In 2015 the Puerto Rico government experienced a complete financial collapse. During this period, Puerto Rico defaulted on $69 billion dollars in municipal bonds. Most of the original bond holders sold their positions and they lost a total of $36 billion dollars.
As someone who was involved in this, I thought I would take a look and try to figure out how this all happened.
I started by reading the bond offering memorandums for the $69 billion dollars in municipal bonds. I was surprised to find out that the bond offering documents openly admitted that these agencies lacked the cash to make the required payments on the bonds. The offering documents also told me that the agencies, for the most part, have significant negative net worth and a ton of legal and regulatory issues. It was clear just from reading the bond documents that all these agencies were bankrupt when they issued the bonds.
Somehow, the agencies were able to pay sizable fee’s to secure good credit ratings from Moody’s, Fitch and S&P, allowing them to sell the bonds. Since the agencies openly admitted in the bond documents they were all technically bankrupt, telling the public, through the false credit ratings that these bonds were a good risk, was fraud. A clear criminal act that resulted in the loss of $36 billion dollars to innocent Americans across the fifty states. I then started to read bond offerings from Chicago, New York, California and Connecticut. Just more of the same. In fact, 55% of the bonds I looked at were materially misleading or fraudulent. In a $4.2 trillion-dollar market that is $2.3 trillion dollars in criminal theft.
I contacted the FBI and they did nothing. I contacted the U.S. Attorney’s office and they did nothing. I contacted the SEC and they did nothing. I wrote all 435 Congressman and 100 Senator’s and they quickly passed a law (PROMESA) revoking all the legal rights of the victims (bond holders) and passed another law preventing any lawsuits.
I went to the Wall Street Journal, The New York Times and the The Bond Buyer. They said these were serious allegations but there wasn’t enough evidence to support my positions. I reiterated, they only need to read the public offering documents to come to my conclusions. I even provided an audit of one of the bonds showing them where in the documents they could find the information. They simply ignored me.
Next I went to the Puerto Rico Legislators and they held special committee meetings to get to the bottom of this. The final report admitted that the Puerto Rico Agencies were selling bonds across America. They also said that they could not make the payments on the bonds or pay them back. They went on to admit that the banks and credit ratings agencies knew this but for the right fees they would overlook it.
I went to the SEC, U.S Attorney’s office and the FBI. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this but for the right fees, they would overlook it. We now have sworn testimony and a confession too.
The SEC, the FBI and the U.S. Attorney’s office did nothing.
I went back to The Wall Street Journal, The New York Times and The Bond Buyer. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this but for the right fees, they would overlook it. We now have sworn testimony and a confession too.
The Wall Street Journal, The New York Times and the Bond Buyer said my claims were not credible. One of the journalist said you could not trust a confession from Puerto Rican politicians. They laughed at me and continued to bury the story.
I then looked at the team the administration put together to solve the Puerto Rico financial mess. It was led by Treasury Secretary Lew who had Antonio Weiss and Stephen Campbell from Treasury assist him. Treasury Secretary Lew was the COO of Citibank and while he was COO, Citibank was among the first banks to issue these fraudulent bonds. Weiss and Campbell were Senior Partners at Lazard, and you guessed it, Lazard, an investment bank, was up to its ears in the Puerto Rico financial mess while Weiss and Campbell were in charge.
I then contacted the SEC, U.S. Attorney’s Office and the FBI. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this, but for the right fees, they would overlook it. We now have sworn testimony and a confession too. I also told them that the people who the administration put in charge of finding a solution were involved in the original fraud.
The SEC, The U.S. Attorney and the FBI, did nothing.
I went back to the Wall Street Journal, The New York Times and the Bond Buyer. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this but for the right fees, they would overlook it. We now have sworn testimony and a confession too. I also told them that the people who the administration put in charge of finding a solution were involved in the original fraud.
The Wall Street Journal, The New York Times and The Bond Buyer said my allegations were not credible. They said just because Lew, Weiss and Campbell were in charge, they may not have known about it.
I then wrote an editorial about this that was widely printed in the Caribbean. The next day a CIA officer called me and expressed extreme frustration that this was all still going on. They have been monitoring phone calls out of Puerto Rico detailing all of this for 10 years. I printed an editorial about that and the next day a newspaper editor was able to confirm everything the CIA agent told me through their agency contacts.
I contacted the SEC, U.S. Attorney’s Office and the FBI. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this, but for the right fees, they would overlook it. We now have sworn testimony and a confession too. I also told them that the people who the administration put in charge of finding a solution were involved in the original fraud. I went on to say that the CIA has been recording conversions documenting all this fraud.
The SEC, The U.S. Attorney’s Office and the FBI did nothing.
I went back to the Wall Street Journal, The New York Times and the Bond Buyer. I said that all you need to prove that there is massive fraud here is to read the bond documents. If that is not enough, The Puerto Rico Senate just released a report detailing how their Agencies sold bonds they could not make payments on or pay back. They admitted that the credit rating agencies and all the Wall Street Banks knew this but for the right fees, they would overlook it. We now have sworn testimony and a confession too. I also told them that the people who the administration put in charge of finding a solution were involved in the original fraud. I went on to say that the CIA has been recording conversions documenting all this fraud.
The same three newspapers told me that my claims were not credible and that the editor who confirmed the CIA story was not credible.
How broken and corrupt is our government and the press? I think this speaks for itself.
There is only so many trillions of dollars our government can steal from its citizens before America becomes an irreversibly corrupt third world country.
On September 27th, 2016 at 10 AM I will hold a Press Conference at the Waldorf Astoria Hotel in New York. I hope you will attend to hear the truth.
Richard Lawless, has been a senior and executive banker for 28 years. He has been through credit training programs with Wells Fargo Bank and the old Crocker Bank and has run multi-billion-dollar lending divisions for a number of major Wall Street banks. In addition to his 28 years’ experience he has a Bachelor’s of Science Degree from Pepperdine University and a Master’s Degree (MBA/Finance) from the University of San Diego.