Opinion ID: 814830
Heading Depth: 3
Heading Rank: 5

Heading: Mario Belaval

Text: According to the allegations in plaintiffs' complaint, Mario Belaval's principal employer is Triple S, the largest managed care company in Puerto Rico, where Belaval is Vice Chairman. Belaval is also a director of twenty-three UBS-affiliated funds, including the four Funds at issue in this case. In the recent past, Triple S has enjoyed a lucrative relationship with UBS Financial and UBS Trust. In fact, in 2006, with the help of UBS Trust and UBS Financial, Triple S engaged in a transaction similar to the ERS bonds offering at issue in this case. In the 2006 transaction, UBS Financial served as the placement agent for a $35 million bond offering from Triple S. UBS Trust purchased this entire offering, and then re-sold the notes to several of the funds it advises, including Fund IV. In other words, Belaval is an officer of a company that benefitted significantly from the same affiliation that is at the heart of this case, using UBS Financial to sell Puerto Rican securities to UBS Trust for resale to its exempt funds. Plaintiffs allege that Triple S's previous use of the relationship between UBS Financial and UBS Trust gives Belaval reason to discourage scrutiny of any similar related-party transactions, such as the purchase of the ERS Bonds. In addition to Belaval's prior reliance on UBS Trust and UBS Financial to raise capital, plaintiffs allege that by remaining in the good graces of UBS affiliates, Belaval would receive -24- benefits including opportunities to use UBS captive funds to support [his] other business ventures. These opportunities are particularly valuable to businesses in Puerto Rico because UBS Trust is the largest asset manager in Puerto Rico, and UBS Trust and its alter ego UBS Financial are an unusually pervasive force in Puerto Rico's financial markets. In deciding that plaintiffs had not established a reasonable doubt about Belaval's independence, the district court failed to consider the facts alleged as a whole about Belaval's relationships with the institutional defendants. See In re Trump Hotels, 2000 WL 1371317, at  (noting that while one allegation standing alone is insufficient to raise a reasonable doubt[,] . . . the totality of the circumstances raises a reasonable doubt as to the director's independence). The district court should have considered Belaval's previous professional relationships with both institutional defendants and the possibility that Belaval will need the assistance of the UBS defendants in the future as a constellation of facts which, considered together, create a reasonable doubt about Belaval's independence. See, e.g., id. at  (Courts have considered the possibility of future influence or remuneration as a factor when weighing director independence.); Krantz, 98 F. Supp. 2d at 156 (listing factors relevant to determining whether a director is controlled including former -25- business associations between the director and the controlling person). Similarly, the district court incorrectly dismissed plaintiffs' characterization of Belaval's entanglements with the institutional defendants as conclusory allegations, and failed to make reasonable, common sense inferences from the facts alleged in the complaint. See In re Oracle Corp., 824 A.2d at 943 (reasoning that in assessing a director's independence the chancellor must necessarily draw on a general sense of human nature). The complaint depicts the institutional defendants as powerful actors in Puerto Rico's capital markets who play multiple roles in Belaval's life: employer, underwriter, investor, and gate-keeper to Puerto Rico's capital markets. For Belaval, deciding to bring plaintiffs' lawsuit would mean not only suing two institutions that are important to Triple S, but also accusing four of his codirectors – who are themselves prominent players in Puerto Rico's business community – of violating federal securities law. Considering all of these allegations together, we conclude that plaintiffs have established a reasonable doubt that a person in Belaval's position could evaluate demand in this case without ponder[ing] the effect affirmative action on a demand would have on [his] future. In re The Student Loan Corp., 2002 WL 75479, at . -26-