Objection Deadline: January 23, 2018

 Hearing Date: February 7, 2018

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO,

Debtor.

PROMESA

Title III

No. 17 BK 3283-LTS

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

PUERTO RICO HIGHWAYS & TRANSPORTATION 

AUTHORITY,

Debtor.

PROMESA

Title III

No. 17 BK 3567-LTS

MOTION OF NATIONAL PUBLIC FINANCE

GUARANTEE CORPORATION FOR ENTRY OF AN

ORDER UNDER BANKRUPTCY RULE 2004 AUTHORIZING LIMITED

DISCOVERY OF THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO

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TABLE OF CONTENTS

Page

i

PRELIMINARY STATEMENT .................................................................................................1

JURISDICTION AND VENUE..................................................................................................2

BACKGROUND ........................................................................................................................3

I. Creation of the PR SIB Trust Fund ..................................................................................3

II. PRHTA Represented That the SIB Funds Were Held In Trust In the Offering 

Statement for the 1998 Subordinated Bonds.....................................................................6

III. GDB Misclassifies the PR SIB Trust Fund as a General Deposit Account and 

Refuses to Release the SIB Funds....................................................................................7

IV. Counsel for GDB Admits that Money Held in Escrow Is Not Part of the PRHTA 

Estate...............................................................................................................................9

RELIEF REQUESTED.............................................................................................................10

BASIS FOR RELIEF REQUESTED.........................................................................................10

CERTIFICATION OF COMPLIANCE WITH LOCAL BANKRUPTCY RULE 2004-1..........15

NOTICE ...................................................................................................................................15

NO PRIOR REQUEST FOR RELIEF.......................................................................................15

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TABLE OF AUTHORITIES

Page(s)

Federal Cases

Air Line Pilots Ass’n, Int’l v. Am. Nat’l Bank & Trust Co. of Chi. (In re Ionosphere Clubs, Inc.),

156 B.R. 414 (S.D.N.Y. 1993), aff’d, 17 F.3d 600 (2d Cir. 1994) ........................................12

Cameron v. United States,

231 U.S. 710 (1914)............................................................................................................11

In re Coffee Cupboard, Inc.,

128 B.R. 509 (Bankr. E.D.N.Y. 1991).................................................................................11

Dynamic Fin. Corp. v. Kipperman (In re N. Plaza LLC),

395 B.R. 113 (S.D. Cal. 2008).............................................................................................11

In re Enron Corp.,

281 B.R. 836 (Bankr. S.D.N.Y. 2002) .................................................................................11

ePlus, Inc. v. Katz (In re Metiom, Inc.),

318 B.R. 263 (S.D.N.Y. 2004).............................................................................................12

In re Gawker Media LLC,

No. 16-11700, 2017 WL 2804870 (Bankr. S.D.N.Y. June 28, 2017).............................. 12, 14

In re Hilsen,

Case No. 87-11261, 2008 WL 2945996 (Bankr. S.D.N.Y. July 25, 2008)............................11

In re Hughes,

281 B.R. 224 (Bankr. S.D.N.Y. 2002) ........................................................................... 12, 14

In re Recoton Corp.,

307 B.R. 751 (Bankr. S.D.N.Y. 2004) ..................................................................... 11, 12, 14

In re Summit Corp.,

891 F.2d 1 (1st Cir. 1989)....................................................................................................12

In re Youk-See,

450 B.R. 312 (Bankr. D. Mass. 2011)..................................................................................11

Federal Statutes

11 U.S.C. § 1109(b) ..................................................................................................................11

23 U.S.C. § 601...........................................................................................................................4

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48 U.S.C. § 2166.........................................................................................................................2

48 U.S.C. § 2167.........................................................................................................................2

48 U.S.C. § 2170.......................................................................................................................10

1997 DOT Appropriations Act ....................................................................................................4

Moratorium Act ......................................................................................................................7, 8

National Highway System Designation Act of 1995 § 350 .............................................. 4, 5, 6, 7

Puerto Rico Oversight, Management, and Economic Stability Act..................................... 1, 2, 10

Transportation Equity Act Transportation Equity Act for the 21st Century..................................4

Rules

Fed. R. Bankr. P. 2004 .......................................................................................................passim

Bankr. D.P.R. R. 2004-1 ..................................................................................................... 10, 15

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National Public Finance Guarantee Corporation (“National”), a party in interest in these

Title III Cases, files this motion (the “Motion”) for an order, pursuant to Rule 2004 of the 

Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), made applicable to the 

Title III Cases by section 310 of the Puerto Rico Oversight, Management, and Economic 

Stability Act (“PROMESA”), substantially in the form attached hereto as Exhibit A

(the “Proposed Order”). National seeks authorization to take discovery of the Government 

Development Bank for Puerto Rico (“GDB”) regarding the existence, historical treatment, and 

status of a State Infrastructure Bank (“SIB”) trust account (the “PR SIB Trust Fund”) created at 

GDB for the benefit of Puerto Rico Highway and Transit Authority (“PRHTA”) bondholders 

pursuant to an agreement (the “Puerto Rico Infrastructure Bank Agreement” or the “Bank 

Agreement”) between the Puerto Rico Department of Transportation and Public Works (“the 

Department”), PRHTA, and GDB on June 12, 1998 and to conduct examinations of designated 

representatives of GDB.

In support of this Motion, National respectfully represents as follows:

PRELIMINARY STATEMENT

1. Starting in 1998, GDB served as trustee and fiscal agent of a trust account that 

was established, under federal and Commonwealth law, to provide financial assistance to public 

and private entities sponsoring transportation infrastructure projects. This account, the PR SIB 

Trust Fund, houses all funds constituting the Commonwealth’s SIB (the “SIB Funds”), and 

serves as collateral to a series of 1998 PRHTA bonds insured by National.

2. By its express terms, the Bank Agreement establishing the PR SIB Trust Fund

created an “irrevocable trust fund . . . held in the custody of GDB in trust, separate and apart 

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from all other funds of the Department, PRHTA and GDB.”

1

 In contravention of these express 

terms, in June 2016—nearly 20 years after the creation of the trust fund—representatives of 

GDB asserted for the first time that, despite its contractual obligations and repeated 

representations to the contrary, GDB held the SIB Funds in a deposit account, rather than a trust 

account. Accordingly, GDB refused to release the SIB Funds to cover a series of defaults on 

PRHTA bonds. Because of those defaults, National was forced to pay millions in bond

insurance payments due on the 1998 subordinated PRHTA bonds that were secured by the PR 

SIB Trust Fund and should have been paid with SIB Funds.

3. National now seeks from GDB discovery regarding the existence, history, and 

status of the PR SIB Trust Fund and the treatment of all accounts and deposits within that Fund. 

This information is necessary to determine whether GDB is currently holding—or has ever 

held—the SIB Funds in a trust account, as it repeatedly represented was the case. Moreover, this 

information will confirm whether GDB is improperly holding the PR SIB Trust Funds as 

property of the PRHTA estate, because as counsel for GDB recently admitted to this Court, 

funds held in escrow are not part of the PRHTA estate.

JURISDICTION AND VENUE

4. The United States District Court for the District of Puerto Rico (the “Court”) has 

jurisdiction to consider this matter under section 306 of PROMESA. 48 U.S.C. § 2166. Venue 

is proper under section 307 of PROMESA. 48 U.S.C. § 2167.

 

1

The Bank Agreement is attached hereto as Exhibit B.

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BACKGROUND

I. Creation of the PR SIB Trust Fund

5. National insures approximately $626 million of outstanding bonds issued by 

PRHTA, including a series of Subordinated Transportation Revenue Bonds (the “1998 

Subordinated Bonds”) that were issued in 1998 pursuant to PRHTA Resolution No. 98-06 (the 

“1998 Resolution”), as amended, and PRHTA Resolution 98-31 (the “98-31 Resolution”).

2

 

National has the right to assert bondholders’ rights in these Title III cases under applicable bond 

and insurance documents.

6. Under PRHTA’s enabling act and various PRHTA resolutions, PRHTA bonds are 

secured by a gross lien on (i) revenues derived from PRHTA’s toll facilities; (ii) gasoline, diesel, 

crude oil, and other special excise taxes levied by the Commonwealth; and (iii) special excise 

taxes consisting of motor vehicle licenses fees collected by the Commonwealth. In addition, 

monies held in a reserve account within the PR SIB Trust Fund secure the 1998 Subordinated 

Bonds. See Puerto Rico Highway and Transportation Authority Subordinated Transportation 

Revenue Bonds (Series 1998) Offering Statement (July 15, 1998) at 11, attached as Exhibit C.

3

 

2

The $626 million figure does not include the $58.5 million in bond insurance payments that 

National has already paid on HTA’s behalf. 

3

The 1998 Resolution established a 1998 Subordinated Bond Reserve Fund. Under the 1998

Resolution, the monies in that fund were to be held, in trust, by the Fiscal Agent and “subject to 

a lien and charge in favor of the holders of the bonds issued and outstanding under this 

Resolution.” See 1998 Resolution § 401, attached as Exhibit D. These monies were to be “used 

for the purpose of paying interest on each Series of subordinated bonds and maturing principal of 

serial subordinated bonds of each such Series to which such account relates whenever and to the 

extent that the moneys held for the credit of the Subordinated Bond Service Account shall be 

insufficient for such purpose.” See id. § 408.

Under the 1998 Resolution, the 1998 Subordinated Reserve Fund is subject to a Subordinated 

Reserve Requirement, an amount “required to be held to the credit of a separate account in the 

Subordinated Bond Reserve Fund corresponding to such Series.” Id. at 14. The 1998 Resolution 

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7. The PR SIB Trust Fund was established through a cooperative agreement entered 

among the Federal Highway Administration (the “FHWA”), the Federal Transit Administration

(the “FTA”), the Department, and PRHTA on December 22, 1997 (the “Cooperative 

Agreement”), attached as Exhibit E, and the Bank Agreement.

8. The Cooperative Agreement created a SIB, or state investment fund, for the 

Commonwealth under section 350 of the National Highway System Designation Act of 1995 

(the “NHS Act”) for the purpose of “making loans and providing other assistance to public and 

private entities carrying out or proposing to carry out” certain transportation-related 

infrastructure improvements. NHS Act § 350(a)(1) (1995) (current version at 23 U.S.C. § 601 

(2015)).4 The NHS Act empowered states with SIBs to transfer up to 10% of certain federal 

funds apportioned to that state in a given year into SIB accounts as capitalization grants, 

provided that the state match a designated percentage of the federal contribution with non-federal 

funds. See id. § 350(b)(2)–(3), (e).

9. The NHS Act required all SIBS, including the Commonwealth’s SIB (the “PR 

SIB”), to maintain separate “highway” and “transit” accounts within the SIB. Id. § 350(b)(1). 

 

further provides, however, that “[f]or purposes of determining the amount on deposit to the credit 

of any such separate account, any agreement between the Fiscal Agent and a financial institution 

serving as the depository institution of the Commonwealth of Puerto Rico state infrastructure 

bank (or other similar fund) created by virtue of Section 350 of the National Highway System 

Designation Act of 1995 . . . or any similar federal legislation, pursuant to which agreement such 

depository institution irrevocably agrees to provide funds to the Fiscal Agent for deposit to the 

credit of any separate account in the Subordinated Bond Reserve Fund shall be treated as 

satisfying the applicable Subordinated Reserve Requirement to the extent of the maximum 

amount of funds so available to be provided to the Fiscal Agent for deposit to the credit of such 

separate account.” Id.

4

The NHS Act was later expanded by the 1997 DOT Appropriations Act—which, among other 

things, authorized the contribution of $150 million in general funds to capitalize SIBs—and 

section 1511 of the Transportation Equity Act for the 21st Century. 

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The Act also prohibited the commingling of SIB funds. Id. (“No Federal funds contributed or 

credited to an account of an infrastructure bank established under this section may be 

commingled with Federal funds contributed or credited to any other account of such bank.”).

10. Accordingly, under the terms of the Cooperative Agreement, PRHTA agreed “to 

create within the SIB a separate account to be designated as the Highway Account and a separate 

account to be designated as the Transit Account, each of which shall be dedicated solely to 

providing loans or other forms of financial assistance consistent with the NHS Act and permitted 

under Puerto Rico law.” Cooperative Agreement § 1.2. The FTA and FHWA agreed to make 

payments to PRHTA for deposit in the PR SIB, and the Department agreed to match a set

percentage of the federal contributions from non-federal sources. See id. § 1.3. In the 

Cooperative Agreement, the parties acknowledged that both the federal and non-federal SIB 

funds “may be used as a source of security for bonds issued by Puerto Rico or PRHTA to finance 

or refinance projects funded through the SIB.” Id. §1.4(v).

11. Consistent with the requirements of the Cooperative Agreement, the Department

and PRHTA entered the Bank Agreement with GDB in June 1998. As administrator and 

custodian of the SIB, respectively, the Department and PRHTA sought “to have the funds 

constituting the SIB held by GDB, as trustee and as fiscal agent.” Bank Agreement at 1. To that

end, the Bank Agreement established “[a]n irrevocable trust fund,” designated the “Puerto Rico 

State Infrastructure Bank Trust Fund,” with separate “Highway” and “Transit” accounts. Id.

§ 101. Under the Bank Agreement, “[t]he moneys in the Trust Fund” were to “be held in the 

custody of GDB in trust, separate and apart from all other funds of the Department, PRHTA, and 

GDB and shall be applied as hereinafter provided and as set forth in the Cooperative Agreement 

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and the NHS Act.” Id. (emphasis added). The Bank Agreement further made clear that GDB 

would have “no lien on the moneys and Investments in the Trust Fund.” Id. § 108.

12. Within the PR SIB Trust Fund’s Highway Account, a subaccount designated 

“Puerto Rico Highway and Transportation Authority Subordinated Transportation Revenue 

bonds (Series 1998) Highway Subaccount” was created and later capitalized by federal 

capitalization grants and Commonwealth matching funds in the amount of $15,010,735. See

Offering Statement at 11.

II. PRHTA Represented That the SIB Funds Were Held In Trust In the Offering 

Statement for the 1998 Subordinated Bonds

13. The Offering Statement published in connection with the issuance of the 1998 

Subordinated Bonds detailed the establishment of the PR SIB Trust Fund, explaining that the 

SIB funds were held in trust and would serve as security for the 1998 Subordinated Bonds. See

Offering Statement at 3 (“The 1998 Subordinated Bonds are also payable from moneys required 

to be transferred to an account established in the 1998 Subordinated Bond Reserve Fund from an 

account within the Puerto Rico State Infrastructure Bank Trust Fund.”).

14. The Offering Statement explicitly noted that GDB served “as trustee of the SIB 

Trust Fund,” which was established pursuant to the Bank Agreement. Id. at 11. It also noted 

that “[f]or so long as the 1998 Subordinated Bonds shall be outstanding, the SIB Trustee will 

make no withdrawals and expenditures, pledges or other encumbrances of amounts held to the 

credit of the 1998 Subordinated Bonds Highways Subaccount, other than to make deposits to the 

credit of the 1998 Subordinated Bonds Reserve Account.” Id.5

 

5

The Offering Statement is thus consistent with section 350 of the NHS Act, which states that 

“[f]ederal funds in the highway account of an infrastructure bank established under this section 

may be used only to provide assistance with respect to construction of Federal-aid highways. 

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15. In the Offering Statement, PRHTA also represented that, as of the date of 

issuance for the 1998 Subordinated Bonds, “[t]he Series 1998 Bonds Highway Subaccount of the 

SIB Trust Fund was . . . capitalized by federal capitalization grants and Commonwealth 

matching funds in the amount of $15,010,735.” PRHTA represented that this account would 

“equal the ‘Subordinated Reserve Requirement for the 1998 Subordinated Bonds’ fixed by the 

Authority in Resolution 98-31.” Id. at 3, 11.

16. Thereafter, at least through June 2014, HTA’s audited financials provided that the 

SIB Funds were held in Trust. See HTA Audited Financial, Exhibit F at 42.

III. GDB Misclassifies the PR SIB Trust Fund as a General Deposit Account and 

Refuses to Release the SIB Funds

17. In response to a Demand for Payment from the PR SIB Trust Fund made by the 

Bank of New York Mellon (“BNY”) as Fiscal Agent under the 1998 Subordinated Bonds in 

anticipation of a potential July 1, 2016 PRHTA default, the President of GDB, Melba AcostaFebo, acknowledged that GDB served as “SIB Trustee” for the SIB Funds. See June 22, 2016 

Letter, attached as Exhibit G. Nevertheless, Ms. Acosta-Febo maintained that the SIB funds 

“constitute[d] deposits held by GDB,” and, as such, were “subject to the provisions of the 

Moratorium Act . . . and the Executive Orders,” which, among other things, placed restrictions 

on the withdrawal and transfer of deposits held by GDB. Id.

18. Counsel for National responded to Ms. Acosta-Febo’s letter on June 29, 2016, 

explaining that the SIB Funds were not subject to either the Moratorium Act or the pertinent 

Executive Orders because the SIB Funds “do not constitute ordinary GDB deposits.” June 29, 

2016 Letter, attached as Exhibit H. National thus demanded that the SIB Funds immediately be 

 

Federal funds in the transit account of such bank may be used only to provide assistance with 

respect to capital projects.” NHS Act § 350(d).

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released to BNY for the 1998 Subordinated Bond debt service payment due on July 1, 2016. See 

id.

19. On June 30, 2016, counsel for GDB replied to National, stating without any 

explanation that “whether or not GDB was contractually obligated to hold the SIB Funds in a 

trust account — the SIB Funds were in fact held in a deposit account at GDB.” June 30, 2016 

Letter, attached as Exhibit I. Accordingly, counsel for GDB maintained that the SIB Funds were 

subject to the restrictions of the Moratorium Act. See id.

20. On July 1, 2016, PRHTA defaulted on a debt service payment due on the 1998 

Subordinated Bonds. Subsequent PRHTA defaults on those bonds occurred in January 2017, 

July 2017, and January 2018. Based upon information and belief, up to $12 million of the debt 

service payments due between July 2016 and January 2018 on the 1998 Subordinated Bonds 

should have been covered by the PR SIB Trust Fund.6 As a result of these defaults, National has 

paid approximately $9.6 million in bond insurance payments. 

21. On July 13, 2016, counsel for National responded to GDB’s June 30, 2016 

correspondence, reiterating that GDB’s refusal to release the SIB Funds violated both federal and 

Commonwealth law and questioning whether the SIB Funds “were ever held in trust.” July 13, 

2016 Letter, attached as Exhibit J.

22. On July 27, 2016, counsel for GDB replied to National. Once again, counsel for 

GDB represented without any explanation that “the SIB Funds were in fact held in a deposit 

account at GDB.” July 27, 2016 Letter, attached as Exhibit K.

 

6 National insures approximately 80% of the total debt service due on the 1998 Subordinated 

Bonds between July 2016 and January 2018.

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IV. Counsel for GDB Admits that Money Held in Escrow Is Not Part of the PRHTA 

Estate

23. On September 14, 2017, Siemens Transportation Partnership filed a motion in 

these proceedings seeking “specific and targeted” discovery relating to a GDB escrow account 

established with PRHTA funds for Siemens’s benefit. See Siemens’s Rule 2004 Motion, Dkt. 

No. 272. In opposition to that motion, GDB and the Puerto Rico Fiscal Agency & Financial 

Advisory Authority (“AAFAF”) submitted an unsworn statement by Jose Santiago Ramos, 

GDB’s Chief Financing Officer, stating that the Siemens account was not, in fact, an escrow 

account but, rather, a demand deposit account owned by HTA. See Exhibit 1, GDB Objection to 

Siemens’s Rule 2004 Motion, Dkt. No. 321-1. On reply, Siemens argued that Mr. Ramos’s 

statement “belie[d] repeated assurances, both verbal and written, by high ranking GDB 

employees, that funds earmarked for Siemens’[s] benefit were in ‘escrow para pago a Siemens.’” 

Siemens Reply to GDB Objection to Rule 2004 Motion, Dkt. No. 323.

24. During an omnibus hearing on November 15, 2017, Judge Dein heard argument 

on Siemens’s Rule 2004 motion. During the course of that argument, counsel for GDB admitted 

that funds held in escrow by GDB “would not be a part of HTA’s estate and therefore . . would 

be payable.” Nov. 15, 2017 Hr’g Tr. at 41. Ultimately, Judge Dien granted Siemens’s motion in 

part, allowing Siemens to take discovery in the form of document production and one deposition. 

See id. at 42–43. In so doing, Judge Dien concluded that Siemens’s request for Rule 2004 

discovery was appropriate for the “inquiry as to whether or not these accounts, these funds are 

held in an escrow account, because that deals with whether or not these assets are part of HTA’s 

estate.” Id. at 42.

25. As with Siemens, GDB has appeared to misrepresent the status of funds held for 

its benefit in a GDB escrow account. Although GDB was required by contract and federal law to 

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hold the SIB Funds in trust, representatives for GDB now insist that the SIB Funds are held in an 

ordinary deposit account, despite their repeated assurances otherwise, including in the 

Cooperative Agreement and the Offering Statement. Thus, National is similarly entitled to Rule 

2004 discovery regarding the status of the PR SIB Trust Fund. Accordingly, the Court should

grant National’s Rule 2004 motion and allow National to investigate whether the SIB Funds are, 

or ever were, actually held in trust by GDB.

RELIEF REQUESTED

26. By this Motion, National requests entry of an order (1) directing GDB to produce 

documents regarding the current and historical status of the PR SIB Trust Fund and the treatment 

of all funds in the Trust Fund’s accounts and (2) authorizing National to conduct examinations, 

under oath, of designated representatives of GDB on such date and time and at a location in 

Puerto Rico as designated in writing by National on not less than 14 days’ notice.

27. National is entitled to the relief requested in this motion under Federal Rule of 

Bankruptcy Procedure 2004, as made applicable to the above-captioned Title III proceedings by 

section 310 of PROMESA, Puerto Rico Local Bankruptcy Rule 2004-1, and the orders of this 

Court incorporating the Local Bankruptcy Rules for the United States Bankruptcy Court for the 

District of Puerto Rico to these proceedings.

BASIS FOR RELIEF REQUESTED

28. Pursuant to section 310 of PROMESA, the Bankruptcy Rules apply in cases under 

Title III. 48 U.S.C. § 2170. Bankruptcy Rule 2004(a) states that on “motion of any party in 

interest, the court may order the examination of any entity.” Fed. R. Bankr. P. 2004(a). The 

scope of any examination sought under Bankruptcy Rule 2004 may relate to “the acts, conduct, 

or property or to the liabilities and financial condition of the debtor, or to any matter which may 

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affect the administration of the debtor’s estate, or to the debtor’s right to a discharge.” Fed. R. 

Bankr. P. 2004(b).

29. The granting of a motion under Bankruptcy Rule 2004 is within the discretion of 

the Court, see In re Enron Corp., 281 B.R. 836, 840 (Bankr. S.D.N.Y. 2002) (“As the permissive 

language of the rule suggests, the Court has the discretion to grant a request for a 2004 

examination . . . .”), and the scope of the discovery granted pursuant to a Rule 2004 motion may 

be extremely broad. Courts consistently have emphasized that the scope of a Bankruptcy Rule 

2004 examination is broader than discovery available under the Federal Rules of Civil 

Procedure. See In re Youk-See, 450 B.R. 312, 319–20 (Bankr. D. Mass. 2011) (citing Dynamic 

Fin. Corp. v. Kipperman (In re N. Plaza LLC), 395 B.R. 113, 122 n. 9 (S.D. Cal. 2008) (“It is 

well established that the scope of a Rule 2004 examination is exceptionally broad and provides 

few of the procedural safeguards found in Federal Rule of Civil Procedure 26.”)). Bankruptcy 

Rule 2004 “allows considerable leeway for all manner of so-called fishing expeditions provided 

that there is a reasonable nexus to the debtor and the administration of the debtor’s case.” In re 

Hilsen, Case No. 87-11261, 2008 WL 2945996, at *1 (Bankr. S.D.N.Y. July 25, 2008) (Peck, J.).

30. Thus, creditors may obtain discovery into any matter regarding the “nature and 

extent of the bankruptcy estate, revealing assets, examining transactions and assessing whether 

wrongdoing has occurred.” In re Recoton Corp., 307 B.R. 751, 755 (Bankr. S.D.N.Y. 2004)

(emphasis added); see In re Hilsen, 2008 WL 2945996, at *4; In re Coffee Cupboard, Inc., 128 

B.R. 509, 514 (Bankr. E.D.N.Y. 1991) (“The purpose of a Rule 2004 examination is ‘to show the 

condition of the estate and to enable the Court to discover its extent and whereabouts, and to 

come into possession of it, that the rights of the creditor may be preserved.’”) (quoting Cameron 

v. United States, 231 U.S. 710, 717 (1914)). Examinations under Bankruptcy Rule 2004 may be 

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conducted by any party in interest, not merely the trustee. See In re Summit Corp., 891 F.2d 1, 5

(1st Cir. 1989) (“Courts have generally construed the term ‘party in interest’ as used in 11 U.S.C. 

§ 1109(b) liberally.”).

31. Moreover, the target of Rule 2004 discovery is not limited to the debtor itself. 

“Any third party who has a relationship with a debtor may be made subject to a Rule 2004 

investigation.” In re Recoton Corp., 307 B.R. at 755 (citing Air Line Pilots Ass’n, Int’l v. Am. 

Nat’l Bank & Trust Co. of Chi. (In re Ionosphere Clubs, Inc.), 156 B.R. 414, 432 (S.D.N.Y. 

1993), aff’d, 17 F.3d 600 (2d Cir. 1994)); see also ePlus, Inc. v. Katz (In re Metiom, Inc.), 318 

B.R. 263, 268 (S.D.N.Y. 2004) (holding that Bankruptcy Rule 2004 may be employed to compel 

discovery of information maintained by creditors or third parties where such information relates 

to the effective reorganization and administration of the estate).

32. Indeed, courts routinely authorize Rule 2004 discovery of third parties in order to 

facilitate the investigation into those parties’ alleged wrongdoing. See, e.g., In re Gawker Media 

LLC, No. 16-11700, 2017 WL 2804870, at *6 (Bankr. S.D.N.Y. June 28, 2017) (approving Rule 

2004 discovery of third parties where discovery was sought to “determin[e] whether wrongdoing 

has occurred on behalf of the Debtors’ estate,” which “fit[] squarely within the purpose of Rule 

2004”); In re Recoton Corp., 307 B.R. at 755–56 (concluding that Rule 2004 discovery related to 

potential securities law violations by former directors and officers of the debtor was appropriate

because it would allow party seeking discovery “to obtain information necessary to determine 

whether claims beneficial to the estates exist and whether to pursue such claims”); In re Hughes, 

281 B.R. 224, 226 (Bankr. S.D.N.Y. 2002) (denying third-party objector’s motion to quash 

subpoenas for Rule 2004 examination because it “would not be an improper use of discovery 

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under Rule 2004” for party seeking Rule 2004 discovery to “assess potential claims” against 

third party).

33. National, as one of PRHTA’s largest creditors, is entitled to pursue Rule 2004 

discovery of GDB with respect to the PR SIB Trust Fund. As an initial matter, such discovery is 

necessary to allow National, as the party directly harmed by the GDB’s claim that the SIB Trust 

Funds are not held in a trust account, to determine what wrongdoing occurred with respect to the 

SIB Trust Fund. If the PR SIB Trust Fund is, in fact and as required by law, held in a trust 

account at GDB, those funds would not be part of PRHTA’s estate and would be subject to 

immediate release. The discovery requested in this Motion will thus allow National to 

understand whether and to what extent its claims against PRHTA may be satisfied from assets in 

the PR SIB Trust Fund. Because the information sought by National will directly affect the 

debtor’s estate by assessing its liabilities, it is a proper subject for Rule 2004 discovery.

34. The requested discovery will also allow National to investigate potential 

wrongdoing by GDB concerning the SIB funds. For nearly 20 years, PRHTA bondholders have 

assumed, based on the express terms of the Cooperative Agreement and the Bank Agreement, the 

clear representations made by PRHTA in the Offering Statement, and the references in PRHTA’s 

audited financial statements, that the SIB Funds have been held safely in trust, “separate and 

apart from all other funds of the Department, PRHTA and GDB.” Bank Agreement § 101.7 Yet, 

in the midst of an unprecedented financial crisis, GDB revoked that security, representing for the 

first time that the funds were, inexplicably, held in an ordinary deposit account at GDB. 

 

7

There can be no doubt that holders of the 1998 Subordinated Bond bondholder relied on 

PRHTA’s representations regarding the bond’s securitization when purchasing the bonds. 

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Needless to say, the timing of the representation is suspect, begging the question of whether the 

SIB funds were ever held in trust, and if so, at what point they were moved into deposit accounts.

35. As it stands, GDB has either been violating the express terms of the Bank 

Agreement for twenty years or has recently misappropriated the SIB Funds for PRHTA’s

benefit. National is plainly entitled to find out which of these scenarios is at play. See In re 

Gawker Media LLC, 2017 WL 2804870, at *6; In re Recoton Corp., 307 B.R. at 755–56; In re 

Hughes, 281 B.R. at 226. Indeed, the requested discovery is necessary to allow National to 

obtain the information for it to determine whether it has a claim against GDB related to the SIB 

Funds, which would directly affect PRHTA’s liabilities.

36. This situation is particularly alarming in light of the unnerving similarities 

between Siemens’s and National’s experience with GDB. As with the PR SIB Trust Fund, GDB 

recently revoked prior representations made to Siemens that certain funds were held in an escrow

account. In so doing, GDB claimed that Siemens’s funds were never held in escrow account and 

instead were held in an unrestricted demand deposit account in PRHTA’s name. These stories

suggest potential widespread misconduct by GDB with respect to trust and escrow accounts

connected to PRHTA. Accordingly, like Siemens, National is entitled to investigate whether the 

SIB funds are—or ever have been—held in trust by GDB and why, after years of assurances to 

the contrary, GDB recently represented that the SIB Funds were held in a deposit account.

37. National thus seeks the production of documents and examination of witnesses 

regarding the existence, historical treatment, and status of the PR SIB Trust Fund, including 

documents concerning the initial opening of, and all changes to, the PR SIB Trust Fund and the 

1998 Subordinated Bonds Highways Subaccount.

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CERTIFICATION OF COMPLIANCE WITH LOCAL BANKRUPTCY RULE 2004-1

38. Undersigned counsel hereby certifies that, on December 28, 2018, they requested 

a conference with counsel for GDB to “arrange a mutually agreeable date, place, and time for the 

examination.” Rule 2004-1(b) of the Puerto Rico Local Bankruptcy Rules. A conference was 

held on January 5, 2018. In light of counsel’s refusal to commit to a mutually-agreeable 

schedule for the production of documents, the undersigned counsel certifies that further meet and 

confer would not be fruitful.

NOTICE

39. Under the Third Amended Case Management Procedures, the deadline to file an 

objection to this Motion is January 23, 2018, 4:00 p.m. (AST). National therefore provides the 

following notice pursuant to Rule 2004-1(d) of the Puerto Rico Local Bankruptcy Rules, 

modified accordingly with respect to the objection deadline: Any party who objects to the 

examination shall serve and file an objection or motion for protective order with the United 

States Bankruptcy Court for the District of Puerto Rico by January 23, 2018, 4:00 p.m. (AST) for 

a Fed. R. Bankr. P. 2004 Examination. If no objection or motion for protective order is timely 

filed, the Court may grant the motion for examination without further notice or a hearing.

NO PRIOR REQUEST FOR RELIEF 

40. National has made no previous request for the relief sought herein to this or any 

other Court.

WHEREFORE, National respectfully requests authority to direct the production of 

documents and the examination of witnesses pursuant to Bankruptcy Rule 2004 as set forth 

herein and consistent with the Proposed Order, and that National be granted such other and 

further relief as is just.

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RESPECTFULLY SUBMITTED, in San Juan, Puerto Rico, this 16th day of January 

2018.

I HEREBY CERTIFY that on this same date a true and exact copy of this notice was 

filed with the Clerk of Court using the CM/ECF system, which will notify a copy to counsel of 

record.

ADSUAR MUÑIZ GOYCO

SEDA & PÉREZ-OCHOA, P.S.C.

208 Ponce de León Avenue, Suite 1600

San Juan, PR 00936

Telephone: 787.756.9000

Facsimile: 787.756.9010

Email: epo@amgprlaw.com

acasellas@amgprlaw.com

 larroyo@amgprlaw.com

By: /s/ Eric Pérez-Ochoa

Eric Pérez-Ochoa

USDC-PR No. 206314

/s/ Alexandra Casellas-Cabrera

Alexandra Casellas-Cabrera

USDC-PR No. 301010

/s/ Lourdes Arroyo Portela

Lourdes Arroyo Portela

USDC-PR No. 226501

WEIL, GOTSHAL & MANGES LLP

Marcia Goldstein (admitted pro hac vice)

Salvatore A. Romanello (admitted pro hac vice)

Kelly DiBlasi (admitted pro hac vice)

Jared Friedmann (admitted pro hac vice)

Gabriel A. Morgan (admitted pro hac vice)

767 Fifth Avenue

New York, New York 10153

Telephone: (212) 310-8000

Facsimile: (212) 310-8007

Email: marcia.goldstein@weil.com

 salvatore.romanello@weil.com

kelly.diblasi@weil.com

gabriel.morgan@weil.com

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