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Puerto Rico Governor Hopes for “Open Dialogue” with Mnuchin

Puerto Rico Governor Ricardo Rossello said on Friday that he was "committed to establishing a working relationship" and fostering "open dialogue" with U.S. Treasury Secretary Steven Mnuchin, after the two met in Washington, D.C., Reuters reported. Rossello, who took office on Jan. 2, met with Mnuchin to discuss his efforts to "put Puerto Rico's financial house in order," a statement from the governor's office said. Rossello has signed more than 20 bills and executive orders aimed at cutting spending and fostering economic growth, but Puerto Rico faces a long haul out of an economic crisis characterized by a 45 percent poverty rate, near-insolvent public pensions and healthcare systems, and almost $70 billion in debt. Under former President Barack Obama, the Treasury took a hands-on approach in Puerto Rico, working with federal lawmakers on legislation aimed at giving the U.S. territory a way to cut debt. President Donald Trump has given little indication of how his administration may handle Puerto Rico. The island's finances are under the supervision of a federally appointed board. Rossello on Tuesday is scheduled to present the board with a 10-year blueprint for the island's fiscal turnaround. Read more

In related news, the federally appointed board tasked with managing Puerto Rico's finances hired retired attorney Jaime A. El Koury, formerly of Cleary Gottlieb Steen & Hamilton, as its general counsel, it said on Thursday, Reuters reported. El Koury, a graduate of Yale Law School, will lead the board in helping the U.S. territory restructure some $70 billion in debt. Cleary was counsel to the Puerto Rican government during ex-Governor Alejandro García Padilla's administration, from 2014 to 2016. El Koury retired from Cleary in 2014 and did not work on the Puerto Rico matter while at the firm, board spokesman Jose Cedeno said. New Governor Ricardo Rossello, who criticized García Padilla's fiscal policies and legislative initiatives during last year's campaign, fired Cleary when he took office on Jan. 2. Read more

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage

Hanjin Creditors Fighting Over Who Can Sell Shipping Containers

Stacks of sky-blue shipping containers, one of the last assets of bankrupt Hanjin Shipping Co., litter ports on both coasts. Now a fight is brewing in U.S. Bankruptcy Court over who can sell them, the Wall Street Journal reported on Saturday. Earlier this month, a Seoul court declared Hanjin bankrupt and ordered the firm’s liquidation, bringing about the final chapter of the ocean-shipping industry’s largest-ever collapse. All that remains of Hanjin will be liquidated, including ships, stakes in seaport terminals and other assets such as its containers. In a court filing this week in New Jersey bankruptcy court, attorneys for a handful of Hanjin’s creditors asked for permission to foreclose on the container assets and sell them.

Competing Priorities Bog Down Efforts to Quickly Roll Back Dodd-Frank

After weeks of high expectations for a swift Dodd-Frank rollback with a Republican in the White House, the reality of a hard slog is beginning to set in on Capitol Hill, the Wall Street Journal reported today. The Trump Administration, which has laid out plans to roll back Obama-era financial regulations along with a range of other priorities, now appears to be more focused on other parts of its agenda, such as tax changes. Republican lawmakers who will usher an overhaul through Congress also are showing signs of a more tempered approach. House Financial Services Committee Chairman Jeb Hensarling (R-Texas), in an interview Feb 17, set the timeline for introducing a rewrite of the 2010 Dodd-Frank financial law “in the weeks to come,” though many had been expecting it this month. Around the same time, Sen. Mike Crapo (R., Idaho) offered a cautious outlook to room full of bankers. Hensarling and Crapo also must tackle legislative business that — unlike changing Dodd-Frank — can’t wait until next year. The National Flood Insurance Program expires this fall, portending a repeat of previous fights between the program’s supporters and small-government conservatives who don’t like the federal insurance assistance. Crapo’s panel also hasn’t begun the time-consuming task of confirming Mr. Trump’s nominees to administrative jobs with responsibilities over the financial sector.

Nebraska County Faces Huge Judgment, on the Brink of Bankruptcy

It started with a murder, was followed by a botched trial and has ended with a small Nebraska county facing a $30 million judgment it can’t possibly pay, according to an Associated Press report yesterday. Now the farmers and small town residents of Gage County, Neb., find themselves on the brink of municipal bankruptcy, and wondering about possibly selling off the county’s road equipment, public buildings and few other assets to pay down the debt. The county’s problems stem from the horrific rape and killing of Helen Wilson in 1985 and the conviction months later of three men and three women who spent decades in prison before DNA evidence exonerated them and implicated an Oklahoma man who died in 1992. Those wrongly convicted filed a federal lawsuit claiming investigators recklessly worked to close the case despite contradictory evidence, and last July, a federal jury awarded them $28.1 million, plus additional money for attorney fees. Unless the verdict is tossed out on appeal, which experts say is unlikely, the county will be ordered to immediately pay the $30 million. That’s a mind-boggling prospect in a rural county of 22,000 residents that only collects $8 million in taxes a year. Bankruptcy is “definitely an option on the table,” said Myron Dorn, the county board’s chairman.

Humble Surgical Hospital Files for Bankruptcy

Humble Surgical Hospital filed for Chapter 11 bankruptcy protection Friday morning, three weeks after U.S. District Judge Lynn Hughes entered a multi-million judgment against the specialty, five-bed hospital, the Houston Chronicle reported on Saturday. Earlier this month, Aetna Life Insurance Co. was awarded $51.4 million, including nearly $10 million in interest, to recover excessive health care fees the insurer said it paid to the hospital during the past seven years. Humble Surgical estimated its assets between $10 million and $50 million and liabilities between $50 million and $100 million. Read more.

For more on hospital and health care insolvencies, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition from the ABI Bookstore. 

Commentary: Score One for the Bank Whistleblowers

The U.S. Supreme Court just handed whistleblowers one of their bigger wins in a long time, according to a commentary in the New York Times DealBook blog on Friday. In its Feb. 21 opinion, which vacated two lower courts’ dismissals of the case, the Supreme Court essentially confirmed that some courts have been using too narrow a legal standard when weighing whistleblower suits under the False Claims Act, which is meant to punish those who defraud the government. By highlighting a more expansive standard for what constitutes a false claim under the act, the Court’s ruling is likely to open the door to more whistleblower cases, according to lawyers who represent plaintiffs in these matters.