Flag of the Commonwealth of Puerto Rico in front of Capitolio, San Juan, Puerto Rico.

On July 10, 2019, the Federal Bureau of Investigation made arrests in connection with a 32-count indictment alleging that Julia Keleher, the former Education Secretary of Puerto Rico, and Angela Avila Marrero, the former Executive Director of the Puerto Rico Health Insurance Administration, illegally steered millions of dollars in federal contracts to politically connected consultants (the Arrests). Patricia Mazzei, Puerto Rico Ex-Officials Accused of Steering $15.5 Million in Contracts to Consultants, The New York Times (July 10, 2019). The Arrests are another tragic chapter of Puerto Rico's history of public corruption. FBI: Puerto Rico cops protected cocaine dealers, CNN (Oct. 7, 2010).

Consequences of the Arrests. The Arrests will have profound consequences for Puerto Rico and the PROMESA bankruptcy cases. An immediate consequence of the Arrests is that Congressman Raul Grijalva, Chairman of the Natural Resources Committee that has jurisdiction of Puerto Rico, has called for the resignation of Governor Ricardo Rossello. Jeff Stein, FBI Makes Arrests in Puerto Rico Corruption Scandal, Prompting Calls for Governor's Ouster and Concerns about Billions in Storm Aid, The Washington Post (July 10, 2019). Congressman Grijalva's lack of confidence in the government of Puerto Rico will adversely affect federal funding for Puerto Rico. After approximately two years Puerto Rico still has not recovered from Hurricane Maria. Greg Allen & Marisa Peñaloza, I Don't Feel Safe': Puerto Rico Preps for Next Storm Without Enough Government Help, NPR (July 3, 2019). The Arrests will probably create a moratorium for federal funding for Puerto Rico until the Congress and President are comfortable that effective anti-corruption measures have been implemented in Puerto Rico.

Another consequence of the Arrests is the impact of Medicaid funding in Puerto Rico. Historically, the Medicaid program in Puerto Rico has been under-funded. Jaime R. Torres, 2019 Medicaid funding cliff could cause mass migration from Puerto Rico, The Hill (March 30, 2019). The arrest of the former head of Puerto Rico's Medicaid program will most likely impede federal funding for Medicaid in Puerto Rico. Medicaid is an important medical program in Puerto Rico because Puerto Rico has a high poverty rate. The lack of Medicaid funding has compelled doctors to leave Puerto Rico. Mariela Patron, Puerto Rico's Exodus of Doctors Adds Health Care Strain to Dire Financial Crisis, NBC News (Aug. 8, 2017). The Arrests have further jeopardized the medical care of those Puerto Ricans that are dependent upon Medicaid.

The Arrests will also have a negative impact on the pending PROMESA bankruptcy cases. Under PROMESA a restricting plan can only be confirmed if it feasible. 48 U.S.C. §2174(b)(6). Feasibility means that there is possibility that the debtor will be able to make its plan payments. In re Chicago Investments, 470 B.R. 32, 107 (Bankr. D. Mass. 2012). The central inquiry is whether there is a reasonable probability that the plan provisions can be effectuated. In re Olde Prairie Block Owner, 467 B.R. 165, 169 (Bankr. N.D. Ill. 2012). The Arrests have jeopardized federal funding. Federal funding is essential to rebuilding Puerto Rico's infra-structure and revitalizing Puerto Rico's economy. Absent massive federal funding it is impossible to stabilize Puerto Rico. Under these circumstances, the Arrests could jeopardize the successful conclusions of the PROMESA bankruptcy cases.

Finally, the Arrests will have an adverse impact on Puerto Rico. The Arrests will further the crisis in confidence in Puerto Rico. Congressman Grijalva's call for the resignation of Governor Rossello will only further destabilize the government of Puerto Rico. A perceived corrupt government will only exacerbate the distrust that people have for the government of Puerto Rico. In the last decade Puerto Rico has suffered a 10% decline in population. Suzanne Gamboa, Dramatic decline in young children brings 'demographic winter' to Puerto Rico, NBC News (May 7, 2019). A perceived corrupt government and lack of federal funding will make it difficult for Puerto Rico to attract new businesses. Government revenues in Puerto Rico will decline.

The House Should Conduct Oversight Hearings and Create an Office with Oversight Authority over the Disbursement of Federal Funds in Puerto Rico. Chairman Grijalva should immediately hold hearings concerning the Arrests. The House of Representatives should exercise its overnight powers over Puerto Rico. One of the issues that should be addressed at the hearing is how to combat corruption in Puerto Rico and to ensure that federal funds are being used properly. There should be an office within the Department of Justice with oversight authority over federal funds disbursed to Puerto Rico, and the name of the office is Puerto Rico Federal Funds Administration Office (the Office). The Office will have the responsibility for the oversight of the disbursement of all federal funds in Puerto Rico. The Office will prepare periodic reports concerning the use of the federal funds by Puerto Rico. The Office will propose and administer conflicts of interest laws and disclosure requirements concerning entities receiving federal funds in Puerto Rico, and audit the manner in which the federal funds are being dispensed in Puerto Rico. In addition, this Office will be authorized to make referrals to the U.S. Attorney when it has probable cause to believe that there has been a violation of federal criminal law. The Public Integrity Section of the U.S. Attorney's Office in Puerto Rico should be expanded to vigorously prosecute public prosecution cases.

The Government of Puerto Rico Needs to Take Dramatic Action to Demonstrate that It is Competent. The Arrests have created an unprecedented crisis of confidence in the government of Puerto Rico. In order for Puerto Rico to succeed the government of Puerto Rico must eradicate corruption and incompetence. The government of Puerto Rico needs to bring in a team of experts to restore its credibility. The government of Puerto Rico has to demonstrate that it is honest and competent. The government of Puerto Rico needs to take dramatic action so that the federal government will have confidence in its ability to properly administer federal funds.

Conclusion. This is an important moment for the people of Puerto Rico because the federal government, the Federal Oversight Board and the government of Puerto Rico can use this crisis to resurrect Puerto Rico.

Carlos J. Cuevas is a solo practitioner in Yonkers, N.Y., and a research associate at the University of Houston School of Law.