UNITED STATES DISTRICT COURT 

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.1

PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

RE: ECF Nos. 3513, 3544 and 

3604

AAFAF’S OMNIBUS RESPONSE TO MOTIONS TO COMPEL PAYMENT FILED BY 

THE RETIREE COMMITTEE [ECF NO. 3513], COFINA AGENT [ECF NO. 3544],

AND UNSECURED CREDITORS’ COMMITTEE [ECF NO. 3604]

The Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”), as the entity 

authorized to act on behalf of the Commonwealth of Puerto Rico (the “Commonwealth”), pursuant 

to the authority granted to it under the Enabling Act of the Fiscal Agency and Financial Advisory 

Authority, Act 2-2017, respectfully submits this response (the “Response”) to the: (i) Urgent 

Motion to Compel the Puerto Rico Department of Treasury to Comply with the First and Second 

Amended Orders Setting Procedures for Interim Compensation and Reimbursement of Expenses 

of Professionals filed by the Official Committee of Retired Employees of the Commonwealth of 

 

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 (“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax 

ID: 8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (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 (“ERS”) (Bankruptcy Case No. 17 BK 3566-LTS) (Last Four Digits of Federal 

Tax ID: 9686); and (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 4780-

LTS) (Last Four Digits of Federal Tax ID: 3747). (Title III case numbers are listed as Bankruptcy Case numbers 

due to software limitations).

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Puerto Rico (the “Retiree Committee”) [ECF No. 3513]; (ii) Urgent Motion to Compel the Puerto 

Rico Department of Treasury to Comply with the Orders Setting Procedures for Interim 

Compensation and Reimbursement of Expenses of Professionals filed by Bettina M. Whyte (the 

“COFINA Agent”) [ECF No. 3544]; and (iii) Urgent Motion, Pursuant to Bankruptcy Code 

Section 105(a), to Compel Debtors to Comply with Interim Compensation Orders and Joinder in 

Motions of Retiree Committee and COFINA Agent to Compel Compliance with the Same filed by 

the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA) (the 

“Unsecured Creditors’ Committee”) [ECF No. 3604] (collectively, the “Motions to Compel 

Payment”). 

PRELIMINARY STATEMENT

The Motions to Compel Payment request that the Court order the Puerto Rico Department 

of Treasury (“Treasury”) to pay certain outstanding Fee Statement, Holdback and Withholding 

Amounts (each as defined below) due to the professionals representing the Retiree Committee, the 

COFINA Agent and the Unsecured Creditors’ Committee. AAFAF has been working diligently 

with Treasury to address the issues raised by the motions and to pay the outstanding fees and 

expenses due to all professionals in the Title III Cases. 

As of the filing of this motion, several of the pending Fee Statement Amounts have been 

paid by Treasury and as detailed below, Treasury expects to have made such payment amounts 

due for pending Fee Statements and Court-approved Holdback Amounts on or prior to July 25, 

2018. Any remaining amounts relate to discrepancies between Treasury’s and the professional’s 

respective records of payments and amounts due, are minimal or substantially less than the 

amounts requested in the Motions to Compel Payment for Fee Statement and Holdback Amounts, 

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and can and should be reconciled by the parties first, without prejudice to any party requesting 

remedies from the Court if such reconciliation is unsuccessful. 

The remaining amounts pending payment are the Withholding Amounts, which correspond 

to tax withholdings made by Treasury on previous payments made to certain professionals and for 

which Puerto Rico law establishes a procedure to be followed for these amounts to be reimbursed. 

To expedite the payment of Withholding Amounts to all professionals, Treasury, in coordination 

with AAFAF, developed a procedure that complies with Puerto Rico tax withholding law and 

provides: (a) that any inapplicable amounts so withheld can be returned to the professionals in an 

expedited manner, and (b) that inapplicable withholdings can be prevented in future payments. 

Accordingly, AAFAF respectfully requests that the Court allow the reimbursement procedure 

established by Treasury and detailed below and in Exhibit A to continue, which is resolving and 

should continue to resolve the pending payments of Withholding Amounts in an expedited manner 

that complies with Puerto Rico tax withholding law. 

BACKGROUND

On November 8, 2017, the Court entered the First Amended Order Setting Procedures for 

Interim Compensation and Reimbursement of Expenses of Professionals (the “First Interim 

Compensation Order”) [ECF No. 1715] outlining the procedure to be followed for the request and 

payment of fees and expenses rendered by professionals in the Title III Cases. 

Pursuant to the First Interim Compensation Order, as amended, through monthly fee 

statements and the procedure established therein, 90% of fees and 100% of expenses requested 

must be paid within fourteen days after the ‘Monthly Objection Statement’ (indicating whether 

objections to the monthly fee statement were received) is served (each such amounts due under 

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pending fee statements, the “Fee Statement Amounts”). The 10% holdback amount for fees is paid 

under the First Interim Compensation Order, as amended, once the Court approves the interim fee 

applications filed by such professional on a quarterly basis (each such amounts due for approved 

holdbacks, the “Holdback Amounts”). 

On June 6, 2018, the First Interim Compensation Order was amended (the “Second Interim 

Compensation Order”) [ECF No. 3269] to clarify, among other things, that all professionals must 

comply with Puerto Rico’s tax withholding law. To this date, the Court has entered three Omnibus 

Orders allowing the interim compensation of professionals for services rendered and approving 

therein payment of Holdback Amounts [ECF Nos. 2685, 2911 and 3279].

As part of certain payments made by Treasury before June 30, 2018 to professionals that 

are not engaged in business in Puerto Rico, as detailed below, Treasury made a 29% tax 

withholding from such payments for amounts corresponding to services that such professional 

asserts were rendered outside of Puerto Rico and, thus, such professional asserts that no tax 

withholding should have been made (each such amount, the “Withholding Amount”).

OMNIBUS RESPONSE

A. Request for Payment of Outstanding Fees and Expenses in the Motions to Compel 

Payment and Payments Made to Date

Through the Motions to Compel Payment, the professionals request payment of amounts 

due for Fee Statement, Holdback and Withholding Amounts.

Specifically, the Retiree Committee requests payment of the following Fee Statement, 

Holdback, and Withholding Amounts, and, as detailed below, the following amounts have already 

been paid by Treasury:

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RETIREE COMMITTEE

PROFESSIONA

L

FEE 

STATEMEN

T 

AMOUNTS 

DUE2

FEE 

STATEMENT

S AMOUNTS 

PAID3

HOLDBACK 

AMOUNTS 

DUE

HOLDBAC

K 

AMOUNT

S PAID

WITHOLDIN

G 

AMOUNTS 

DUE

WITHOLDIN

G

AMOUNTS 

PAID

Jenner & 

Block LLP

$398,791.9

5

$387,166.67 $148,339.8

1

$0.00

Requested without 

specifying amount in the 

Motion to Compel.

Bennazar, 

Garcia, 

Milián, C.S.P.

$95,962.21 $89,820.89 $21,001.73 $0.00

FTI Consulting $540,807.8

5

$538,703.76 $72,727.15 $0.00

Segal 

Consulting

$122,421.5

9

$100,863.22 n/a n/a

Marchand ISC $21,571.17 $20,197.58 Requested 

without 

specifying

amount.

n/a

The COFINA Agent requests payment of the following Fee Statement, Holdback, and 

Withholding Amounts, and, as detailed below, the following amounts have already been paid by 

Treasury:

COFINA AGENT

PROFESSIONAL FEE 

STATEMENT 

AMOUNTS 

DUE4

FEE 

STATEMENTS 

AMOUNTS 

PAID5

HOLDBACK 

AMOUNTS 

DUE

HOLDBACK 

AMOUNTS 

PAID

WITHOLDING 

AMOUNTS 

DUE

WITHOLDING

AMOUNTS 

PAID

Bettina M. 

Whyte

$314,073.61 $0.00 $16,094.50 $0.00 n/a n/a

Willkie Farr & 

Gallagher LLP

$3,635,860.38 $0.00 $501,912.39 $0.00 $385,055.81 $0.00

Klee, Tuchin, 

Bogdanoff & 

Stern LLP

$581,063.79 $0.00 $31,116.30 $0.00 n/a n/a

 

2 This table includes the Fee Statement Amounts requested by the professionals in the Motions to Compel Payment. 

3 This table includes the payment of the Fee Statement Amounts requested in the Motions to Compel Payment. 

Additional Fee Statement Amounts due but not included in the Motions to Compel have also been paid. 

4 This table includes the Fee Statement Amounts requested by the professionals in the Motions to Compel Payment. 

5 This table includes the payment of the Fee Statement Amounts requested in the Motions to Compel Payment. 

Additional Fee Statement Amounts due but not included in the Motions to Compel have also been paid.

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NavarroCabrer Law 

Offices

$34,285.00 $14,501.03 $9,519.25 $0.00 n/a n/a

Finally, the Unsecured Creditors’ Committee requests payment of the following Fee 

Statement, Holdback, and Withholding Amounts, and, as detailed below, the following amounts 

have already been paid by Treasury:

UNSECURED CREDITORS COMMITTEE

PROFESSIONAL FEE 

STATEMENT 

AMOUNTS 

DUE6

FEE 

STATEMENTS 

AMOUNTS 

PAID7

HOLDBACK 

AMOUNTS 

DUE

HOLDBACK 

AMOUNTS 

PAID

WITHOLDING 

AMOUNTS 

DUE

WITHOLDING

AMOUNTS 

PAID

Paul Hastings, 

LLP

n/a n/a n/a n/a $537,854.80 $517,292.82

Kroma 

Advertising, 

Inc.

$73,509.35 $69,729.35 n/a n/a n/a n/a

Finally, AAFAF will file a motion informing the Court of the updated payments made on or 

before July 24, 2018.

B. Pending Amounts Due for Fee Statement and Holdback Amounts

As detailed above, as of today, several of the pending Fee Statement Amounts have been 

paid by Treasury. Treasury expects to have made such payment for amounts due for pending Fee 

Statements and Court-approved Holdback Amounts on or prior to July 25, 2018. While there may 

be discrepancies between the amounts asserted as due and paid by Treasury and the amounts still 

asserted as pending by each professional for Fee Statement and Holdback Amounts, AAFAF 

submits that it has been working with each professional and Treasury to reconcile these amounts 

 

6 This table includes the Fee Statement Amounts requested by the professionals in the Motions to Compel Payment. 

7 This table includes the payment of the Fee Statement Amounts requested in the Motions to Compel Payment. 

Additional Fee Statement Amounts due but not included in the Motions to Compel have also been paid.

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and resolve any pending discrepancies and that, considering the progress to date, these matters can 

and should be resolved between the parties, without prejudice to any party requesting remedies 

from the Court if these amounts are not reconciled and so resolved. 

C. Pending Amounts Due for Withholding Reimbursements 

The Motions to Compel Payment also request payment of the Withholding Amounts, for 

tax withholdings made by Treasury on prior payments made to professionals. These withholdings 

were made under Puerto Rico’s tax law, as provided under the Second Interim Compensation 

Order8. 

The Second Interim Compensation Order provides that all professionals “shall comply with 

Puerto Rico tax withholding law, to the extent applicable to each Professional.” See, paragraph 9 

of the Second Interim Compensation Order. As Treasury detailed in the memorandum circulated 

to all professionals and included as Exhibit A, Sections 1062.08 and 1062.11 of the Puerto Rico 

Internal Revenue Code of 2011, as amended, require that any person making payments for services 

rendered, including Treasury, withhold 29% of the amounts due in the case of foreign corporations 

and partnerships that are not engaged in trade or business in Puerto Rico for the services they 

render in Puerto Rico. Accordingly, Treasury withheld 29% on certain payments made through 

June 30, 2018 to professionals that are not engaged in business in Puerto Rico, as it had insufficient 

information regarding (i) whether such professional rendered its services in or outside of Puerto 

Rico, and, (ii) the amount of services rendered in or outside of Puerto Rico. 

 

8 Tax withholding laws, as clarified by the Second Interim Compensation Order, apply to payments to Title III 

professionals and, thus, Treasury has applied Puerto Rico tax withholding laws to payments made throughout the Title 

III Cases prior to the entry Second Interim Compensation Order. 

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Since the entry of the Second Interim Compensation Order, AAFAF has worked with 

Treasury to develop a procedure, under Puerto Rico’s tax withholding law, to reimburse the 

Withholding Amounts for services rendered by these professionals outside of Puerto Rico, and to 

ensure that withholdings for such amounts can be avoided in future payments, if such professional 

provides the requisite information. Treasury, through AAFAF, has provided guidance and 

instructions to all professionals to avoid inapplicable withholdings in the future, including but not 

limited to, instructions on the segregation of services performed in Puerto Rico from services 

performed outside of Puerto Rico in all future monthly fee statements served and the forms and 

certifications required for reimbursement of Withholding Amounts and avoiding future 

inapplicable withholdings. 

Specifically, on July 17, 2018, Treasury, through AAFAF, circulated the guidelines on 

Exhibit A to all professionals. See, copy of email communication attached herein as Exhibit B. 

The guidelines and procedures, detailed on Exhibit A, provide the process to expedite the payment

of Withholding Amounts and avoid future withholdings for services rendered outside of Puerto 

Rico. Since then, Treasury has been able to process and start to reimburse Withholding Amounts 

to professionals, upon receipt of the documents detailed on Exhibit A. Accordingly, AAFAF 

respectfully requests that the Court allow the reimbursement procedure established by Treasury to 

continue, which should resolve the pending payments of Withholding Amounts in a manner that 

complies with Puerto Rico tax withholding law. 

WHEREFORE, AAFAF respectfully requests that this Court (i) take notice of the above, 

(ii) allow the parties to reconcile any pending amounts for Fee Statement and Holdback Amounts, 

without prejudice to any party requesting remedies from the Court if such reconciliation is 

unsuccessful, (iii) allow the process to pay the Withholding Amounts detailed on Exhibit A to 

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continue, (iv) deny the Urgent Motion to Compel the Puerto Rico Department of Treasury to 

Comply with the First and Second Amended Orders Setting Procedures for Interim Compensation 

and Reimbursement of Expenses of Professionals filed by the Official Committee of Retired 

Employees of the Commonwealth of Puerto Rico [ECF No. 3513]; Urgent Motion to Compel the 

Puerto Rico Department of Treasury to Comply with the Orders Setting Procedures for Interim 

Compensation and Reimbursement of Expenses of Professionals [ECF No. 3544]; and Urgent 

Motion, Pursuant to Bankruptcy Code Section 105(a), to Compel Debtors to Comply with Interim 

Compensation Orders and Joinder in Motions of Retiree Committee and COFINA Agent to Compel 

Compliance with the Same [ECF No. 3604], and (v) grant any further relief the Court deems just 

and proper.

Dated: July 20, 2018

San Juan, Puerto Rico

Respectfully submitted,

/s/ Peter Friedman

John J. Rapisardi 

Suzzanne Uhland

Peter Friedman

Diana Perez

(Admitted Pro Hac Vice)

O’MELVENY & MYERS LLP

7 Times Square

New York, NY 10036

Tel: (212) 326-2000

Fax: (212) 326-2061

Attorneys for the Puerto Rico Fiscal Agency 

and Financial Advisory Authority 

/s/ Luis C. Marini

Luis C. Marini-Biaggi

USDC No. 222301 

Carolina Velaz-Rivero

USDC No. 300913

MARINI PIETRANTONI MUÑIZ LLC

MCS Plaza, Suite 500

255 Ponce de León Ave.

San Juan, Puerto Rico 00917

Tel: (787) 705-2171

Fax: (787) 936-7494

Attorneys for the Puerto Rico Fiscal Agency 

and Financial Advisory Authority

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