although La Fortaleza wants the consumer electricity rate to be stabilized so it can be an engine for economic development, officials acknowledged Thursday that the Puerto Rico Electric Power Authority (PREPA) may have to increase its electricity rates as the public corporation needs to make up a gap of 7.8 to stabilize its finances. The remarks were made after one of PREPA s board members, Carlos Gallisa, said Wednesday that the utility will pursue a rate hike. We want the rate to serve as the economic engine, said La Fortaleza Public Affairs Secretary Jesús Manuel Ortiz. He added, however, that La Fortaleza recognizes that there is a nearly 8 gap in the rate that arises from the debt situation, and it is necessary to stabilize the finances of the public corporation. The amount of the rate gap is in PREPA s restructuring plan, which explains that 7.8 per kilowatt-hour (kwh) is the difference between current costs and the basic rate. Ortiz was not categorical as to whether La Fortaleza will favor a rate increase of exactly 7.8. He reiterated that all parties involved in stabilizing PREPA s finances must share the responsibility for the gap. PREPA is currently restructuring its $9 billion debt. It will submit a new rate structure in January. When the current government came to La Fortaleza, the energy rate was about 30 per kwh, and currently it is 18 per kwh due to the fall in the price of oil and other savings that have been made at PREPA, Ortiz said. Nonetheless, the question remains as to how much the electricity rate will have to go up. One of PREPA s insurers, National Public Finance Guarantee Corp, recently asked the Energy Commission to temporarily raise the rate by 4.2 cents, saying that would be enough for PREPA to cover debt payments. The commission rejected the request.
3 4 October 9-11, 2015 The San Juan Daily Star Ex-Island Chief Justice Says Educational Alliances Pass Constitutional Test By EVA LLORENS VELEZ Former Puerto Rico Supreme Court Chief Justice José Andreu García said the proposed educational alliances bill that calls for deficient public schools to be put under the management of non-profit groups is constitutional. I am offering you my constitutional analysis and the constitutional norm to serve as a basis, he said. Senate President Eduardo Bhatia said his proposal is very different from the proposed school voucher program whose imposition was attempted in the past. The voucher program gave money to public school students for the purpose of attending private schools. The island Constitution states that all children have the right to a public education. The Constitution can not be a constraint, Bhatia said. Alliances can be done in Puerto Rico if they are done well. The public school system spends $9,000 per student per year. In response to questions from Sen. Aníbal José Torres, Andreu García said the proposed educational reform penned by Bhatia is not going to result in the privatization of the public school system as critics have said. He noted, however, that the public school system needs the help of the private sector to provide resources. When the state fails to provide services, it needs to seek resources, Andreu García said. The intervention of the private sector, once obligations and duties of all sides have been defined, does not mean there is going to be a privatization. Justice Secretary César Miranda also said the bill was constitutional because the government was delegating only the management of the public schools and not educational public policy. A state can outsource even on such a sensitive issue as the education of children to companies that administer educational services under state law, as it has already been doing for years, he said. The important thing is that these private or quasi-public entities follow constitutional mandates that stipulate: 1) that education should be free, nonsectarian, and non-discriminatory; 2) that the state is responsible for public education; and 3) that public property and money can not be invested in the maintenance of private educational institutions, he said in a statement. Bhatia s bill would transfer 15 percent of public schools that are lagging behind to non-profit entities or municipalities. Education Office Employees to Be Transferred to Police Dept., Schools By EVA LLORENS VELEZ More than 200 Education Department employees will be relocated to the Puerto Rico Police Department to perform clerical work, La Fortaleza Public Affairs Secretary Jesús Manuel Ortiz, announced Thursday. As La Fortaleza chief of staff [Victor Suarez] has said, as part of the reorganization plan of the government we are going to relocate employees, Ortiz said in his weekly press conference at La Fortaleza. Today we are sending letters to 200 Department of Education employees to notify them that that they are candidates for transfer to the Puerto Rico Police to perform duties of civil servants. Currently, the police superintendent [José Caldero] has said it has 1,200 policemen performing civil functions. He said the transfer will allow the Police Department to put more officers on the streets. Ortiz also said 407 employees who perform administrative functions in the Education Department s central offices will be transferred to schools to perform similar tasks. The move will allow school principals to have more free time to supervise teachers.
4 The San Juan Daily Star October 9-11, GO Debt Payments Through 2020 Said Out of Reach for PR By The STAR Staff Puerto Rico wouldn t be able to repay the $5.5 billion of principal and interest due on its general obligation (GO) bonds in the next five years even if the commonwealth diverted sales tax revenue pledged to cover payments elsewhere, according to Bloomberg, which cited a report written by Barclays. The information comes amid news that the government could shut down next month in order to make debt payments. The GOs due through fiscal 2020 surpass the $4.2 billion of revenue, including sales tax receipts, that commonwealth officials calculate Puerto Rico will have to pay down central government and some agency debt during that period, Mikhail Foux, a municipal debt strategist at Barclays in New York, wrote in a report this week. The island s sales tax collections repay bonds, known as COFINA by the Spanish acronym for Puerto Rico Sales Tax Financing Corp., that are backed by that revenue stream. Even if COFINA s cash flow stream is invaded, there would still not be enough value to fully cover principal and interest for GOs and commonwealth guaranteed debt in fiscal year 2016 through fiscal year 2020, Foux wrote in the report. This suggests that some type of haircut would be needed, over those five years, he wrote. Puerto Rico officials haven t said that they plan to redirect, or claw back, sales tax collections to pay down GO debt before COFINA bonds. The island Constitution states that GOs must be repaid before other expenses. The commonwealth on Sept. 25 said it would take into account the constitutional priority given to GO bonds as it seeks to restructure $73 billion of debt. Prices on some COFINA debt would fall if the government uses the sales tax receipts to repay GOs first, Foux said. Subordinate COFINAs, which are repaid after senior-lien sales tax bonds, would drop in value, he said. If COFINA is pierced, subs would be severely affected, allowing for more downside even at current depressed levels, Foux wrote.
5 6 October 9-11, 2015 The San Juan Daily Star Bond Denied to Aurea Vázquez, Accused of Murder-for-Hire A federal judge on Thursday denied bond to Aurea Vázquez Ríjos, who is accused of offering a hitman $3 million to kill her wealthy Canadian husband. Vázquez pleaded not guilty and was ordered to remain in jail until her trial, which is scheduled to start Oct. 27. Vázquez arrived in Puerto Rico in late September after a court in Spain ordered her extradition. Attending Thursday s hearing was Vázquez s mother, who was given custody of her daughter s baby, who was born in Spain. A U.S. grand jury charged Vázquez in June 2008 following the death of real estate developer Adam Anhang, who had an estimated net worth of $24 million. He was beaten and stabbed to death in September 2005 in the historic district of Puerto Rico s capital after he and Vázquez met to discuss their pending divorce. Vázquez refused to cooperate with police and filed a civil lawsuit against Anhang s family after his death seeking $1 million in damages and millions more from his estate. A judge dismissed the suit. Vázquez later vanished and reappeared in Spain, where she was arrested in June Maker of El Torito Performance Enhancers Faces Federal Charges for Misbranding By MARIA MIRANDA SIERRA Jorge Pagán and his companies AWD Group Inc. doing business as El Torito USA, Inc., Allied Worldwide Distributors Inc., and All Wheel Drive Corp., were indicted by a federal grand jury in San Juan for introduction of misbranded drugs into interstate commerce, conspiracy to commit wire fraud, wire fraud, and mail fraud, U.S. Attorney for the District of Puerto Rico Rosa Emilia Rodríguez announced Thursday. The indictment alleges that the defendants, aiding and abetting each other, with the intent to defraud or mislead, introduced and delivered for introduction into interstate commerce drugs, namely El Torito Plus 1000 mg, El Torito Xtreme 500 mg, and El Torito Black Bull Power 500 mg that were misbranded -- the labeling of each drug was false and misleading. The drugs were sold on El Torito s website, at Amazon.com, on ebay.com, and at gas stations across the island El Torito Plus 1000 mg, El Torito Xtreme 500 mg, and El Torito Black Bull Power 500 mg, were capsules and pills sold over the counter and on the Internet that were labeled and marketed as 100% natural dietary supplements and performance enhancers. The capsules and pills were marketed as natural supplements for men and women to help achieve a pleasant and lasting sexual experience with all natural ingredients. In fact, El Torito s products contained sildenafil and tadalafil (the active ingredients in Viagra and Cialis respectively), and their synthetic analogs, including desmethyl-carbodenafil and dithiodesmethyl-carbodenafil. Sildenafil and tadalafil are the active ingredients of branded drugs approved by the FDA and are also prescription drugs that, because of their toxicity and other potential harmful effects, are not safe for use except under the supervision of a practitioner licensed by law to administer such drugs. These undeclared ingredients may interact with nitrates found in some prescription drugs such as nitroglycerin and may lower blood pressure to dangerous levels for individuals with diabetes, high blood pressure, high cholesterol, or heart disease. Part of the scheme perpetrated by defendants and their co-conspirators was to illegally enrich themselves by obtaining money and property from individuals under the false and fraudulent pretenses and representation that individuals were purchasing 100% natural dietary supplements and performance enhancers when, in fact, defendants were selling misbranded prescription drugs. The authorities were not fooled by these criminals, who are now in federal custody, Rodríguez said. The law requires that drugs be produced and branded under the most rigorous of quality standards. When individuals and companies fail to exercise the vigilance that the law demands, they will held be accountable. During the course of the conspiracy, communications were sent by defendants to their manufacturers, distributors, and others in furtherance of the scheme to defraud and payments were received using PayPal. For example, one of the s sent by an El Torito distributor to gmail.com under the name Jorge Pagán stated that: You need to change the pictures of Torito Chinese box from the website because the sheriff will probably look at the site for info and I told them that Torito is made in USA and I showed them the box without the Chinese letters. Another communication sent from gmail.com under the name Jorge Pagán to a manufacturing contact stated that he was Only worried about my investment and the loss of money if authorities find controlled ingredients. The authority will only get involved when the big pharmasuricals [sic] companies pressure them because they lose sales with these products. If Mr. Wangs product get problems, all he has to do is send me a new brand name box and just change the style of the packaging the capsule in the blister pack and we can do this for ten years, the said. So the authorities will be fooled all the time. As another part of the scheme to commit mail fraud, the defendants knowingly placed numerous El Torito products in an authorized depository for mail, to be sent and delivered by the United States Postal Service, Distributing prescription drugs disguised as all-natural dietary supplements puts the health and safety of the American public at risk, said Acting Special Agent in Charge Robert West, Food and Drug Administration (FDA) Office of Criminal Investigations Miami Field Office. We will continue to focus our resources on removing illegal products from the marketplace, as well as prosecuting those who attempt to evade FDA regulations. The investigation was led by the FDA, Office of Criminal Investigations (FDA-OCI), with the collaboration of the Puerto Rico Police Department (PRPD), Guayama Municipal Police, and the Puerto Rico Treasury Department. The case is being prosecuted by Assistant U.S. Attorney Luke Cass. Attorney Shannon Singleton from the FDA s Office of Chief Counsel provided valuable assistance to this criminal investigation. If found guilty, the defendant could face a possible sentence of up to 30 years behind bars for the mail and wire fraud counts. Federal authorities are calling on citizens that have used El Torito products in the past and have questions to call INFO-FDA or contact the FDA online at
6 The San Juan Daily Star October 9-11,
7 8 October 9-11, 2015 The San Juan Daily Star Pierluisi Bill Would Authorize US Treasury to Guarantee PR Bonds By MARIA MIRANDA SIERRA The Puerto Rico Financial Improvement and Bond Guarantee Act of 2015, which would authorize the U.S. Treasury Department to guarantee repayment of principal and interest on bonds to be issued in the future by bond-issuing government entities in Puerto Rico, was introduced Thursday by Puerto Rico Resident Commissioner Pedro Pierluisi. In order to guarantee the issuance of bonds, the U.S. Treasury must first determine -- and notify Congress -- that the government of Puerto Rico has shown significant improvement in managing its public finances. The legislation would further require any Puerto Rico bonds guaranteed by the U.S. Treasury Department to be used solely to meet urgent short-term financing needs like Tax and Revenue Anticipation Notes (TRANS), to make capital expenditures that promote long-term economic growth (as opposed to government operating expenditures), or to refinance its existing bond debt at a lower interest rate. As Puerto Rico s representative in Congress, my objective has been to drive the debate in Washington, D.C. about how the federal government can help the territory manage its fiscal crisis. I am the first to criticize the government of Puerto Rico when it demonstrates a lack of fiscal discipline or takes actions that undermine its credibility with the public and the investment community, Pierluisi said. But responsibility for the crisis also lies squarely with the federal government, which treats the territory in a profoundly inequitable fashion under spending and tax credit programs. For this reason, the federal government has a particular obligation to provide Puerto Rico with the tools it needs to alleviate the crisis. More specifically, the Puerto Rico Financial Improvement and Bond Guarantee Act of 2015 would require the federal Treasury secretary to examine the Puerto Rico government s current fiscal management practices, identify important gaps and weaknesses, and make specific recommendations designed to help the commonwealth government address those gaps and weaknesses. For example, some areas that should be examined, according to the legislation, include Puerto Rico s efforts to: enhance fiscal stability and operational efficiency, reduce deficits and debt, accurately estimate revenues and expenditures, collect outstanding taxes, improve federal grant management, strengthen financial recordkeeping and reporting, increase the use of information technology and streamline the permitting system to make it easier to start, expand, and operate businesses while protecting public monitoring goals. The federal Treasury Department can update and revise its recommendations as deemed necessary. I have already introduced legislation, H.R. 870, to empower the government of Puerto Rico to authorize its insolvent public corporations to adjust their debts under Chapter 9 of the federal bankruptcy code, a power that Congress has provided to all state governments. A companion bill, S. 1774, has been introduced in the Senate, Pierluisi reiterated. The legislation -- which is supported by individuals and organizations across the political spectrum -- would not require the federal government to spend a single dollar. My allies and I will continue to do everything within our power to enact this bill into law. But the time has come to broaden the conversation in Congress beyond Chapter 9 alone. That is why I am filing this carefully calibrated bill, which seeks both to enable Puerto Rico to regain access to the capital markets on reasonable terms and to address the legitimate concerns that have been expressed regarding the need for the Puerto Rico government to get its fiscal house in order. Under the new bill, upon receiving a written request for a bond guarantee from the governor of Puerto Rico, the U.S. Treasury Department would be authorized to determine whether the government of Puerto Rico has shown meaningful improvement in managing its finances and, specifically, in implementing the recommendations made by the Treasury Department. If the governor of Puerto Rico requests a bond guarantee for one of Puerto Rico s public corporations, as opposed to the central government, the Treasury Department would examine whether both the public corporation in question and the central government have demonstrated meaningful improvement in implementing the recommendations made by the federal Treasury Department. This bill is modeled on prior Acts of Congress, including the New York City Seasonal Financing Act of 1975 (Public Law ), in which Congress authorized the Treasury Department to establish a $2.3 billion fund for the purpose of making direct shortterm loans to New York City, which was facing a major fiscal crisis and therefore was unable to obtain loans from its customary sources, Pierluisi noted. If the U.S. Treasury Department does not determine that significant improvement has been made, then under the proposed legislation it can not permit to guarantee the bond issue, he said. Pedro Pierluisi However, if the Treasury Department does in fact make the necessary determination, and notifies Congress of that conclusion, then the U.S. Treasury is authorized to guarantee repayment of principal and interest. Nevertheless, the bill further provides that the federal Treasury Department is only authorized to guarantee a bond issue if it determines that there is a reasonable prospect of repayment of the principal and interest by the bond issuer in Puerto Rico. If Congress has authorized the Treasury Department to provide loans to a municipality in the states that was undergoing a fiscal crisis, Congress should also provide the Treasury Department with the express authority to guarantee bonds issued by a U.S. territory that is home to 3.5 million American citizens, does not presently have access to the capital markets on reasonable terms, is losing approximately 60,000 residents a year to the states, and may soon be required to curtail essential government services, Pierluisi added. The need for Congress to provide such authority is particularly critical given that discriminatory federal policy toward Puerto Rico -- only possible because it is a territory and not a state -- is the root cause of the island s economic, fiscal and demographic crisis. A second provision in the bill introduced by Continues on page 10
8 The San Juan Daily Star October 9-11,
9 10 October 9-11, 2015 The San Juan Daily Star From page 8 Pierluisi would authorize the Federal Reserve to directly buy certain shortterm bonds issued by government entities in Puerto Rico. Section 14 of the Federal Reserve Act currently authorizes the Federal Reserve to buy bonds issued by government entities in the continental U.S., which is expressly defined to encompass the 50 states and the District of Columbia and therefore appears to exclude Puerto Rico and the other territories. Although the Federal Reserve has not used its Section 14 authority in the modern era, there is no principled reason why this authority should not be available to buy bonds issued by government entities in the U.S. territory of Puerto Rico, just as it is available to buy bonds issued by government entities in the states and the District of Columbia, Pierluisi contends. Pierluisi noted that he has also introduced legislation to eliminate or mitigate nearly all of the disparities that Puerto Rico -- as a territory -- confronts under federal spending and tax credit programs, whether it be Medicaid, Medicare, Supplemental Security Income, Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program, the Earned Income Tax Credit program, or the Child Tax Credit program. In short, I have put forward many proposals for how the federal government -- both Congress and the administration -- can empower Puerto Rico to overcome its challenges the resident commissioner said. There has been enough talk about and analysis of the problem. What Puerto Rico needs from the federal government is action. US Senators Urge Judiciary Committee to Take Up Chapter 9 Access for PR By MARIA MIRANDA SIERRA Twelve U.S. senators, including the top Democrat on the Senate Judiciary Committee (Patrick Leahy of Vermont) and the top Democrat on the Judiciary panel subcommittee that has jurisdiction over the bankruptcy code (Chris Coons of Delaware) on Thursday wrote Senate Judiciary Committee Chairman Charles Grassley a letter seeking a hearing on S. 1774/H.R. 870, companion bills that would give Puerto Rico access to Chapter 9 bankruptcy protections equal to that of the 50 states. Puerto Rico is in the midst of a severe financial crisis, which has the potential to become a humanitarian disaster. We respectfully request that the Senate Judiciary Committee swiftly hold a hearing on S. 1774, the Puerto Rico Chapter 9 Uniformity Act, which would allow Puerto Rico to authorize its municipal and public corporate debt to be restructured under Chapter 9 of the bankruptcy code, the same authority provided to every state, the senators wrote Grassley. Charles Grassley On June 29, Puerto Rico Gov. Alejandro García Padilla announced that the island faces debts it is unable to pay. Not only does this unpaid debt burden threaten to stifle economic growth and fiscal stability in Puerto Rico, but the ramifications of further uncertainty and potential default could also lead to a humanitarian crisis that threatens citizens ability to access basic human resources like electricity, water and sanitation services, among others, the senators noted in their letter. It is important to remember that not only does this crisis threaten the welfare of the 3.5 million U.S. citizens of Puerto Rico, but it also threatens the U.S. economy at large, they added. The group of senators wrote Grassley that the U.S. government must do more to ensure that residents of Puerto Rico, our fellow American citizens, have a chance at economic rehabilitation through a process that offers fairness to creditors and debtors alike. The issues facing communities and public corporations in Puerto Rico have an enormous impact on the livelihood of Puerto Rican families across the nation -- issues we believe warrant the attention of the Senate Judiciary Committee and are well within its jurisdiction, they wrote. We urge the full Committee to consider these issues.