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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In Re: )

)

THE FINANCIAL OVERSIGHT AND )

MANAGEMENT BOARD FOR PUERTO RICO, )

) No. 17 BK 3283-LTS

as representatives of )

)

THE COMMONWEALTH OF PUERTO RICO, )

et al, )

)

Debtors )

STATUS CONFERENCE

BEFORE THE HONORABLE JUDITH GAIL DEIN

UNITED STATES MAGISTRATE JUDGE

United States District Court

1 Courthouse Way, Courtroom 8

Boston, Massachusetts 02210

May 29, 2018

1:35 p.m.

Debra D. Lajoie, RMR, FCRR, CRI

United States District Court

1 Courthouse Way, Room 3-209

Boston, Massachusetts 02210

lajoiedebra@gmail.com

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A P P E A R A N C E S:

ANDREW J. SOVEN, ESQ., and CLAUDIA Z. SPRINGER,

ESQ., Reed Smith LLP, for Siemens Transportation

Partnership Puerto Rico, SE

MARGARET DALE, ESQ., and TIMOTHY MUNGOVAN, ESQ.,

Proskauer Rose LLP, for The Financial Oversight and

Management Board for Puerto Rico on its own behalf and

as Representative of Puerto Rico Highways and

Transportation Authority

HERMANN D. BAUER ALVAREZ, ESQ., O'Neill & Borges,

for The Financial Oversight and Management Board for

Puerto Rico and Puerto Rico Highways and Transportation

Authority

MARIA DELORES TRELLES HERNANDEZ, ESQ., Pietroanoni

Mendez & Alvarez LLC, for Government Development Bank

of Puerto Rico

GISELLE LOPEZ SOLER, ESQ., Law Offices of

Giselle Lopez Soler, for Government Development Bank

of Puerto Rico

LUIS C. MARINI, ESQ., Marini Pietrantoni Muniz

LLC, for Puerto Rico Fiscal Agency and Financial

Advisory Authority

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P R O C E E D I N G S

THE CLERK: The United States District Court for

the District of Puerto Rico is now in session on

May 29, the year 2018, in the matter of The Financial

Oversight and Management Board for Puerto Rico, as

representative of the Commonwealth of Puerto Rico,

et al; and also in the matter of Siemens Transportation

Partnership Puerto Rico, SE v. Puerto Rico Highways and

Transportation Authority, et al; Case Nos. 17BK3283,

Adversary Proceeding No. 18-030, and Bankruptcy

No. 17BK03567.

Magistrate Judge Dein presiding.

THE COURT: Okay. Counsel need to introduce

themselves for the record, who's here.

MR. SOVEN: Good afternoon, Your Honor.

Andrew Soven and Claudia Springer for Siemens.

MS. DALE: Good afternoon, Your Honor.

Margaret Dale for the Defendant, the Oversight

Management Board of Puerto Rico on its own behalf and

as a representative of the Puerto Rico Highways and

Transportation Authority.

MR. MUNGOVAN: Good afternoon, Your Honor.

Timothy Mungovan from Proskauer Rose on behalf

of the Oversight Board and HTA.

MR. BAUER: Good afternoon, Your Honor.

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Hermann Bauer from O'Neill & Borges on behalf of

the Oversight Board and HTA.

MS. TRELLES: Good afternoon, Your Honor.

Maria Trelles from Pietranoni Mendez & Alvarez

for GDB.

MS. SOLER: Good afternoon, Your Honor.

Giselle Lopez Soler on behalf of GDB.

MR. MARINI: Good afternoon, Your Honor.

Luis Marini of Marini Pietrantoni Muniz on

behalf of AAFAF.

THE COURT: All right. Welcome, everyone here

in Boston and those who are attending by I am not sure

what method but hopefully a working method in New York

and Puerto Rico.

All right. We have a status conference. Why

don't we hear what's going on. Why don't I hear from

Siemens first.

MR. SOVEN: Good afternoon again, Your Honor.

From what I --

THE COURT: You know what? I think it's easiest

if you talk from the podium. Just I think it goes

through --

MR. SOVEN: Oh, okay.

THE COURT: -- more clearly.

MR. SOVEN: Your Honor, as you know, we're only

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here on a status conference today, and I believe that

there's really two documents that are pending in front

of the Court. There's, obviously, the complaint that

was filed in late March, and the deadline for the

response -- responses to the complaint is in fact

today.

It's my understanding that the Defendants will

each be filing a motion to dismiss in response to the

complaint, and I guess we -- from what I understand,

you may hear the motion to dismiss, or it may go to

Judge Swain.

THE COURT: Makes life interesting.

MR. SOVEN: Makes life interesting. But if

you're, you know, willing to entertain a schedule for

the motion to dismiss now, I'm certainly happy to talk

about that, or we can --

THE COURT: It may make sense to talk about it

in the context of the other motion and see --

MR. SOVEN: Okay.

THE COURT: -- where that fits in.

MR. SOVEN: Yeah. I mean, the other motion, you

know, as you know, was filed several weeks ago. A

response has been filed. Again, so you know, I guess

we could potentially file a reply, but at some level,

it's fully briefed. I mean, there are factual issues

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and legal issues implicated by the motion. We think

that the legal issues, obviously, will ultimately be

resolved in our favor and that the factual issues can

be relatively quickly resolved as well.

When we received the response, you know, my

initial reaction was potentially to ask for a hearing

in front of Your Honor so that those issues could be

promptly resolved. It would not require much testimony

to do so, and we'd be happy to schedule a date to have

that motion heard, you know, as if it was in fact a

motion for preliminary relief before Your Honor.

You know, again, it would require some testimony

but not much. It requires one -- it appears really

only one central legal issue of whether or not the

funds at issue are subject to the restructuring and

support agreement or not. We think that, that also can

be resolved in fairly short order. And I admit, it

will also have to be resolved in connection with the

motion to dismiss.

But at the same time, you know, what we're

really worried about is the uncertainty that seems to

be attendant to these funds. I mean, on one hand, the

Defendants, or at least GDB, in their papers and all of

the Defendants are essentially saying, Siemens, you

know, you've got nothing to worry about, those funds

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will be there when this all gets worked out. If you're

right, maybe you'll have access to them.

What we suggested to counsel was, Well, why not

just put that in an order, because that would really

resolve the motion. I mean, my first choice would be

that the funds be paid into the Court, and I think that

that's what would normally happen certainly in a

Bankruptcy Court, or could happen in a bankruptcy

situation, which is really what this is closest to.

But if not, you know, why, if they say in the

papers there's no worry, the funds aren't going

anywhere, can't that just be embodied in an order that

says as much? I mean, and my concern, frankly, is the

witness may have said that, but it's a little

concerning that, you know, the parties aren't saying

that. I mean, the witness also at some level said,

This is an escrow account, and we're still getting, you

know, the sense, and I think later today we'll know for

sure, that they're going to argue it's not an escrow

account.

So, I mean, why not resolve that motion with an

order -- if there's not going to be an order directing

the funds to be paid into the Court, then it can be

resolved with an order saying that the funds will be

maintained and kept in place pending the resolution of

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the case. And if neither of those things are

agreeable, and as of last week, they weren't, then we

would like a hearing to get those -- to get our claim

to essentially those rights resolved.

THE COURT: Okay. Well, I guess I do want to

hear from all of the respondents, and my critical issue

here, obviously, is whether or not it's agreed, I think

it's agreed, but I want to confirm it, that this issue

would be resolved in connection with the Title VI, with

the Court's approval of the Title VI. Do you see it as

an issue that would come up there? I know from the

respondents -- I know that you feel it's separate.

MR. SOVEN: Right.

THE COURT: And I'll let you address that in a

minute.

MR. SOVEN: Okay.

THE COURT: But I want to know from the

respondents if they think it would come up in a

Title VI before Judge Swain would resolve -- would be

asked to approve it, and sort of in what forum does it

come up? Does it come up with whether or not this

account is a qualifying bond? I'm not quite sure where

it comes up, but --

MR. SOVEN: Yeah. Well --

THE COURT: -- let me hear from them first.

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MR. SOVEN: Do you want to hear from them first?

THE COURT: Yes. You want to address that?

MR. SOVEN: I mean -- look, I mean, their

response that was filed a couple of weeks ago, the key

paragraph is Paragraph 20. And in Paragraph 20, they

say that this escrow account should be considered a

loan -- right? -- a loan, which is one of the things

that's considered a bond in PROMESA, which would

subject the account to the RSA -- to the Title VI

proceeding.

You know, we disagree, I mean, because on one

hand they also say, you know, that HTA is the owner of

this account; right? Now, we claim, obviously, that

we're now entitled to the funds in the account. But,

you know, they say in the papers as well that HTA owns

the account, and that's why, you know, this morning we

were asked if would dismiss HTA. Well, no. I mean, we

want declaratory relief as to an account that's owned

by HTA -- right? -- and so HTA, you know, is a

necessary party to the case.

But, you know, so the fundamental issue of

whether or not this is a loan, which, again, to not

belabor the merits, you know, if we have the

overwhelmingly stronger position on that one question,

you know, that issue can and should be decided in

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connection with either this motion or the motion to

dismiss that will be filed later today -- or later --

THE COURT: Why not as part of the Title --

we're dealing with a short timeframe; right? We have

the RS -- the money is identified in the RSA, as I

understand it; right? So I think the respondents

expect that this would be resolved before the RSA date

of June 28th?

MR. SOVEN: Well, I -- I mean, from what -- I'll

let them speak to it. But, you know, from -- my

understanding is the RSA has received preliminary

approval sufficient to prepare to submit it to the

Court, but no notices have been sent out. I mean,

Siemens was never contacted in any respect during the

process of which a plan was negotiated. But putting

that aside, you know, there's no timeframe, from what I

can tell, for notices being distributed, for voting,

for submission to the Court to approval.

And if you really look at the statute itself --

you know, they say, We've got claims and rights in

front of Judge Swain in connection with the Title VI

proceeding -- it's not actually that clear -- right? --

that there is this statutory vehicle, in my view, for

us to raise these issues.

And so, again, we think the preliminary relief

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we're asking for is not much, but if that can't be

granted and a schedule for the motion to dismiss is set

down by Your Honor, you know, you or Judge Swain can

decide, No, they're wrong, it's not subject to the RSA,

you know, in connection with this complaint and, you

know, where there's a clear procedure, you know, in

place. Obviously, the time-warrant procedure,

complaint, motion to dismiss, answer, they raise a

legal issue, if they're wrong, the case goes forward;

if they're right, then we're stuck in Title VI.

THE COURT: But you also have a different

problem in this case as well as to who the parties are;

right? I mean, one of their contentions is that GDB is

not here.

MR. SOVEN: GDB is here. I mean, who is -- I

mean, the primary claim in connection with the

complaint is one for declaratory relief; right? So,

obviously, we don't want to leave out somebody --

right? -- in connection with asking for a declaration

that these funds belong to us; right? So GDB is the

bank where the funds were placed. HTA is the owner of

the account, at least in name, if not the proceeds in

it. The Oversight Board is the representative of HTA;

right? So I don't think that, you know, the claim is

just as, if not more, you know, adverse to HTA as it is

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to GDB.

I mean, GDB is named -- if this was an ordinary

bankruptcy and HTA was the debtor in bankruptcy,

which it is, and HTA put money at a bank, Citizens,

Wells Fargo, whatever, and the creditor wanted those

assets, you know, there would be no question that they

would name the bank as at least a nominal party in

order to have an order, you know, ultimately if proved

successful, that controlled, that controlled anybody's

potential interests.

Here it's a little bit different because you've

got one entity, HTA, in a Title III proceeding and

another entity, GDB, in this Title VI proceeding, but

you know, they're saying, You belong over there, we're

saying we belong over here. And that issue, you know,

is essentially teed up through this motion to dismiss

and the motion to try to secure the funds.

THE COURT: But even if HTA agreed with you and

said the money's supposed to be in escrow, that doesn't

end your issue, does it?

MR. SOVEN: Well, only if they're right that it

belongs in Title VI, only if they're right that it's a

loan; right? If HTA agrees, Yes, it's an escrow

account, Yes, the requirements for payment have been

fulfilled, then the only issue left, frankly, is: Does

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it belong in the RSA process or not?

And, you know, and, again, I don't want to keep

repeating myself, but that issue seems to be teed up

for a decision here. And I don't see anything that

says, Well, that has to be decided in some other type

of proceeding, which is very vaguely defined. You

know, the idea of, Well, you've got a right to stand up

and say, No, no, no, Siemens objects to the whole

thing; right?

I mean, frankly, this is a cleaner, more

efficient and, frankly, likely to be faster way of

getting it decided because all of the deadlines in the

past for the RSA have had to be extended. There's no

telling when the notice and voting is going to take

place. There's no telling when anything is going to be

submitted to the Court. You know, I haven't seen the

motion that's been filed yet, but I expect it's going

to look a lot like the response to the prior motion we

filed, and that to me doesn't say that this Court,

meaning, I'll call it the Title III Court -- right? --

can't hear that motion to dismiss.

THE COURT: Okay. Thank you.

Who wants to respond?

MS. TRELLES: Your Honor, we'll take it for GDB.

Good afternoon again. Maria Trelles.

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So I'll go briefly and just agree with counsel

that we will be filing the motion to dismiss today.

That will go to the merits of Siemens' complaint

against GDB, and I understand co-Defendants are filing

motions to dismiss as well also geared at the merits.

THE COURT: Meaning whether or not this is an

escrow account or --

MS. TRELLES: Well, both whether or not this an

escrow account, as Siemens understands it, and whether

this is the proper venue, forum, and I don't mean venue

in the sense of the Federal statute but, rather, the

proper procedure to address this claim, which is what

Your Honor was going to before with regards the

Title VI.

THE COURT: So you're going to address whether

this is appropriate in the Title III or the Title VI --

MS. TRELLES: Yes.

THE COURT: -- as well as whether or not -- is

it the same issue, though, as to whether or not it

becomes a bond under the RSA? I mean, is that the

merits issue?

MS. TRELLES: Well, to the extent -- this is a

deposit account. As a deposit account, it is a bond

for the purposes of the RSA; and, therefore, it belongs

within the RSA and the Title VI process.

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THE COURT: And that's being raised in your

motion to dismiss?

MS. TRELLES: Yes, Your Honor.

THE COURT: All right. So I will hear from you,

but also address for me whether or not you think, if

it's not appropriate here, is it appropriate in the

Title VI? And how does that -- does that issue get

addressed head on in the Title VI?

MS. TRELLES: Well, Your Honor, again, there is

a deposit account here. There's no question that

there's a deposit account here. Accounting-wise, there

was a deposit account for $13 million. The deposit

account, pursuant to Puerto Rico law, and that's

well-established, they're treated as loans and

therefore are -- for purposes of PROMESA, they're bond

claims.

THE COURT: Well, that's not so clear, though.

I mean, that's the issue -- isn't it? -- that Siemens

says you said it's an escrow account, not that it's a

deposit account and that, as an escrow account, even

under Puerto Rico law, if there's a sufficient writing

to establish this escrow account, it would not be a

bond.

MS. TRELLES: So let's take it -- there are two

issues there. One -- the first issue which I meant to

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say was clear was that deposit accounts are in the

nature of loans and, therefore, bond claims.

The second issue is whether this account is a

deposit account or what Siemens deems an escrow

account.

And the fact -- here there are key legal issues.

There is no definition in Puerto Rico law for an escrow

account, so there's no binding that definition that

says, An escrow looks this way in particular, and

certainly no definition in Puerto Rico law that says

that an escrow account must be separated from the

liquidity of the bank. That's step one.

Step two, GDB is a Government entity, and I

think there's no question about that. As a Government

entity, GDB is subject to particular legal requirements

in terms of contracts, and that is very

well-established Puerto Rico law. Whereas, you could

have, theoretically, let's -- I'm assuming for

argument's sake that you can have, under Puerto Rico

law, escrow agreements that are not set down in

writing. You cannot have those with a Government

entity.

THE COURT: Well, but there are lots of

arguments on the merits. I mean, they're going to

argue, Take a look at this email, take a look at this

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picture, take a look at all this, this is all writings

that you sent that are sufficient.

You're going to turn around and say, It's

supposed to look like a contract, and it's supposed to

have my name on the bottom, and it's not sufficient.

My question to you, though, is: Is that

issue -- it's an issue; it is not because you say it's

so that it's so. So the question is: Does that issue

get decided in the context of the motion to dismiss in

this case, or, in your opinion, does it get decided in

the Title VI?

MS. TRELLES: Your Honor, we are arguing the

motion to dismiss, and I'm opening a parentheses here.

It's not because I say so; there is Puerto Rico law as

to the form a contract with the Government must take.

So it's not a matter of GDB says here or there; there's

case law on this. But --

THE COURT: Well, there's also case law in the

First Circuit that says an escrow is not part of the

bank's assets. So, I mean, it's -- you will both find

cases to file a brief on that, of that I have no doubt,

and I'm not ruling on that now. I'm trying to figure

out the best forum to decide it.

MS. TRELLES: The best forum is the Title VI,

and I'll tell you why, Your Honor. Ultimately, this

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claim is for 13 million against GDB. What Siemens

wants is for GDB to pay out $13 million from the money

it has right now, which is all co-mingled, and they

want GDB to pay out those $13 million.

Now, that implicates the RSA. GDB has a finite

amount of funds. They're all -- they have all been

taken into account in the RSA, including those

$13 million. It needs to pay off all of its creditors,

not only -- assuming Siemens prevails on the merits,

that they have a -- that they actually should be paid

$13 million and that they should be paid from GDB,

let's assume that for a moment, that means that they

have a $13 million claim against GDB, as do, you know,

dozens of other creditors against GDB, that they have

claims of 13, 20, 50, 100 or more million dollars. And

so we -- there's a finite amount of funds, and those --

all of those claims need to be seen together in order

for the distribution of the moneys that there are to be

paid out to all of the creditors.

THE COURT: I mean, I think the argument's a

little different in that what Siemens is saying, I have

no idea if they're right or not, but they're saying

this isn't your money to be handing out, so when you

counted your assets as to what gets distributed, this

13 million should not have been on your spreadsheet.

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That's their claim, that I think counsel's right that

the procedure for the Title VI approval is not that

detailed.

So my question to you is whether you agree that,

before Judge Swain would approve the Title VI

qualifying modification, would she -- is this the type

of issue -- is this an issue that she would have teed

up to decide in connection with whether or not to

approve the qualifying modification?

MS. TRELLES: Your Honor, it's certainly an

issue that Siemens can raise in the Title VI

proceeding. I agree that the Title VI proceeding is

not particularly detailed in the statute. There's no

question the funds, whether rightly or wrongly, have

been accounted for in the RSA. Again, let's assume

that they were wrongly accounted for in the RSA. They

were accounted for in the RSA.

And so all of the other GDB creditors and GDB

have a -- are counting with those 13 million with

everything else for the RSA and the ultimate

distribution. So if those moneys -- if Siemens' claim

is that those moneys shouldn't be there and so we

should subtract 13 million, that is something that

should be decided within the Title VI process so that

all of the other GDB creditors are aware and we can

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make arrangements or have the RSA pull through or not

on the basis of the same information for all creditors.

THE COURT: Okay. And what is the schedule now?

MS. TRELLES: Right now, there's a June 28th

deadline for the Court, for the qualifying modification

to be approved, and there's a June deadline for

solicitation. So the solicitation hasn't concluded

yet.

THE COURT: And when would you expect to submit

it to the Court?

MS. TRELLES: The Title VI proceed -- our

qualifying modification? It has to be before

June 28th, Your Honor, but I will get you the date, the

expected date at this point. But it has to be no later

than June 28th.

THE COURT: Well, by -- okay. The question -- I

thought it was by June 28th the Court had to approve

it, which I'm assuming that -- Judge Swain is

superwoman, I do agree, but I do think she needs some

time. Do you have a schedule in mind?

MS. TRELLES: I can verify with the RSA. Just a

second, Your Honor. I don't have that precise deadline

written here.

THE COURT: Okay, thank you.

MS. TRELLES: So do you mind if I --

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THE COURT: No, I won't hold you to it yet.

MS. TRELLES: Okay.

THE COURT: But it is something that we will

need to know in one form or another.

All right. So, as I understand it, what you're

saying is that you believe that the Title VI would be a

forum to discuss basically the same issues as are

raised in your motion to dismiss here, except that

in -- the Title VI you think is the appropriate

jurisdiction for it, as opposed to the Title III pro --

MS. TRELLES: Yes, Your Honor.

THE COURT: Okay, thank you.

MS. TRELLES: Thank you.

MS. DALE: Good afternoon, Judge.

On behalf of the Oversight Board and HTA, we

will be filing motions to dismiss later today.

The complaint -- let me take one at a time.

With respect to the Oversight Board, the complaint

makes no allegations against the Oversight Board, any

purported misconduct by the Oversight Board or any

right that Siemens has against the Oversight Board. We

think that's a straight motion to dismiss on behalf of

the Oversight Board, as itself.

The Oversight Board is also appearing in the

Title III as the representative of HTA. We also

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believe that there is a good motion to dismiss

against -- as to HTA, that it fails to state a claim.

The $13 million is called the completion payment

under the settlement agreement. There's no doubt that,

that money is at GDB, and the complaint doesn't make

any allegations that HTA has breached the settlement

agreement or the second amendment to the settlement

agreement.

I think, getting to your question that you've

been asking the parties about, Where is the right forum

for this, so the Oversight Board is not going to take a

position in its motion to dismiss as to whether a real

escrow account, a true, valid escrow account was formed

or not. If the Court --

THE COURT: When you say Oversight Board --

MS. DALE: On behalf of HTA. Sorry. As the

representative of HTA.

THE COURT: Okay.

MS. DALE: We lay this out in the motion, but

our argument is: If there is not a valid escrow

agreement, then the proper forum is the Title VI for

GDB. If the Court were to find that there was or

should have been -- or the money is -- should have been

in an escrow or is in an escrow account, we think in

that scenario, then, that there's a claim that Siemens

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has against HTA in the Title III for which it has filed

a proof of claim already, and we think that's the

proper forum were the Court to conclude that there had

been or was a true escrow formed.

So that's our position. It really does come

down to the legal issue of whether an escrow was formed

or not. If there isn't a valid escrow, we believe this

is a Title VI issue for resolution. And if there

are -- were to be found to be a real escrow, we think

the proper method here is for Siemens to file a proof

of claim in HTA's Title III, which it has done, and to

be resolved along with the other claims.

THE COURT: All right. But that assumes that

HTA is the owner of the funds, and --

MS. DALE: I'm not sure it does.

THE COURT: I'm chasing my tail here, as we all

are, I think, but I guess -- let me ask you this:

Would you object if it came up in the Title VI, having

the issue resolved there without predisposing whether

or not it was a valid escrow account or not a valid

escrow account?

MS. DALE: I don't think we would object to

that.

THE COURT: I'm just trying to find it --

MS. DALE: Yeah.

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THE COURT: -- in the right forum and not spend

a whole lot of time on procedural problems that take up

a lot of research time for something that I think needs

to be decided promptly, on the same schedule sort of

regardless of the forum. So I may be -- this may be

one of those "hope springs eternal," but I'm not giving

up my options yet.

MS. DALE: Thank you.

THE COURT: All right. So you wouldn't object

either way?

MR. MARINI: Good afternoon, Your Honor.

Luis Marini for AAFAF.

Your Honor, I'll be brief. AAFAF joined GDB's

opposition to the motion to segregate funds, and we

intend as well to join GDB's motion to dismiss today.

We adopt their legal arguments. We also understand

that the complaint, at least as to AAFAF, doesn't set

forth any specific allegations that give rise to a

basis for relief. We set that out in our motion to

dismiss today. But I don't want to belabor the point.

We adopt GDB's position, and AAFAF's joined their

opposition to the motion and is going to join their

motion to dismiss.

THE COURT: Okay. And let me ask you the same

question, though: Would you have an objection to

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having this issue on the merits, you know, whether it's

an escrow account, as Siemens understands it -- I guess

that's the magic phrase that everybody's using -- or

whether it's a bond, do you have any objection to

having that decided in the Title -- before Judge Swain

is asked to approve the qualifying modification?

MR. MARINI: No, Your Honor, no objection.

THE COURT: All right. Anybody else want to be

heard?

Do you want to respond?

MR. SOVEN: One more moment?

THE COURT: Yeah.

MR. SOVEN: I'm going to defer the merits

arguments. I mean, we disagree that it's a bond or a

loan, but that's -- I don't think that's what

Your Honor wants to hear about right now.

THE COURT: I think your opposition to that is

clear.

MR. SOVEN: Okay. I didn't hear from counsel --

there's a June 28 date, which seems to be written down

but may only be aspirational, given the number of

extensions that have been given already. I didn't hear

a date for which notice of whether or not we wish to

participate or object to the RSA would be sent to

Siemens. I didn't hear a date for when what pool we're

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even in will be identified.

There has been no communications to date between

anybody on behalf of GDB or any of the other parties

with respect to its rights, to the extent it even

belongs in the RSA, with extent to its rights under the

RSA. No creditor -- other creditor is here; right? No

creditor -- no other party claims that it has an escrow

account like this one. I mean, we've been completely

left in the dark.

Now, we may say, Well, it's only $13, we're on

the smaller end of the scale in terms of this claim,

but the fact is, is we have received nothing about this

so-called process. And if you look at -- I mean, I

tried to do it last week --

THE COURT: Is that because HTA is the

account-holder?

MR. SOVEN: That's a better question for them.

We have received no -- the Siemens, the client, Reed

Smith, the law firm, has been in no way involved, asked

to be involved, asked for its views, asked to vote on

any aspect of the RSA.

If you look at the process, which is in 48 USC,

2231(m), which is the section they cite in the brief, I

would say it's vague at best as to what Siemens's

rights would be in that process. I mean, there's a

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process -- you know, they say, Once the process

concludes, and, again, in the process, it's tough to

find Siemens's -- a role for Siemens, and assuming the

necessary positive votes have been received from the

holders of the outstanding bonds in each pool and that

the FOMB certifies the matters set forth in the

statute, the matter will be submitted to Judge Swain

for approval, I mean, so -- it's not even clear -- what

do I tell the client as to when we have to file

something?

THE COURT: I'll tell you that.

MR. SOVEN: You'll tell me that, but when is --

but when -- and there is no guarantee at all that this

June 28th deadline is going to even be met. So, I

mean, if you are, and I think correctly, interested in

getting the "is Siemens in the RSA or is not in the

RSA" decided, I mean, what I laid out I think was a

guarantee, you know, that, that issue can be decided in

the next 30 to 60 days. And under the process that I

propose, I know that Siemens's argument will be heard

with the amount of, you know, with all due respect to

the statute, with the amount of due process that

Siemens is entitled to.

I don't know what to tell the client and what

guarantees I can provide to the client about when

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Siemens's arguments will be heard under this process.

And look, I mean, counsel was -- you know, counsel may

not know, but if this is all going to happen on

June 28th and it's May 29th today, when does the

notice -- I mean, when do I get notice; right? I mean,

she may not know, but she didn't say certainly when I

was going to get -- when Siemens was going to get

notice, how this voting was going to be -- how it was

going to work.

I mean, and frankly, it's a bit of a rubber

stamp because the parties -- other creditors or, you

know, the other people with much larger obligations as

to GDB have already been brought onboard, so to

speak -- right? -- into the qualifying modification

that is now going to be submitted for a vote; whereas,

Siemens has not certainly been involved in that process

at all, and there's nothing very clear in the statute,

and counsel didn't point out anything very clear in the

statute that would say when we really do have a right

to be heard.

And, you know, if they're going to make this

argument, Well, is it an escrow account, or is it not

an escrow account, I mean, even the witness said it was

an escrow account, well, that potentially raises a

factual issue. There's certainly no vehicle in

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Title VI to have that heard; right?

And so, I mean, I think, frankly, based on the

record that's already been created, there's no doubt

that this was not a loan. I mean, the statute doesn't

include deposit accounts as a bond. I mean, it said

that it did, but it doesn't. Deposit accounts aren't

mentioned. You know, it says loans, letters of credit,

bonds. There's nothing about deposit accounts.

But anyway, I don't want to repeat myself too

many times, but I do think that if, in the ordinary

course, they file a motion to dismiss today, I file a

response in 20 days, they file a reply brief in ten

days, whether it's you or Judge Swain decides that

motion during the ordinary course, then by mid-summer,

there's at least a preliminary determination as to

whether or not these funds are in the RSA or not.

THE COURT: But that schedule doesn't comport

with the RSA schedule, as I understand. So that's a

nice schedule. I would love to give you all

extensions, and we can do this all summer, and we can

be nice and relaxed, but you have a fundamental

issue -- right? -- on whether or not these -- maybe

I'm wrong, but I'm assuming that the RSA is sort

of dependent on -- well, it includes this $13 million,

so that if the $13 million comes out of the RSA, there

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has to be recalculations and I assume revoting to some

extent, but I'm not giving any opinion on that. I

don't know.

MR. SOVEN: Yeah.

THE COURT: But I think it's agreed that the

13 million is included in the RSA; correct?

MS. TRELLES: Yes, Your Honor.

MR. SOVEN: Well, no, no. I mean --

THE COURT: Is it listed? It's represented as

being included among GDB's assets?

MS. TRELLES: Yes.

MR. SOVEN: It is represented amongst being --

THE COURT: Everybody agrees --

MR. SOVEN: Right.

THE COURT: -- it's been represented as that.

So it seems to me -- maybe I'm rushing something that

doesn't need to be rushed, but it seems to me that the

issue of whether or not this 13 million is

appropriately listed as GDB assets in the RSA has to be

decided before Judge Swain is asked to approve the

qualifying modification.

Does everybody agree with that, or am I --

people are nodding at me.

MR. SOVEN: Well, I mean, my take --

THE COURT: Unless I issued an order that says

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you can't disburse it -- somebody issues an order that

says you can't disburse it. Now, we all agree that,

until the qualifying modification's approved, money's

not going anywhere, so everybody agrees with that. And

everybody's nod -- for the record, everyone is nodding

at me.

So, in other words, if Judge Swain was asked to

approve the qualifying modification, it's premised on

that $13 million being included as an asset of the GDB.

So at some point -- you don't think so?

MS. SPRINGER: No, not necessarily, Your Honor.

MR. SOVEN: The audit. Can I pass the baton?

THE COURT: Yes. And just identify yourself so

everybody knows who's talking.

MS. SPRINGER: Claudia Springer, partner of

Mr. Soven, counsel for Siemens, from Reed Smith.

No. I look at the RSA, Your Honor, very much

like a bankruptcy plan, liquidating plan. And in a

liquidating plan in a bankruptcy proceeding, oftentimes

it is unclear, upon confirmation, how much money will

be available for the distribution to creditors of the

estate.

It is, obviously, a requirement under the

Bankruptcy Code for there to be sufficient funds or a

sufficient means to obtain funds to pay certain types

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of claims, administrative claims, priority claims. But

as to general unsecured claims, it is often guesswork

on the confirmation of a plan as to how much is going

to be available for the distribution to creditors.

Now, in this particular situation, there is

built into the RSA, as there is in most plans,

estimates as to what is probably going to be paid out

to holders of claims over the course of I believe it's

something like 20 years. It's a long period of time.

I don't expect to be here at the end date, at least not

practicing. But the bottom line is that it is

extremely, at this point, unclear under the RSA as to

what is going to ultimately be available because many

of the funds that are supposedly going to be funding

this distribution, the ultimate distribution that's

going to be made to the holder of bonds is coming from

sales of real estate and other types of things,

that it's unknown at this juncture, at this time, what

that's going to result in.

Yes, there has been opinions about it, there are

projections that are attached to the RSA, but there are

in every bankruptcy case as well. And as we've all

seen, people who've practiced in that bankruptcy field

for many, many years, these are just projections,

that's all they are, and oftentimes they are woefully

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wrong or accurate. But there's -- it's impossible at

this point to say what that's going to be.

And I don't believe that because, you know, they

put that on a schedule without our consent, without

asking us, without even entertaining our position,

which they've known for many months that, that is an

escrow account, the funds belong to us, and we are

prepared to show that under the law, that they had any

right to take the position that those funds were

available to distribute to other creditors in this

case.

And I note the interesting part about this whole

dispute is that, even though our papers were filed and

everyone's had a chance to view them, and as Your Honor

is aware, nobody's been shy in this case about filing

pleadings and stating their position, no other creditor

in this case that is going to participate in obtaining

funds from GDB, as far as I can see, has filed anything

to say, Hey, wait a minute, Siemens. You can't get

this money back because that -- some fraction of that

money belongs to me. Nobody has done that.

Interesting. They filed numerous other pleadings, all

of these bondholders have filed pleading upon pleading

upon pleading, but nobody has taken that position in

this case.

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THE COURT: So, from your point of view, if the

distribution takes so long, why do you need an order

that says that these funds can't be distributed? Like,

what --

MS. SPRINGER: Why do I need an order to protect

the funds?

THE COURT: Yes.

MS. SPRINGER: Because I don't want them to say

at some point that my position, vis-a-vis these funds

being in escrow, is now moot because they've taken

money that belongs to me and they've distributed it to

other people, to other holders.

My view is that's not your money to distribute;

that's my client's money that they were told again and

again was being set aside for them and for them only.

And even at Mr. Santiago's deposition, on numerous

occasions did he say that money was earmarked for

Siemens.

THE COURT: So what -- I just want to make sure

I understand. So you're saying that the issue needs to

be decided in some forum --

MS. SPRINGER: Yes.

THE COURT: -- as to whether or not GDB has the

right to allocate this money at all, so whether it's

part of the RSA, that issue has to be decided but that

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the Court has authority to issue an injunction on the

distribution of the $13 million, which, in your view,

would not disrupt the approval of the qualifying

modification?

MS. SPRINGER: That's correct. Thank you.

THE COURT: Can I hear from GDB on that?

MS. SOLER: Good morning, Your Honor.

Giselle Lopez on behalf of GDB.

Just to address the comments by Ms. Springer

regarding the Title VI process, I think what she

ultimately was saying to the Court is precisely that

this needs to be addressed in the Title VI process

because she's talking about the lack of notice to a

creditor, and she's talking about certainty of a plan,

and those were the precise issues that would be decided

before Judge Swain when the Title VI qualifying

modification gets submitted for approval.

In terms of the disruption of the approval of

the RSA, I think it's clear from what Your Honor has

understood, and that's the way we understand it as

well, that the funds are in fact considered in the RSA.

So any disruption, any order that would require GDB to

set out funds that are already co-mingled with the

funds of the RSA would certainly disrupt the RSA and

disrupt the Title VI process ultimately.

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THE COURT: I don't want to be quoted on that;

okay? I don't know the answer.

MS. SOLER: Okay.

THE COURT: I think counsel raised a very good

point on whether or not it actually would disrupt it,

so I don't know.

MS. SOLER: Okay, sure. But our position is

that --

THE COURT: Your position is that --

MS. SOLER: Right, for sure.

THE COURT: -- it would disrupt it.

MS. SOLER: Right. That's our position.

THE COURT: Is there an easy answer to Siemens's

concerns that it never got notice in the RSA?

MS. SOLER: Well, there's going to be

solicitation of votes to creditors, and that date is I

believe June 2nd, so there is a date certain for that.

And I don't have information at this point that that's

not going to be met, so what I know is that it will be

met. I'm not saying that, that could not change, but

I'm saying that's the information I have at this point.

So --

THE COURT: And so what's been circulated is to

the major creditors; is that a -- you have enough

preliminary votes to go forward, to have a general

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vote? I haven't been following this. It's not been on

my agenda. I'm just trying to figure out --

MS. SOLER: That's correct. That's correct.

But still there's going to be a solicitation process.

THE COURT: And you expect --

MS. SOLER: I'm sorry. June 8th is the date

for --

THE COURT: All right. I have June 8th as

the --

MS. SOLER: Right.

THE COURT: -- closing date in your papers.

Okay. That's the same date? We're talking about the

same date?

MS. SOLER: That's the same date. This hasn't

changed.

THE COURT: All right. And that you expect to

submit it to the Court for final approval, so that the

Court's approval date would be June 28th?

MS. SOLER: June 28th, correct.

THE COURT: So sometime in advance of that so

that the Court would have time to address --

MS. SOLER: Correct.

THE COURT: -- issues.

Okay. Thank you.

Anybody else? I'll tell you what I'm thinking,

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and then you can all tell me why I'm thinking wrong.

All right. I'm thinking that everybody has agreed that

this issue should be decided before there's any

distribution, let me put it that way.

I think that, for Judge Swain to have time, it

needs to -- it's not clear to me whether it gets

decided in this setting or the Title VI, but as I'm

hearing it, there is no objection by any of the

respondents to have the issue of whether or not these

funds constitute a bond or escrow account, as defined

by Siemens, decided in the Title VI; is that correct?

MS. DALE: That's correct.

MS. TRELLES: Yes, Your Honor.

THE COURT: Yes, everybody's agreeing with me on

that.

MR. MARINI: Correct.

THE COURT: What I would like to do is set up a

schedule. Either way, I think it needs to be moved

forward fast. I don't think it's going to be referred

here on the motion to dismiss, just because of the

timing. I think I would have to do it as a report and

recommendation, and I think that takes up time, unless

you all consent to having me do it, but I don't know

where that fits in, in the PROMESA statute.

So what I would like is for everybody to submit

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a joint status report sometime before the Omni, though,

so that Judge Swain can address it at the Omni, which

would have a schedule -- first you need to identify

what other discovery, if anything, you need, what the

format of the hearing is that you see. Is it

witnesses? Is it, you know, by deposition? You know,

are there really factual issues that we're disputing,

or do we have a sort of a record?

The briefing schedule, I think it makes sense to

consolidate it. I don't know if it's best to do it in

the form of the response to the motion to dismiss or

not, but the schedule would be -- she needs to have at

least ten days but at least by the 15th to have

everything fully briefed. By June 15th, everything

needs to be fully briefed, it seems to me, if you're

going to have this decided by the 28th.

It may be easiest to do it on the merits of the

motion -- like, I haven't seen the motion to dismiss,

so if we all agree that it can be done in the context

of the Title VI, then maybe we don't have to spend time

on the jurisdictional issue and we just deal with the

issue of what kind of account -- you know, what's the

accounting for this money. But that's more Siemens's

issue at this point on whether or not you want to have

that fight.

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MR. SOVEN: Your Honor, just so I -- is what --

I just need to better understand, I think, what you're

proposing or suggesting. I mean, would the idea be

that, like, a -- the outstanding discovery issues would

be -- I heard two things. I heard that all the

briefing would be done on June 15th, which, you know,

the issues are fairly narrow, and I think that's

doable.

But I guess I wasn't sure how -- if

Judge Swain -- if it was possible that Judge Swain

needed to hold a hearing on this issue, I mean, I

obviously can't speak for her calendar, you know,

whether you're thinking, well, that could potentially

be done before the, quote/unquote, deadline for

approval of the qualifying modification. Is that

what --

THE COURT: So, since I'm making her life

miserable, sure.

MS. SOVEN: Right.

THE COURT: I think what I'd like to do is set

it up so that you have a proposed schedule assuming

that it's all resolved by the 15th, identifying what

discovery, if any, that you need and what form the

hearing would be before Judge Swain -- all right? --

but have a status report that sort of outlines that in

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time for her to address it at the Omni.

Is everybody going to the Omni? Are you going

to Puerto Rico? Are you on now?

MR. SOVEN: I may be -- right. I'll call my

travel agent.

THE COURT: I'm assuming that the respondents

will all be there in some form or another.

MR. SOVEN: Do you want to speak to these

issues? All right.

MS. DALE: Your Honor --

THE COURT: Go ahead. I think I'm not being as

clear as I would like to be.

MS. DALE: I'm sorry. I just wondered if --

we're still planning to file our motion to dismiss

because that needs to happen in this forum.

THE COURT: I'm assuming that's done.

MS. DALE: It is done.

THE COURT: So those should be filed today, and

we should -- then we're clearly discussing what the

issues are that are in dispute.

MS. DALE: And then are you thinking that the

rest of that briefing that needs to be done by

June 15th is happening in the Title III, or are we

setting up a different briefing schedule for --

THE COURT: So I think, if you're all agreeing

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that it can go forward in the Title VI, that it's

easier to do it in that context. But I realize that

Siemens hasn't seen your motion to dismiss yet, and I

recognize that -- I'm only saying that based on your

representations today, which I'm holding you to,

frankly, I'm holding everybody to the representation

that this issue is appropriately decided in the context

of the Title VI. All right.

The reason I want Siemens to take a look at

this, or unless you tell me we can go forward just on a

Title VI for a briefing, is it would be nice if you

took a look at the motions to dismiss and you said to

the respondents, Look, I don't want to address the

jurisdictional issues, whether it's Title III or

Title VI; let's just agree that these are the issues

that are raised in your motion to dismiss that are

going to be decided in the context of the Title VI.

Does that make sense?

MR. SOVEN: Sure.

THE COURT: It always makes sense to me until I

read the transcript, and then I have absolutely no idea

what I said.

MR. SOVEN: Look, I -- you know, in one of my

statements I, you know, was talking about due process,

and so the process that I think you're contemplating

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sounds like due process, but I guess what I'd like

to -- I would like to be able to speak to Ms. Springer

and perhaps to the client before I say we're onboard

for having this decided in the context of the Title VI

proceeding. But I understand what you're proposing, or

proposing for Judge Swain, and I respect it, but I

guess I need to maybe think about that and speak to

Ms. Springer and the client.

THE COURT: Why don't I say let's make that an

item in the status report to be filed by June 4th;

okay? There'll be a status report, a joint status

report, filed by June 4th that will address: One,

whether Siemens agrees to have it in the Title VI. I'm

assuming everybody else -- I'm binding everybody else

to agreeing.

MR. MUNGROVAN: Can we just address that point,

Your Honor?

MS. DALE: Your Honor, I apologize. With

respect to HTA's position, HTA is not in the Title VI;

GDB is in the Title VI, so we would need to confer, I

think, and we could certainly do this quickly, with our

client before we can say HTA, Oversight Board,

everyone's good with this happening in the Title VI,

but I --

THE COURT: Okay, fair enough.

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MS. DALE: Thank you.

THE COURT: Let me just make it clear. It's

going to be heard somewhere, and it's going to be heard

sooner rather than later, and it's going to be heard on

the merits somewhere; okay? I'm not sure any of the

above of where it is and who that leaves standing as to

the party advocating which position, but I think it

needs to be decided on the merits somewhere.

MR. SOVEN: We agree.

THE COURT: All right. So in the -- and I'd

like a status report that Judge Swain can address at

the Omni, and the Omni is June 6th in Puerto Rico, so

if you can file it by June 4th? The status report

should have the appropriate form, you know, the

context; an agreement as to the issues to be decided; a

statement as to what form the hearing you envision to

be -- do you envision it as an evidentiary hearing, and

if so, who are the witnesses? -- do you need additional

discovery and, if so, what it is; and a briefing

schedule. I think the easiest briefing schedule would

be to sort of take the motion to dismiss, as I'm

hearing it, and use that as the moving paper in

whatever form it is, but I leave it to you, but a

briefing schedule that would be completed by June 15th.

Now, I think that, if it's in the Title VI maybe

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officially, it can't really be filed until the voting's

done, your moving paper, until you've actually got all

your votes to submit it, so maybe the briefing schedule

is more on the motion to dismiss side and that you

agree to then have those papers be used in the Title VI

or -- I'm not real clear on who all the parties are so

whether that actually lines up, but I think you need to

think about it; all right? And I think it needs to be

completed so that Judge Swain has at least ten days to

figure out, if she needs a hearing, how to rule on it,

something like that.

Does that make sense?

MS. DALE: Yes.

THE COURT: Anybody got any questions or

comments?

MR. SOVEN: I mean, I think Your Honor said the

money's not going anywhere, but is there anything --

THE COURT: I'm not going to issue -- if I -- I

don't -- if I issue an order, I have to do it as a

report and recommendation. Everything is done here.

As of now, it cannot be disbursed while the

RSA -- before the RSA is approved; okay? So if there

is a -- and everybody's agreed to that. I mean, I

don't think that's disputed at all; right? GDB is

definitely standing up, and everybody else is nodding.

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So we have until at least this issue being

presented to Judge Swain when it's not going anywhere;

okay?

MR. SOVEN: All right. Thank you.

THE COURT: All right. Is this going to be one

where we all roll our eyes when I go, and then we get

briefing on, What did I mean? I hate those briefs.

MR. SOVEN: I don't think so.

THE COURT: Everybody okay?

MS. DALE: Yeah.

MR. MUNGOVAN: Yes, Your Honor.

THE COURT: All right. If you have any

questions about any of it, just let's do it on the

telephone conference or something, but the goal is by

June 4th to have this agenda on how this is going to

get teed up; okay?

Is there anything else on the status conference

that we need to address? No?

Okay. Thank you all.

MR. SOVEN: All right. Thank you very much,

Your Honor.

MS. DALE: Thank you, Your Honor.

MR. MUNGOVAN: Thank you, Your Honor.

MS. TRELLES: Thank you, Your Honor.

THE CLERK: Court is in recess.

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(Adjourned, 2:32 p.m.)

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C E R T I F I C A T I O N

I, Debra D. Lajoie, RPR-FCRR-CRI-RMR, do

hereby certify that the foregoing pages are a true and

accurate transcription of my stenographic notes in the

above-entitled case.

/s/ Debra D. Lajoie

5/29/18

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