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,

et al.

Debtors. 

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In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

PUERTO RICO ELECTRIC POWER

AUTHORITY (“PREPA”)

Debtor.1

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PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

PROMESA

Title III

No. 17 BK 4780-LTS

Re: 17-BK-04780-LTS, ECF Nos. 

3834, 3840 

JOINT RESPONSE OF THE FINANCIAL OVERSIGHT

AND MANAGEMENT BOARD FOR PUERTO RICO,

PUERTO RICO ELECTRIC POWER AUTHORITY, AND

PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY

TO THE INFORMATIVE MOTION OF COBRA ACQUISITIONS LLC

IN CONNECTION WITH THE ORDER REGARDING

COBRA ACQUISITIONS LLC’S MOTION TO MODIFY STAY ORDER

1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last four (4) 

digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico 

(Bankruptcy Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax 

Financing Corporation (Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) 

Puerto Rico Highways and Transportation Authority (Bankruptcy Case No. 17-BK-3567-LTS) (Last Four Digits of 

Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of the Commonwealth of Puerto Rico 

(Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (v) Puerto Rico Electric Power 

Authority (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico 

Public Buildings Authority (Bankruptcy Case No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title 

III case numbers are listed as Bankruptcy Case numbers due to software limitations).

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To the Honorable United States District Judge Laura Taylor Swain: 

The Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), 

as Title III representative of the Puerto Rico Electric Power Authority (“PREPA” or the “Debtor”) 

pursuant to section 315(b) of the Puerto Rico Oversight, Management, and Economic Stability Act

(“PROMESA”), and the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF,” 

and together with PREPA and the Oversight Board, the “Government Parties”), in accordance with 

this Court’s Order Concerning Informative Motion of Cobra Acquisitions LLC in Connection with 

the Order Regarding Cobra Acquisitions LLC’s Motion to Modify Stay Order (ECF No. 3840), 

respectfully submit this response (the “Response”) to the Informative Motion of Cobra 

Acquisitions LLC’s [sic] in Connection with the Order Regarding Cobra Acquisitions LLC’s 

Motion to Modify Stay Order [ECF No. 3834; Case No. 17-03283, ECF No. 24717]2 (the 

“Informative Motion”).3 In support of this Response, the Government Parties respectfully state as 

follows: 

RESPONSE

1. On June 14, 2023, the Government Parties filed the Informative Motion of the 

Financial Oversight and Management Board for Puerto Rico, Puerto Rico Electric Power

Authority, and Puerto Rico Fiscal Agency and Financial Advisory Authority Relating to Order 

Regarding Cobra Acquisitions LLC’s Motion to Modify Stay Order (ECF No. 3754) (the “Invoice 

Status Report”) providing detailed information regarding the steps involved in PREPA’s review of 

the Approved Unpaid Invoices and where each of these invoices were in the review process at that 

time. Additionally, based on estimates provided by PREPA’s outside consultant retained to 

2 Docket numbers refer to Case No. 17-4780 unless otherwise noted.

3 Terms that are capitalized but not defined herein have the meanings ascribed in the Informative Motion.

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complete this review, the Invoice Status Report provided expected completion dates for the review 

of each open invoice. At that time the total balance of the Approved Unpaid Invoices was 

approximately $103 million. As the Invoice Status Report indicated, payment of eleven of those 

invoices totaling approximately $10,750,000 was then in progress. That payment was completed 

on June 14. 

2. PREPA and its outside advisors have been working diligently to complete the 

invoice review and validation process. This is not a simple process and, particularly given Cobra’s 

former CEO’s criminal conviction, it is an extremely important and sensitive one. Prior to this

indictment, PREPA timely approved and paid more than a billion dollars to Cobra. The indictment 

of Cobra’s former CEO (for actions related to the contract at issue) brought FEMA’s and PREPA’s

review process to a standstill. In the meantime, PREPA transitioned the operation of the grid to 

LUMA Energy, which left PREPA without any of the personnel previously charged with reviewing 

and approving Cobra’s invoices. PREPA was thus required to hire an outside consultant to 

complete this work, which it did in November 2022. 

3. Although the Approved Unpaid Invoices are the subject of a FEMA determination 

memo obligating funds to pay the federal share of those invoices (90%, or about $93 million), 

PREPA is required by federal regulation to follow its own documented procedures for the 

acquisition of services funded by federal grants (2 C.F.R. § 200.318(a)) and, pursuant to its 

subgrant agreement with the Central Office for Recovery, Reconstruction and Resiliency 

(“COR3”), the Puerto Rico agency that serves as the Recipient and pass-through entity for FEMA 

Public Assistance funds, PREPA is liable for the return of obligated funds, “including funds paid 

to any contractor,” if COR3 or FEMA “disallow costs and recover funds based on a later audit or 

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review during or after performance of the subaward to ensure compliance with the terms of the 

Agreement and subaward document.” 

4. In addition, the regulation at 2 C.F.R. § 200.332 outlines the requirements for passthrough entities like COR3. The regulation requires COR3 to “ensure that the subaward is used 

for authorized purposes, in compliance with Federal statutes, regulations, and the terms and 

conditions of the subaward; and that subaward performance goals are achieved.” Failure to follow 

these requirements can result in PREPA being required to return funds it received. If COR3 (or 

FEMA, at closeout) determines that PREPA “fail[ed] to comply with the U.S. Constitution, Federal 

statutes, regulations or the terms and conditions of a Federal award,” then it may impose a remedy 

for noncompliance pursuant to 2 C.F.R. § 200.339, which includes disallowing costs, among other 

remedies. Payment by PREPA for work that is not necessary, reasonable, or adequately 

documented violates federal regulations. See 2 C.F.R. § 200.403, Factors affecting allowability of 

costs. The regulations also require PREPA to “[b]e consistent with policies and procedures that 

apply uniformly to both federally-financed and other activities of the non-Federal entity.” Id. at 

§ 200.403(c). In other words, PREPA cannot reserve its strictest standards for payments made out 

of its own funds while applying more liberal treatment to federally-financed work. 

5. All of the steps required for PREPA’s approval of the Approved Unpaid Invoices

are set forth at the top of the columns in the chart attached to the Invoice Status Report as Exhibit 

A. One of the steps shown on this chart is “Confirmation of Approval by Authorized Personnel.” 

This requirement is derived from two sources. First, PREPA’s Procedimiento para el Trámite de 

los Contratos por Servicios Profesionales, No Profesionales o de Expertos, specifically its 

Instrucciones para la Verificación, Evaluación y Pago de los Servicios, requires, among other 

things, that the end user of the services verify each invoice to determine if the amount corresponds 

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with the task performed and certify the invoice for payment. Second, Article 3 of Cobra’s Second 

Contract requires that “Prior to payment, the invoices submitted by the Contractor must be 

approved by the Engineer and must be accompanied by the proper supporting documents (such as 

inspection certifications, work reports and third-party invoices).” Article 2 of the Second Contract 

defines “Engineer” as “the Transmission and Distribution Director of PREPA, acting directly or 

through his properly authorized representatives.” 

6. This step is neither new nor something Cobra did not know. Its own contract with 

PREPA requires an engineer on staff at PREPA authorized by the Transmission and Distribution 

Director to confirm the subject work was performed as requested by PREPA. As indicated in the 

Invoice Status Report submitted on June 14, this step had not yet been completed for a substantial 

majority of the Approved Unpaid Invoices. PREPA’s outside consultant performing the invoice 

validation worked diligently to complete its review according to the schedule reported to the Court 

on June 14, including to confirm invoice certification by an authorized engineer as required by the 

Second Contract. However, when it reached this point it determined that this particular step would 

be problematic, given that PREPA’s Transmission and Distribution division no longer exists—it 

now resides with LUMA Energy. There are no remaining PREPA personnel that can authorize 

Cobra invoices.

7. PREPA’s consultant reported to the Government Parties on June 23, 2023 (more 

than a week after the Invoice Status Report was filed and more than two weeks after the June 8 

omnibus hearing) that its invoice validation process was essentially complete, with the exception 

of “Confirmation of Approval by Authorized Personnel” for invoices that were never approved by 

PREPA personnel. Thereafter, the Government Parties contacted LUMA Energy to obtain access 

to the former PREPA engineer that was authorized to approve the invoices so that PREPA’s 

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consultant could complete its validation and obtain the required approval. Counsel to the 

Oversight Board informed Cobra of these facts on June 28, and subsequently informed Cobra that 

it had only recently learned of these developments and also that none of PREPA’s remaining 

employees have the knowledge needed to confirm approval. Notwithstanding these facts, Cobra 

falsely accused the Oversight Board in the Informative Motion of withholding this information 

from the Court.4 Regardless, since learning of this issue the Government Parties have been 

attempting to address it, including evaluating other paths to certify these invoices in lieu of utilizing

a current LUMA employee.

8. In addition, since the filing of the Invoice Status Report, PREPA has continued to 

work diligently with its outside advisors to complete its review of the Approved Unpaid Invoices 

within the estimated timeframes reported to the Court. On July 17, PREPA’s invoice validation 

consultant recommended an additional payment of $8,357,746 billed under 26 invoices to be 

submitted to PREPA’s systems for payment and for submission to COR3 for reimbursement. 

PREPA does not intend to wait for disbursement of FEMA funds from COR3 before making this 

payment to Cobra.

9. The 149 invoices that still need Engineer certification amount to over $72 million

of FEMA-approved costs. The Government Parties are continuing to work diligently to find a way 

over this hurdle. Once the invoices are certified or a workaround is achieved, PREPA’s consultant 

will be able to recommend the invoices for payment, subject to any discrepant amounts that failed 

4 Cobra asserts in its Informative Motion that the Government Parties failed to “adequately inform[]” both Cobra and 

the Title III Court regarding “the need for LUMA Energy’s assistance.” Informative Motion ¶ 10. Cobra further 

asserted the “Government Parties have not satisfactorily answered Cobra’s repeated questions as to why no current 

employee of PREPA can provide such verification or what will happen if this former employee is no longer available 

or accessible.” Informative Motion ¶ 9. This assertion is also false. The Oversight Board provided an answer to this 

exact question in an email dated July 7, 2023, in which the Oversight Board explained “all of PREPA’s Transmission 

& Distribution personnel who authorized Cobra’s work are now with LUMA.” 

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the validation process (which would become disputed amounts to be resolved through settlement 

or litigation). Any such amounts will be identified and quantified in a separate report to the Court 

identifying remaining disputes. 

10. Regarding Cobra’s assertions that PREPA has available FEMA funds, as the 

Government Parties explained in previous filings, none of the funds obligated by FEMA for the 

federal share of the Approved Unpaid Invoices are available to PREPA until COR3 releases such 

funds. Nonetheless, PREPA used its limited unrestricted cash to pay Cobra approximately $10.75 

million on June 14, 2023 in advance of formally submitting an RFR to COR3 for those invoices

and is processing an additional approximately $8million in payments. These now – or soon to be 

satisfied invoices fall within those Cobra identifies as the Approved Unpaid Invoices, i.e., the 

approximately $103 million at issue in the Lift Stay Motion. 

11. Cobra also once again inappropriately admonishes PREPA for seeking 

reimbursement of payments it previously made to Cobra, while delaying submission invoices for 

payment to Cobra.5

 As PREPA explained in the Lift Stay Objection, prior to paying these invoices 

from its own resources in the first instance, PREPA completed the same invoice review process it 

is now undertaking for the Approved Unpaid Invoices (at a time when it was fully staffed for this 

task). Because the invoices were already internally validated, approved, and paid years ago, all of 

the prerequisites for submission of a request for reimbursement were long ago completed. 

Moreover, due to the criminal misconduct of Cobra’s former CEO, PREPA has been forced to wait 

almost five years for reimbursement of these payments from FEMA funds. 

5 See Informative Motion ¶ 2 (“By April 4, 2023, PREPA had submitted a request for reimbursement from these 

available funds to pay itself . . . . Yet, as of the filing of the Lift Stay Motion, no request for reimbursement had been 

made by PREPA with respect to the Approved Unpaid Invoices.”).

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12. Finally, regarding the status of settlement discussions, on June 29, 2023, on the eve 

of the four-day July 4th holiday weekend and nearly three months after the Oversight Board 

communicated a settlement proposal to Cobra (to which Cobra has yet to respond), Cobra 

requested the relevant parties enter into mediation of the remaining outstanding disputes regarding 

Cobra’s asserted administrative claim. At that time, the Oversight Board was in the midst of 

completing fiscal year 2023 and certifying the then-outstanding fiscal plans and budgets for fiscal 

year 2024. Four business days after the July 4th holiday, Cobra filed the Informative Motion, 

criticizing the Oversight Board for, among other things, failing to respond to the request for 

mediation. Informative Motion ¶ 15. Cobra’s complaint is especially inappropriate given Cobra’s 

complete lack of a response to the Oversight Board’s April 3 settlement proposal. The Oversight 

Board is considering Cobra’s request, though it is difficult to assess the benefits of mediation when 

the Oversight Board has not received a substantive response to its prior proposal. However, the 

Oversight Board concurs with Cobra that settlement of all outstanding issues is the best path 

forward, and commits to working in good faith to achieve it. 

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San Juan, Puerto Rico 

July 21, 2023 

Respectfully submitted,

O’NEILL & BORGES LLC

By: /s/ Hermann D. Bauer 

Hermann D. Bauer 

USDC No. 215205 

250 Muñoz Rivera Ave., Suite 800 

San Juan, PR 00918-1813 

Telephone: (787) 764-8181 

Facsimile: (787) 753-8944 

Email: hermann.bauer@oneillborges.com 

PROSKAUER ROSE LLP

By: /s/ Paul V. Possinger 

Martin J. Bienenstock* 

Paul V. Possinger* 

Ehud Barak* 

Eleven Times Square New York, NY 10036 

Telephone: (212) 969-3000 

Facsimile: (212) 969-2900 

Email: mbienenstock@proskauer.com 

ppossinger@proskauer.com 

ebarak@proskauer.com

* admitted pro hac vice 

Attorneys for the Financial Oversight and 

Management Board as representative of the 

Puerto Rico Electric Power Authority

DÍAZ & VÁZQUEZ LAW FIRM, P.S.C.

By: /s/ Arturo Díaz Angueira 

Arturo Díaz Angueira

adiaz@diazvaz.law

USDC-PR 231812

290 Jesús T. Piñero Ave. 

Oriental Tower, Suite 803 

San Juan, PR 00918 

Tel. (787) 395-7133 

Fax. (787) 497-9664

Co-Attorneys for Puerto Rico Electric Power 

Authority 

MARINI PIETRANTONI MUÑIZ LLC

By: /s/ Luis C. Marini-Biaggi 

Luis C. Marini-Biaggi 

USDC No. 222301 

Email: lmarini@mpmlawpr.com

250 Ponce de León Ave., Suite 900 

San Juan, Puerto Rico 00918 

Tel: (787) 705-2171 

Fax: (787) 936-7494 

Attorneys for the Puerto Rico Fiscal 

Agency and Financial Advisory Authority

O’MELVENY & MYERS LLP

By: /s/ Maria J. DiConza 

John J. Rapisardi* 

Maria J. DiConza*

7 Times Square 

New York, NY 10036 

Telephone: (212) 326-2000 

Facsimile: (212) 326-2061 

Email: jrapisardi@omm.com 

mdiconza@omm.com 

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-andPeter Friedman* 

1625 Eye Street, NW

Washington, D.C. 20006

Tel: (202) 383-5300

Fax: (202) 383-5414

pfriedman@omm.com

-andElizabeth L. McKeen*

610 Newport Center Drive, 17th Floor

Newport Beach, CA 92660

Tel: (949) 823-6900

Fax: (949) 823-6994

emckeen@omm.com

* admitted pro hac vice 

Attorneys for the Puerto Rico Fiscal

Agency and Financial Advisory 

Authority and Puerto Rico Electric Power 

Authority

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