Puerto Rico Update

Hurricane Maria

Hurricane Maria, a category 4 storm, caused severe damage to Puerto Rico when it struck the island on early Wednesday morning, September 20th, with winds up to 155 miles an hour. It was the most powerful storm to hit the island in nearly a century.

Only about 50% of the houses on the island were covered by insurance policies.1

The storm destroyed the island’s electricity infrastructure and crippled its cellular grid, which greatly impeded the coordination of relief efforts. Without electricity, internet service, and practically no telephone service, a nightly curfew was imposed and there was a need for armed escorts for fuel deliveries. Continue Reading

Appeals Court Upholds Conviction In Insider Trading Case

A federal appeals panel on August 23, 2017 upheld the insider trading conviction of Mathew Martoma, the former analyst at SAC Capital Advisors.


Attorneys for Mr. Martoma had argued that the government prosecutors did not introduce enough evidence that he had a sufficiently close relationship with Dr. Sidney Gilman who leaked confidential information about a clinical trial of an Alzheimer’s drug that led SAC Capital to sell out its position in two pharmaceutical companies, resulting in gains and losses avoided of over $250 million. Continue Reading

Hedge Fund Lawsuit Seeks Puerto Rico’s Bankruptcy Filing Dismissed And Other Developments

On Monday, August 7, 2017, the Aurelius Capital Management hedge fund, as a $468 million holder of Puerto Rico’s general obligation bonds, filed a lawsuit in the United States District Court in San Juan arguing that the federal Oversight Board, created by the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), was unconstitutionally established.

Claims of Dismissal Lawsuit

The lawsuit cited the “Appointments Clause” of the United States Constitution, which calls for all principal officers of the federal government to be appointed by the President and confirmed by the U.S. Senate. The lawsuit claims this did not happen when the seven members of the Oversight Board were selected. Instead, the members were “handpicked by individual members of Congress” through “an intricate system of Balkanized lists, designed to severely constrain the President’s appointment powers.” Continue Reading

Puerto Rico Electric Power Authority Defaults

On July 2, 2017, Puerto Rico’s Fiscal Agency and Financial Advisory Authority announced that the island’s troubled power authority defaulted on a deal to restructure roughly $9 billion in bond debt and sought protection from its creditors.

Power Authority Files for Bankruptcy

The government said the move to file for bankruptcy was the only way to reduce the existing debt of Puerto Rico Electric Power Authority (PREPA) “to a sustainable level.” PREPA had previously negotiated an out-of-court deal to reduce its bond payments by about 15 percent. The bondholders now seem likely to sustain larger losses under court supervision. Continue Reading

Recent Developments In Puerto Rico Bankruptcy

As previously reported, the U.S. Congress last year approved the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to address the island’s financial crisis.

U.S. territories are barred from filing a traditional bankruptcy.

Under the PROMESA legislation signed by former President Barack Obama, an Oversight Board and the Title III process were created. Title III is like a Chapter 9 bankruptcy. Continue Reading

Puerto Rico Files For Bankruptcy Protection

The Commonwealth of Puerto Rico is seeking the largest municipal bankruptcy filing in U.S. history, after failed negotiations with creditors over its $70 billion debt crisis. That is more than four times the debt Detroit collapsed under.

As previously reported, U.S. territories were barred from filing for a traditional bankruptcy, permitted for most U.S. cities or states. As a result, the U.S. Congress last year approved the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to address the impending financial crisis Puerto Rico was already facing.1 Continue Reading

Recent Important Insider Trading Trial

On Friday, April 7 of this year, the famed Las Vegas sports gambler William T. “Billy” Walters was found guilty in the U.S.  District Court for the Southern District of New York in Manhattan of 10 charges of securities fraud, wire fraud and conspiracy, the most serious of which carry a potential sentence of up to 20 years in prison. This was one of the biggest insider trading trials in recent years.

At issue in the trial was whether the relationship between Mr. Walters and his source, Thomas C. Davis, a former chairman of the board of Dean Foods of Dallas was sufficiently close to find that tips about Dean Foods were a gift in violation of the insider trading laws.1 Continue Reading

Commentary On Nortel Networks Inc. Bankruptcy Court Ruling Re Trustee Fee Application

As previously reported in the article by Tina N. Moss and Yasamin N. Oloomi on March 31 of this year entitled “Nortel Court Rejects Noteholder Objection to Indenture Trustees’ Fees,” the United States Bankruptcy Court for the District of Delaware in In re Nortel Networks Inc., No. 09-10138(KG), 2017 WL932947 (Bankr. D. Del. Mar. 8, 2017) largely overruled certain noteholders’ objections to the indenture trustee fees.

Two hedge fund noteholders purporting to hold 90% of the outstanding 7.875% senior notes issued pursuant to an indenture qualified under the Trust Indenture Act of 1939, as amended, opposed the attorneys’ fees and sought to reduce the $8 million fee request roughly in half arguing that the indenture trustee did not properly discharge its duties. The two noteholders asserted that (1) the indenture trustee did not act prudently in assigning work to and supervising its attorneys, and (2) the attorneys’ fees charged were unreasonable. Continue Reading

Nortel Court Rejects Noteholder Objection to Indenture Trustees’ Fees

On March 8, 2017, the United States Bankruptcy Court for the District of Delaware in In re Nortel Networks Inc., No. 09-10138(KG), 2017 WL 932947 (Bankr. D. Del. Mar. 8, 2017) largely overruled certain noteholders’ objections to an indenture trustee’s fees and further clarified that the indenture trustee could recover the fees that it incurred in defending its attorneys’ fees, notwithstanding the Supreme Court’s recent decision in Baker Botts LLP v. ASARCO.  Central to the court’s decision was its refusal to evaluate the prudence of the trustee’s fees through hindsight and its upholding of the indenture’s provision allowing for the recovery for costs incurred by the trustee in defending itself. Continue Reading

Continuing To Define Insider Trading

Courts will define the boundaries of friendship in insider trading.


The issue in these cases revolves around how to interpret the United States Supreme Court’s December 6, 2016 decision in Salman v. United States1 which found that the government did not always have to show that something valuable changed hands to prove a crime was committed.

The source of the controversy was the 2014 decision by the United States Court of Appeals for the Second Circuit in Manhattan in United States v. Newman2 which had required prosecutors to also prove that the tipper received something “of a pecuniary or similar valuable nature” – a more difficult standard to meet. Continue Reading