6. The Bankruptcy Letters

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A front payment of $45 for three-month plan equivalent to $15 per month required. New customer offer for first three months only. Speed slow after 35 gigabytes if network's busy. Taxes and fees extra. See mintmobile.com. Hey, quick note. There are English and Spanish episodes of La Brega. This is the English one. Si quieres escuchar en español, vuelve al feed y selecciona la versión con el título en español. This is a call I had with Luis Valentín.

a reporter from El Centro de Periodismo Investigativo, the Center for Investigative Journalism. They partnered with us for this episode. For the past five years, he has been covering Puerto Rico's fiscal crisis and bankruptcy proceedings. One of the ways Luis keeps up with this complicated case is by getting an email digest from The Docket. That's a repository where every single fileable document that pertains to the bankruptcy case lives.

He then sent me a particular link that was the spark for this episode of La Brega. 11791. This five-digit, seemingly cold number led to a very warm and human artifact, a scan of a handwritten envelope and letter. It's not the kind of thing we're used to seeing on bureaucratic government websites. He asked me to read the letter out loud.

A letter by one Mariluz Collazo from Patillas, Puerto Rico, a retired special education teacher who claimed the government of Puerto Rico owes her money for a raise she was promised. but never received. Luis told me that in 2019, he started noticing that the emails he received from the docket started showing names that were not the usual ones he had been seeing in his past research. Names like Pérez, Rodríguez, and Collazo. Names that were actually Puerto Rican.

So he took a closer look. And he found out there were a lot of handwritten letters, just like the one by Mariluz. From WNYC Studios and Futuro Studios, I'm Alana Casanova-Burgis, and this is La Brega. In this episode, the people standing on the long waiting line of Puerto Rico's debt and their struggle to collect what the government owes them.

That was former governor of Puerto Rico, Alejandro García Padilla. on Puerto Rican TV officially announcing that the debt of the Commonwealth was unpayable. This announcement, back in 2015, was confirmation of a very popular suspicion. Puerto Rico had no money left to pay its debts, and there were a lot of overdue bills to pay.

The main problem with all of this was that the government of Puerto Rico could not declare bankruptcy, and several hedge funds were threatening to sue and to embargo government accounts. In the summer of 2016, the U.S. government intervened. Then-President Barack Obama passed la ley promesa. Promesa means promise. A year later, Puerto Rico declared bankruptcy under provisions of this new law.

And with this, the process became the biggest government bankruptcy in the history of the United States. A lot of the financial institutions which threatened suing the government are now creditors in this legal action. In other words... The government of Puerto Rico owes them money. But they are not the only ones. There's another kind of creditor, like Mariluz Collazo. And this group is the focus of our story.

Luis Valentín picks it up from here. In the summer of 2018, Mariluz Collazo started to hear a lot about the promesa law. The word promesa was being used all the time. She heard it in the context of a legal battle and the government owing money to folks like her. Mariluz is a retired elementary school teacher. She worked all her life in Puerto Rico's public school system. She was 22 when she started and still remembers her first day on the job. She packed a bag and went to school.

A little scared. A co-worker introduced herself, showed her around, and pointed out her classroom through a window. Look, there it is, she said. And Mariluz remembers feeling excited at that moment. She took care of that space, decorating and fixing it by herself. Forward 20 years.

Mariluz was a special education teacher. Then she took a break and taught social studies and science classes. But like a river that returns to its course, she says, she returned to special ed because that's what she liked. She also remembers her first check. It was $435. To date, that will be around $1,200. Forty years later, the starting salary for a teacher in Puerto Rico is $1,750 a month, the lowest in the United States.

She also recalls that over the years, some administrations have given the schools a lot of resources. and some have given nearly nothing. The most recent administrations have given nothing, because since the start of the 2006 financial crisis, The public sector has seen budget cuts, salary freezes, and the massive firing of public employees. So the working conditions for Mariluz and fellow teachers only got worse, with little or no institutional support.

In 2013, Mariluz decided to retire, and today she thinks she did it just in time. Things are more difficult now. For example, Mariluz has noted that there are no longer assistant positions to help special education teachers. In 2015, Mariluz moved to Florida.

She lives there with her husband, daughter, and two grandchildren. In the midst of her retirement, she started receiving letters from the U.S. Federal Court, all of them about the bankruptcy case under Promesa. It was June 2018. when she received the first forms that had to be filled out as part of what she describes as a struggle to get the money that is owed. What Mariluz received is part of any bankruptcy process.

when a debtor contacts a creditor. The proof of claim is basically a form where a creditor would state what's the debt that he's owed. and what's the classification of that debt, if it is an unsecured or secured or priority debt. This is Jessica Mendez Colbert, a lawyer in Ponce. She has been practicing law for six years and has represented creditors in Puerto Rico's bankruptcy since the start of the case in 2017.

They received these letters saying you need to file your proof of claim and they didn't even know if they were owed something or not. And these people received these letters after being listed as potential government creditors. The first of this list identified more than half a million persons and entities. So people started receiving these notices with a deadline. One of them was Mariluz, and she and all the others received the letter with a form.

In that document, they had to detail all that was owed to them. Or, as Mariluz puts it, they had to detail all the government's promises. What she means is all the wage increases that were promised by the Commonwealth of Puerto Rico and its administrators, but which never materialized. For example, Mariluz mentions a $100 monthly increase from a law that then-governor Sila María Calderón signed into law in 2002. Mariluz never saw that in her checks.

And a lot of ex-teachers and thousands of public servants had similar experiences. So when these letters from the court came in... Everyone went a little crazy looking for these farms, she recalls. When Mariluz received their own, she had only two days left until the deadline to send back her information. She was not alone.

A lot of her co-workers also didn't get a lot of advance notice. None of them were very clear on how the process worked and were even less sure of how much the government owed them.

So she decided to meet with some of the people that were in the same boat. She went to her old school and met with all the other teachers in a packed classroom, all of them frantically filling out forms. Picture the scene. Dozens of elementary school teachers, most of them retired, sitting at the desks of their former students. figuring out the math behind pay raises they never received. Her estimate was $75,000. And of course,

Filling that out was just the beginning. They had to turn it in. There were six locations on the island for people to bring their forms in person, and she went to the one in the city of Ponce, the only one in the south of the island. It was at the federal courthouse there. Marilu says she's grateful that coronavirus didn't exist when she filed her claim.

because the crowd didn't allow for social distancing. She recalls how the place in Ponce was just a mess. She even saw people filling out their papers right there on the spot. Hundreds of retired public servants were gathered. most of them over the age of 60. It was very sad because you know that they are there because they feel that they need to do this, but they don't actually know what they're doing.

Jessica Mendes, the lawyer we heard before, remembers seeing all of them. Her office is very close to the courthouse. And watching them making these long lines. Under the sun, the heat of Ponce, for example, and not knowing what's going to happen. So it was very, very heartbreaking. And these scenes unfolded in all of the places where retirees were turning in their paperwork. Back in San Juan, there were reports in the Puerto Rican media about it.

This is sound from a social media video from one of the major news radio broadcasters on the island. You can see the reporter approaching an elderly woman who is sitting on the sidewalk. She's trying to cover herself with an umbrella from the Syrian sun. The reporter asked her if she's all right. She told him, since she has lupus, she had to take a break. Yes, lupus.

She had been under the sun for one hour waiting in line. At that moment, the line was so long it went around the whole building. Many others were there for the same reason that Mariluz was there. seeking money from a promised pay raise for public employees. And then the reporter asked, but that raise was never given, right? No. The reporter then followed up and asked, even though it was a law, yes, it was legislated and approved, but it was never given.

All of these people are creditors of the government of Puerto Rico. They are part of a big and diverse group of individuals, organizations, and companies that ask for over $43 trillion. Yes, that's right. Trillion with a T. But not all creditors will get their money back because not all creditors are equal. When Puerto Rico's debt bubble broke... and Promesa was enacted, eventually leading to the bankruptcy process, most media outlets referred to a very specific creditor.

We should point out that Goldman Sachs really isn't the biggest holder of Puerto Rican debt. Hedge funds own it. 40% is owned by retail investors. The hedge funds went. All in, in March of 2014, when Puerto Rico issued $3.5 billion of general obligation bonds. Along with two other relatives, Gervasio Garcia Rodriguez, his wife Maria, and her brother, say they lost almost...

$2 million duped into putting their retirement savings into funds filled with Puerto Rico bonds. The bondholders. These are the institutions and people who knowingly bought Puerto Rico's municipal bonds. And these bondholders come in many flavors, ranging from the suit and tie Wall Street type to the middle-class Boricua pensioners who invested their life savings in Puerto Rican bonds. But Mariluz and thousands of other Puerto Ricans like her

fit a whole different profile. So the social creditor, it's a figure that's not necessarily recognized before these proceedings began. Mendes knows social creditor groups very well. She, alongside her law firm partner, Rolando Manuelli, have represented various public sector employee unions since the beginning of the bankruptcy process. They are parties. in the proceedings that are affected by these proceedings because we have the oversight board.

that comes to establish austerity measures and cuts all over in essential services. The oversight board. La Junta. Well, they are a board of seven members and an executive director, and they are appointed by the president of the United States. And we need to remember that in Puerto Rico, Puerto Ricans don't have the right.

to vote for the president of the United States or any member in Congress except for the resident commissioner who has no vote in Congress. And these unelected officials have a long reach. They can... have a say into what laws are going to be enacted, if those laws are going to affect the budget and the restructuring process or not, and they can even rescind those laws if they deem that they are not compliant with the fiscal.

plan. And since 2017, La Junta basically controls Puerto Rico's checkbook. They have the last word in any debt negotiations while acting as a legal guardian of the elected Puerto Rican government in the debt proceedings. And many, like Mendez, see a conflict between what the board is doing and what serves Puerto Ricans. Their focus is on restructuring the debt.

but giving as much as they can to the bondholders instead of the well-being of the people. I reached out to the fiscal control board to ask for an interview about how they see their role in the bankruptcy. but they had not replied by the deadline for this piece. To summarize, in the vast ecosystem of people and entities that are owed money by the government of Puerto Rico, there are two main categories, the bondholders,

and the rest of the creditors, most of whom are social creditors. And of course, the difference between these groups can be huge. And that fact is often reflected in the legal representation each group has.

As Mariluz tells us, when she sent her claims letter to the court, she had to write it herself, by hand, because she didn't have a way to type it out. When we come back, we'll hear more proof of that divide. Handwritten letters. And they're not the romantic kind. We'll be right back. This is La Brega.

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You can find all kinds of government creditors. The most powerful hedge funds in the world are the big fish. Then you have the small fish. Those are the unions and government contractors. And then even smaller ones, like Mariluz. who we met at the beginning of this story. And she's not the only one. There are more teachers, police officers, and other public employees who never received the raises they were promised by the government.

The bankruptcy case seems to have given them the opportunity to cash in on these promises. But most of them don't have the means to pay lawyers. So they enter into this complicated judicial process almost blind. The situation begs the question, Why is it so important to settle debts with creditors like these? What is owed to them for their service? Luis Valentín continues the story from here.

Mariluz has felt like quitting many times since she waited in line under the sun in Ponce. It's been two years since that day, and nearly two decades since she was promised that salary increase that never arrived.

Sometimes, Mariluz told me, she forgets about the whole thing. For her, it's hard to grasp the process around her case and what she has to do to navigate it. When she receives a new letter from the court, or some of her retired friends bring it up, or perhaps when a news reporter calls to ask about her situation, then she starts thinking about the prospect of finally getting that money. Look at that, Luis. She has a box full of what she calls her court sentences.

What she's referring to are actually official orders from Judge Laura Taylor Swain, the appointed federal judge from New York who is leading the bankruptcy proceedings. Mariluz is under the impression that those letters are a big pile of nothing. But it's not. Over the past year, the Fiscal Control Board and the court have denied thousands of claims, most of them from social creditors.

One of those claims belonged to Mariluz. And as part of that claim, Mariluz sent a letter addressed to the court. Mariluz tells us that she poured her heart into this letter, and she read it out loud for us. She wrote it on the 18th of February, 2020, by hand because she didn't have a way to type it out. Even so, it employs the formal language of court documents. I am a retired teacher, she wrote, and worked for 30 years and nine months. I completed the information required by you.

Her claim is for $75,000, or whatever she is legally entitled to. And the thing that gets me about her letter... is that it was written by a teacher who dedicated her life to educating some of the most underserved students in Puerto Rico. And you can sense the deep hope that she will finally get paid what she was promised. And in this part, she mentions the 2002 pay raise.

that never arrived. And there are more, more letters from Puerto Ricans who are claiming money owed to them, like Vicenta Matos. Trabajé para el Departamento de Educación por espacio de 31 años desde el 1982 al 2013. She worked for the Department of Education for 31 years, and she refers to a previous pay raise in the 80s, one promised by then governor Carlos Romero Barceló.

She writes that she was a responsible and excellent employee and she just wants what is rightfully hers. Here's another one from a man called Jose Baez. He's a police officer asking for benefits that he never received. Benefits that were passed into law during his years of service. Here's a letter from Jesus Rabel.

who wrote his in English claiming $500 that the government owes him due to the death of his sister, a public servant. I feel confident that the filing of this objection as to my proof of claim has been an inadvertent error in this voluminous case. And the letters come from all different kinds of places. This next one was written by Daniel Almeida Medina, who is incarcerated. Daniel says that when he was arrested, the police appropriated money that was for his son.

Eight years later, he writes. They tell him about the promesa law and that Puerto Rico is in crisis. But he still believes he can claim his money back and is fighting for it. And this is how I found out about Mariluz. while reading letters like these from a bankruptcy case docket alongside thousands of legal motions and objections. A group of actors read these letters for this story to give a better idea of their content.

We kept them in the original language that they were written in, even though the language of this court case is English. I feel confident.

So how does Judge Swain deal with these letters? We know that the court dismisses a lot of them for technicalities, like not including an English translation, for example, but the letters keep on coming. The judge does not talk to the media, so I decided to contact a Puerto Rican lawyer that knows the bankruptcy case well.

My name is John Mudd. I'm 62 years old, and I am unfortunately a lawyer by profession. He, like Mendez, the lawyer we heard from earlier in this story, also represents creditors. So I asked his opinion about Judge Swain. I am not going to answer that, except to say that she always is extremely polite and she always, always, it's obvious that she reads everything. Even the letters. Even the letters.

And I'm sure they affect her because she's a human being. And some of those letters are heart rendering. But she has to do her job. So even though the two lawyers we have spoken to represent the same type of creditors, they have different perspectives about this process. We heard Mendes say that the board seeks to pay bondholders more by promoting austerity measures that affect the majority of Puerto Ricans. But Mott tells me, I thought that the board would do more control.

I never thought the board would fight so much against bondholders as it has fought and is fighting. But there is something that they both agree on. that the process is really difficult for small social creditors like Mariluz. For starters, they normally don't have the means to pay an attorney to guide them through the process.

How are you supposed to get an attorney who knows about this, who's going to charge you, for Puerto Rico standards, a lot of money? On an island where almost half its population lives under poverty, access to justice is a serious issue. with people worried, stressed, anxious about all of these proceedings and not knowing if they are involved, if they are not involved, if they should do something else, if they need legal assistance or not. Mariluz, for instance, doesn't have a lawyer.

She tells me she has received a lot of letters with quote-unquote court sentences. She has also received a lot of date changes regarding hearings in front of Judge Swain. And that is her hope, she says, to have her day in court. But the experience can be intimidating. The courtroom has tall ceilings and is very cold. It has a dozen wooden benches at each side.

divided by a corridor that leads to a lonely podium. And there's a dais looming over it all, with the judge sitting in the middle. On days where there is an actual hearing, they only put up a single wooden bench. for the attendees and the press. All the other spaces are occupied by lawyers, most of them belonging to white shoe law firms from the United States. They tend to bill a thousand dollars an hour.

They have been part of the biggest bankruptcy cases in the world. Enron, Argentina, Detroit, GM. You know, the big leagues. Mendes describes it this way. You have this courtroom full of people. full of the media and the other attorneys that are not from here, everybody in English, but we're in Puerto Rico, so we still speak Spanish. And it's pretty intimidating. And you know, you know what's at stake. So if it is intimidating,

For me, imagine someone that has never stepped into a courtroom before. She actually had the opportunity to witness a scene like that one in a hearing in 2019. the judge decided to give opportunity to people to speak. She wanted to hear from the people. And it was devastating for me to see that they were given just five minutes. That's nothing.

that's nothing and five minutes turns into two minutes or three minutes at the most because they need a translator So it was very devastating for me to see these people be brave and stand in the podium and face the judge and the other people present in the courtroom and state their frustration, their fear.

about what's going on and how their income is being affected. In October of last year, I had a chance to see a social creditor in action. The court had set several dates for claim hearings. And I met with Ezequiel Rodriguez, one of the producers of this story, to attend. We are at 250 Ponce de Leon Avenue, where satellite hearings for the omnibus objections from the board are supposed to be held.

Yep, you heard right. We are not in court. The federal court in Puerto Rico was closed due to COVID-19 restrictions and Judge Swain wasn't in San Juan. She attended via videoconference from New York. Same with the lawyers. I'm sorry? The person that works for the court. She's here. Can I ask? Absolutely. Would you like some water?

No, we're good. Or snacks or anything? We should've got some good snacks. We're in all the bars now. Don't worry, don't worry. So she's in conference now, but if you guys can wait, that'd be great. No, I'll wait, I won't. Okay. Thank you. You're very welcome. We were in a modern co-working space in San Juan and on that day the place was basically empty except for the security guard and a couple of office workers.

So you're here for the hearing, for the prime clerk's hearing? Justice Goldberg, I know that we can't take it or anything like that. Okay, so I'll put you in one of our offices where the hearing is going up. Perfect. And this friendly host took us to one of the three private rooms they had rented for the proceedings. The court prohibits recording these, so we can't share it with you. But you're not missing much.

No claimants, no social creditors show up today. The hearing was over in less than half an hour. Basically what happened is that the court and the judge, Judge Swain, held the hearing. And even though the hearing agenda included 12 people who were set to attend, not a single one of them showed up. What happened is that these claims are now disallowed, so they can no longer pursue these claims in this process.

And this was really hard for me to understand. How do we go from hundreds of people enduring long lines under the sun to empty offices with granola bars? And what about social creditors like Mariluz? Would they ever get the chance to speak to the judge? Weeks later, a second hearing was called. It was in the same co-working space. I listened in on my phone while we waited outside.

To my surprise, after the judge was told nobody arrived at the hearing, I saw some social creditors leaving the building. This is Leticia Flores, and she told me there was apparently a communications conflict, or at least that's what she was told. that none of the people who arrived that day were on the court's list of participants. She came all the way from Cidra, a 45-minute drive, to help her husband, a retired public servant, with his claim of unpaid salary raises.

Then at least 10 more people came out, all of them with similar stories. But not all of them took these as a mere communications error. This is Carmen Lopez, who also is retired from the Department of Education. She noted that everyone who came that day had to travel from outside San Juan. and she felt that the whole event had been hastily put together. She was the last person to come out that day, and her right leg was in a cast.

She told me they're not on the same page. She was frustrated and said she would write a letter to Judge Swain. Yes, another letter. This time to let her know that social creditors like her are not happy about the kind of treatment they're receiving. It is time for this to be over, she said, and for justice to be served for the public servants. Mariluz also received a letter telling her about this hearing.

But since she was in Florida, she saw it way past its due date. Weeks later, she received another letter from the court and called me to discuss it. She was happy. Every time she gets a letter, she hopes it's the one that tells her she'll get paid. This was new. The court was informing her that her claim will now be handled by government agencies outside the bankruptcy case. More than 15,000 claims like hers were transferred to this administrative process.

There is not a lot of information of how this will work, and Mariluz has no idea what she has to do. She feels that they delayed the whole thing to discourage people. In this new process, for instance, her claim can take months to be resolved, and she could end up without seeing a single cent. She says she's worried about her many co-workers who are older than her.

that they might die without seeing a final resolution to their claims. She told me, sometimes I think we will never see this come to an end. We won't see it because the government has so many problems. So this will probably end up in a big pile of papers. and a letter from a poor teacher that retired in 2013. She told me it makes me want to cry.

When former governor Garcia Padilla said that the Puerto Rican debt was unpayable, he was referring to the bondholders. But there's another kind of debt. What do we owe to social creditors? These Puerto Ricans who worked for decades in government jobs. and who received blow after blow from years of financial crisis and economic depression. Their salaries were low, and they dedicated the most productive years of their lives to public service. And when they were promised a bit more,

The government failed them. Now, after almost three years of letters and waiting in line, the promises are once again broken. And the debt keeps piling up. Luis Valentín is a reporter with El Centro de Periodismo Investigativo, based in San Juan. As of today, more than 60,000 creditors' claims have been rejected. There are still 15,000 pending claims. Most of them are from retired public servants. As of this recording, Mariluz is still in the dark about the status of her claim.

La Brega is a co-production of WNYC Studios and Futuro Studios. This episode was a collaboration between La Brega and CPI, the Center for Investigative Reporting in Puerto Rico. It was produced by Ezequiel Rodriguez-Andino with help from me. It was edited by Luis Trelles and Carla Minet with additional editing for the English version by me. Fact-checking by Istra Pacheco. Our engineer was Jennifer Munson.

Original music for La Brega was composed by Balun, and our theme song is by Ife. Art for this piece was done by Mia Pagan. Leadership support for La Brega is provided by the Jonathan Logan Family Foundation and the John S. and James L. Knight Foundation, with additional support provided by Amy Liss. Deep gratitude to Lucien Hernandez, Jesus Rabel.

Rolando Emanuele, Yvonne González, David Caravaggio, Sonia Palacios, Marilín Goico, Construyamos Otro Acuerdo, and Armando Santiago. In the next and final episode of La Brega, What's the afterlife of Puerto Rico's political experiment? Hasta la próxima!