Three members of a federal control board overseeing Puerto Rico’s finances, who were recently fired by the administration of U.S. President Donald Trump, filed a lawsuit in federal court on Thursday alleging their firings were illegal.
The lawsuit was filed against Trump; Sergio Gor, director of the White House personnel office; John E. Nixon, the lone remaining board member; and Robert F. Mujica, the board’s executive director.
Attorneys said that Arthur J. Gonzalez, Andrew G. Biggs and Betty A. Rosa were unlawfully removed from the board and asked that a judge reinstate them.
“This is a case about power over the board and over Puerto Rico,” said Eduardo Santacana, an attorney with Cooley LLP, a law firm that is helping with the case. “The president is attempting to exert a lot of power here that he does not have.”
Dismissed by email
The lawsuit revealed more details about the abrupt dismissals last month, including that the deputy director of the U.S. presidential personnel office sent Gonzalez and Rosa a two-sentence email on Aug. 1 notifying them that they had been removed. Gonzalez was board chairman at the time.
Nearly two weeks later, Biggs received the same message.
“Neither email articulated any ‘cause’ or provided any other justification for the removals,” the lawsuit stated. “Those purported removals were unlawful.”
Attorneys argue that Trump does not have inherent authority to terminate Gonzalez, Biggs or Rosa because they are not officers of the U.S. within the executive branch.
The lawsuit noted that when Congress approved an act in 2016 known as Promesa, it created the financial oversight and management board within Puerto Rico’s territorial government.
“The stakes of this case could not be higher: If the President can violate the laws that Congress passed establishing local governments in the territories, he could remove any territorial officer tomorrow. On that theory, he may also be able to remove officers from the District of Columbia,” the lawsuit stated.
It also stated that if any board member is removed “for cause,” they have a right to notice and a hearing, which neither Gonzalez, Biggs nor Rosa received.
A debt-restructuring struggle
Overall, six board members have been fired by the Trump administration, including Cameron McKenzie, Juan Sabater and Luis Ubiñas. They were not named in Thursday’s lawsuit.
Four of the six dismissed members are Democrats, while Nixon, who remains on the board, is a Republican.
Gonzalez is a retired bankruptcy judge; Rosa is the commissioner of the New York State Education Department and president of the University of the State of New York; and Biggs a Social Security reform expert.
The board was overseeing a bankruptcy-like process after Puerto Rico announced in 2015 that it was unable to pay its more than $70 billion public debt load and then filed for the biggest municipal bankruptcy in U.S. history in 2017.
Until recently, the board was struggling to reach a debt-restructuring agreement with bondholders on the more than $9 billion in debt held by Puerto Rico’s Electric Power Authority.
The board had insisted on a $2.6 billion payment before the dismissals of its six members.
The removals sparked concern given that experts believe Trump will appoint new members who might favor paying the full $8.5 billion that bondholders are demanding.
The board is supposed to have seven members, six of whom can be appointed by the U.S. president with the Senate’s advice and consent. They serve for three years and can be removed only for cause.
