White House Upends Puerto Rico Oversight Board With Mass Firings
(Bloomberg) -- The White House fired five of the seven board members of the federal watchdog that oversees Puerto Rico’s finances, inserting itself in the island’s high-stakes debt and contract negotiations.
Board Chairman Arthur Gonzalez, a former bankruptcy judge, Cameron McKenzie, Betty Rosa, Juan Sabater, and Luis Ubiñas were notified Friday they’ve been terminated, according to emails viewed by Bloomberg. Andrew Biggs and John Nixon weren’t included in the cull, which was first reported by Breitbart.
The Financial Oversight and Management Board for Puerto Rico said in a statement on Tuesday that the White House had informed them of the terminations and that it “will continue to work to fulfill the mandate of PROMESA and in the interest of the people of Puerto Rico.”
The board has saved the island’s tax payers $55 billion in creditor payments over 40 years but has come under fire in recent days from Trump confidant and far-right activist Laura Loomer, who’s taken issue with the cost of Puerto Rico’s numerous bankruptcies.
“This is a colossal failure all around,” she wrote Saturday on X. “Every single one of these lawyers and consultants need to be fired, and a new Board needs to be installed to clean up this mess.”
Loomer did not respond to requests seeking comment.
She said the board has spent more than $2 billion on bankruptcy lawyers and restructuring advisers alone in the past decade, a widely reported estimate of the costs of reorganization, and claimed Trump has the power to replace it with a new group. Emails viewed by Bloomberg cited the board’s salaries and decisions made by the group for prolonging the bankruptcy as reasons for the terminations.
“Trump is making wholesale changes to NGOs and boards and government bodies across the country, so it should not have been a surprise that this could happen,” Matt Fabian, a partner at Municipal Market Analytics, said in a telephone interview.
Established in 2016 under the Obama administration, the board is in a protracted fight to reduce the obligations of the Puerto Rico Electric Power Authority, or Prepa, from $10 billion to $2.6 billion, with some bondholders insisting the utility can repay more. It has also slowed the local government’s plans to sign a multi-billion dollar liquefied natural gas delivery contract with New Fortress Energy.
Shares of New Fortress Energy, run by billionaire Wes Edens, surged as much as 17% Tuesday before paring the gain to nearly 13% as of 3:20 p.m.
Puerto Rico has some of the highest priced and least reliable energy of any US jurisdiction and the complex restructuring process is seen as key to the island’s financial viability.
While some Prepa bondholders have pushed back against the oversight board’s latest debt-cutting proposal, the board has kept Puerto Rico’s spending in line with its revenue collections, a practice missing in the years leading up to the commonwealth’s record bankruptcy.
The oversight board also stepped in and paid general obligation bondholders nearly $11 billion in 2022 to finalize the restructuring of that debt load after island lawmakers refused to authorize the payment to investors. The board filed Prepa’s bankruptcy in 2017, but it’s been delayed by Puerto Rico’s own debt restructuring, natural disasters including Hurricane Maria — which wiped out power on the island for nearly a year — the Covid pandemic and two prior Governors ripping up deals that would have cut Prepa’s debt load.
Representative Nydia Velazquez, a New York Democrat, blasted the move, saying it gives Trump the ability to name new board members who would prioritize bondholder interests.
“It simply creates an opening to stack the Board with even more extreme, pro-bondholder appointees who will continue to put the needs of hedge funds over the Puerto Rican people,” she said in a statement.
(Updates with new statement from the Financial Oversight and Management Board for Puerto Rico and New Fortress Energy share price.)
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