EXHIBIT 17 

Case:17-03283-LTS Doc#:24535-17 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

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1 IN THE UNITED STATES DISTRICT COURT

 FOR THE DISTRICT OF PUERTO RICO

2

 - - - - - - - - - - - - - - - - - - - x

3 In Re: THE FINANCIAL OVERSIGHT :

 AND MANAGEMENT BOARD FOR PUERTO :

4 RICO, : Case No.

 : 17-BK-3283-LTS

5 as a representative of :

 THE COMMONWEALTH OF PUERTO RICO, :

6 et al., :

 :

7 Debtors. :

 - - - - - - - - - - - - - - - - - - - x

8 In Re: THE FINANCIAL OVERSIGHT :

 AND MANAGEMENT BOARD FOR PUERTO :

9 RICO, : Case No.

 : 17-BK-4780-LTS

10 as a representative of :

 THE PUERTO RICO ELECTRIC POWER :

11 AUTHORITY, :

 :

12 Debtor. :

 - - - - - - - - - - - - - - - - - - - x

13

 Friday, May 26, 2023

14 Washington, D.C.

15 Confidential Subject to Protective Order

16

17 Videotaped Deposition of:

18 JUSTIN PETERSON,

19 called for oral examination, pursuant to notice, at the

 law offices of Paul Hastings, LLP, 2050 M Street,

20 Northwest, Washington, D.C. 20036, before Christina S.

 Hotsko, RPR, CRR, of Veritext Legal Solutions, a Notary

21 Public in and for the District of Columbia, beginning at

 a.m., when were present on behalf of the respective

22 parties:

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1 you've had with the board and its advisors as part

2 of your role as a board member.

3 THE WITNESS: Understood.

4 MR. BASSETT: And I tried to be cognizant

5 of that by specifically asking for the facts

6 that --

7 MR. MERVIS: I understand. I just don't

8 want the substance of communications to come out.

9 THE WITNESS: So just -- will you repeat

10 the question?

11 MR. BASSETT: Sure.

12 BY MR. BASSETT:

13 Q. I said, so when you say that there are

14 more funds available to PREPA to pay bondholders,

15 what are all of the facts you are aware of that

16 support that position?

17 A. So one example -- I alluded to it

18 earlier -- is the amount of subsidy that PREPA

19 provides the Commonwealth and its municipalities.

20 Some of it is required by statute. It's still a

21 subsidy. Not all of it's required by statute.

22 I don't remember the number. It was -- I

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1 looked at it once, and it was substantial. And

2 it's certainly represented in a number in and of

3 itself that would make a difference in trying to

4 get something done. So that's one example.

5 Another example is the -- sort of the

6 notion of affordability is, in my view, made to

7 order, to pay as little as possible. And there

8 hasn't been a rate -- when I say rate increase,

9 rate per kilowatt hour. There hasn't been much of

10 a rate increase -- any rate increase. I know it's

11 for more than a decade. I don't know if it's two

12 decades. Just like there's no toll road increases

13 ever. Puerto Rico is the only place in the United

14 States where rates don't increase ever.

15 And meanwhile, everybody gets raises,

16 everybody gets Christmas bonuses, everybody's

17 pensions get topped off. Everybody but the

18 bondholders get paid. And I think it's unfair.

19 Q. Are there any other facts other than

20 those two examples that support --

21 A. Well, there's -- so there's the federal

22 money that I mentioned earlier. I believe it's

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1 so that they don't have to pay -- again, it's the

2 only place in America where rates don't increase

3 and the municipalities don't have to pay for their

4 power service. PREPA does.

5 Q. You mentioned increasing rates.

6 Have you done any kind of analysis or

7 assessment of whether PREPA could increase rates

8 and, if so, by how much?

9 A. Have I performed any analysis on my own?

10 No.

11 Q. Have you had anybody perform any analysis

12 on your behalf?

13 A. No. I have looked at the record, which

14 shows that there's been no rate increase for

15 almost two decades. I've looked at the facts

16 related to the subsidies I mentioned to you. I've

17 read information related to all the federal money

18 that's been provided. And I have -- without

19 getting into anything that I shouldn't, I've

20 looked at what I perceived to be and observed all

21 the omissions, oversights, as I said, in this sort

22 of made-to-order affordability analysis that

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1 Brattle did for the board.

2 Q. Have you ever worked at a utility

3 provider?

4 A. No.

5 Q. Have you ever visited any of the

6 PREPA-owned generation facilities on the island?

7 A. I don't think so.

8 Q. Do you know how many generation plants

9 PREPA owns?

10 A. No.

11 Q. Do you know the average age of PREPA's

12 generation assets?

13 A. It's old.

14 Q. Beyond that?

15 A. Not off the top of my head.

16 Q. Do you know the approximate generation

17 mix in Puerto Rico, such as how much comes from

18 coal, natural gas, or renewables?

19 A. Most of it comes from bunker fuel, coal,

20 really expensive, inefficient forms of energy.

21 Q. Do you know the maximum generation

22 capacity that PREPA owns and PREPA can generate?

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1 PREPA, what would your view be at that point as to

2 what the bondholders are entitled to receive or

3 should receive under PREPA's plan of adjustment?

4 MR. MERVIS: I object to the form.

5 THE WITNESS: I think -- I think it's

6 engaging in hypotheticals to predict what they

7 will or won't do, what the judge will or won't do.

8 It's up to her.

9 I would maintain -- I would go back to

10 what I say in the first instance, which is that,

11 as a matter of principle and, in my view, the law,

12 contracts should be honored. Bondholders should

13 be compensated. Their return should be maximized

14 within, you know, a rational context of

15 affordability.

16 And for all the reasons I went through

17 earlier, I don't believe the plan of adjustment is

18 reflective of that. I think the plan of

19 adjustment is reflective of an ideological desire

20 to pay bondholders as little as possible.

21 BY MR. BASSETT:

22 Q. Mr. Peterson, you have a Twitter account,

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1 A. Yes.

2 Q. And then there's a quote in the image of

3 a purported definition of bad faith.

4 A. It comes from Wikipedia.

5 Q. Okay.

6 A. I just wanted to make sure I was clear on

7 sourcing.

8 Q. Why did you send this tweet?

9 MR. MERVIS: Okay. I'm sure this isn't

10 going to be a problem, but I have the same

11 admonition, which is not to reveal the substance

12 of communications with board members or

13 advisors --

14 THE WITNESS: Understood.

15 MR. MERVIS: -- as part of your role as a

16 board member.

17 THE WITNESS: Understood.

18 So I recognize the tweet. I remember it.

19 I have held the view that the board's mode of

20 operating with PREPA bondholders has not been in

21 good faith.

22

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1 BY MR. BASSETT:

2 Q. What's the basis for your view that the

3 board has not acted in good faith vis-a-vis the

4 bondholders?

5 MR. MERVIS: Same admonition.

6 THE WITNESS: The goalposts on numbers

7 have been moved again and again. In my

8 estimation, based upon observations which, for the

9 reasons he states, I can't really get into, they

10 seem made to order, the affordability analysis.

11 And I very much think it's an ideological

12 process driven to pay as little as possible. And

13 that's my opinion. And it's informed by what I

14 just said.

15 BY MR. BASSETT:

16 Q. Did you believe it was bad faith for the

17 Oversight Board to pursue the lien challenge?

18 A. So bad faith -- bad faith, you know,

19 without reading the deposition [sic], when I think

20 of that, it's to purport or go through the motions

21 of doing something but really not trying to get it

22 done. So as in go through the motions of trying

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1 THE WITNESS: I can't speak to motive.

2 What I meant when I said that was that the

3 affordability analysis has changed quite a bit,

4 and it consistently changes to suit what -- to

5 suit the ideology of where the board has headed

6 with its approach to negotiation with creditors.

7 It --

8 BY MR. KIRPALANI:

9 Q. But aren't you -- I'm sorry.

10 Aren't you part of the board,

11 Mr. Peterson?

12 A. Yes.

13 Q. And have you had any conversations with

14 Brattle about what you think Brattle should be

15 solving for when it's giving advice to the board?

16 MR. MERVIS: Hang on a second. Let me

17 just think about that one.

18 I'm okay with a yes or no answer to that

19 one, but please don't say anything more than that.

20 THE WITNESS: Could you repeat the

21 question?

22

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1 And what I'm trying to understand is, are

2 you speculating when you say if your goal is to

3 pay creditors as little as possible, or is that

4 really your belief as to what the proposed plan

5 does?

6 MR. BASSETT: Object to form.

7 MR. MERVIS: I object to the form.

8 THE WITNESS: I believe it's designed to

9 pay as little as possible and, at the same time,

10 using PREPA -- excuse me, using Commonwealth funds

11 to top off PREPA pensions, to pay for

12 infrastructure projects using surpluses, to take

13 care of every stakeholder except bondholders.

14 BY MR. KIRPALANI:

15 Q. We're going to come to that subject more

16 broadly in a bit.

17 Can I ask you to look at tab 1 in the

18 Quinn Emanuel binder that you should have with

19 you?

20 MR. KIRPALANI: And I'm happy for the

21 concierge to put it up on the screen if she can do

22 that.

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1 I asked why -- why his $2-1/2 billion of

2 CapEx suddenly appeared out of nowhere in our

3 projections, when that did recently.

4 And I don't -- on the inflation, I know

5 I've raised that with folks that, you know, are

6 part of the board. I don't know that I've raised

7 it directly with Brattle.

8 BY MR. KIRPALANI:

9 Q. You mentioned the roughly 2-1/2 billion

10 of CapEx accrual that, I think to use your phrase,

11 suddenly appeared.

12 In your view, did the board make a

13 mistake in not accruing that cost previously?

14 MR. MERVIS: Hold on. Okay. I object to

15 the form.

16 Same admonition about not revealing

17 communications; but otherwise, you can certainly

18 say your view.

19 THE WITNESS: Yeah -- well, I would say

20 on the face of it, when you're -- when you're in

21 the midst of negotiations and suddenly you have a

22 $2-1/2 billion expense which has never appeared

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1 before, on the face of it that's a mistake.

2 However, I've -- it was a mistake, in

3 other words, that -- that it wasn't there to begin

4 with and it was just part of this -- when I

5 referred before to goalposts moving, that's an

6 example.

7 But I would argue it's also -- in my

8 opinion, it's a mistake to have the accrual in the

9 first place because -- or to have it at that level

10 because the federal funding -- it ignores the

11 federal funding question.

12 And when I've asked about -- about that,

13 I mean, there's just -- okay, never mind.

14 MR. MERVIS: Yeah, just -- I don't want

15 you to --

16 THE WITNESS: Okay.

17 MR. MERVIS: Thank you.

18 BY MR. KIRPALANI:

19 Q. Have you, Mr. Peterson, satisfied

20 yourself that that new accrual of CapEx was an

21 honest mistake, or do you believe that it was

22 uncovered for a different purpose?

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