© Reuters. FILE PHOTO: The flags of the U.S. and Puerto Rico fly outside the Capitol building in San Juan

By Luis Valentin Ortiz

SAN JUAN (Reuters) – Puerto Rico’s federally created financial oversight board on Tuesday began filing the first round of scores of lawsuits seeking to recover money the bankrupt U.S. commonwealth paid to bondholders, businesses and others.

The board has until the end of this week to file certain claims after the U.S. judge hearing Puerto Rico’s bankruptcy cases declined to extend an expiring two-year statute of limitations. 

More than 230 complaints were filed in U.S. District Court in Puerto Rico targeting about $4.2 billion in payments made by the island’s government, according to the board. Defendants include pharmaceutical maker Bristol-Myers Squibb (NYSE:) Puerto Rico Inc, as well as individuals and local companies that provide educational, health, IT, security, construction and communication services.

“The oversight board has a responsibility to the people of Puerto Rico to recover any payments in contravention of bankruptcy or Puerto Rico law made prior to the commonwealth’s bankruptcy,” board executive director Natalie Jaresko said in a statement. 

The legal actions cover a period dating back as far as four years before Puerto Rico filed for bankruptcy on May 3, 2017, in an effort to restructure about $120 billion of debt and pension obligations. 

Legal arguments for the claims include that these payments “deviate from historical payment patterns,” were made “in the absence of a contract,” or do not correspond to existing contracts. Claims would be dismissed against defendants who can show “a proper basis for the payments.”

A spokeswoman for Bristol-Myers Squibb said, “We do not comment on ongoing litigation.”

The board contends that Puerto Rico was insolvent at the time these payments were made. The parties being sued “knew or should have known that the commonwealth was insolvent, in the vicinity of insolvency, or unable to satisfy its obligations as they became due,” the fiscal panel argues.

A deluge of lawsuits is also expected this week against owners of general obligation bonds the island issued in 2012 and 2014. The board wants to recoup payments made to bondholders if the court grants its motion to invalidate the bonds because they were issued in violation of a debt limit in Puerto Rico’s constitution.

On Monday, the board informed the court it is targeting investors who owned $2.5 million or more of the bonds any time between May 3, 2013, and May 21, 2017.

Claims would also be pursued against 27 bond underwriters, nine law firms, and five accounting firms, according to an attorney for the oversight board.

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