Judge Charts New Waters in Puerto Rico Bankruptcy Case
U.S. District Judge Laura Taylor Swain is no stranger to big cases. She oversaw one of the Bernie Madoff trials and she presided over the guilty plea of SAC Capital Advisors, the hedge fund accused of insider trading. The Puerto Rico case before her now is bigger — and has far broader consequences.
“This is a very heavy lift for a judge. There are multiple factors obviously very complex and highly aggressive litigation going on,” said James Spiotto, a restructuring expert who advised Congress on new legislation that essentially allowed Puerto Rico to go bankrupt.
In court, however, Swain has a pleasant, easy manner. In her 22 years on the federal bench, she has developed a reputation for an impeccable character and warm disposition.
Matthew Schwartz, a former federal prosecutor, said Swain was notable for her thoroughness and patience when he participated in the Madoff case.
“She really wants to make sure that she has stopped, thought through her decision and the implications of her decision, and gotten the right ruling,” Schwartz said.
She’ll need those skills for the enormous and historic task ahead. No one has ruled on Puerto Rico’s new bankruptcy law before. That means many of Swain’s decisions will be appealed, potentially all the way to the Supreme Court.
In Puerto Rico, many groups are watching Swain closely. Among them, a group of retirees organizing to combat pension cuts. Dr. Marcos López Reyes, who represents thousands of public retirees, told WNYC he approved of how tough she was with the high-priced New York lawyers.
“We perceive Judge Laura Taylor Swain as a very capable person who knows how to control different factions, because she is managing high-powered law firms who represent the strongest economic power,” López Reyes said.
However, Swain is not the only force in resolving the bankruptcy. One other player rivals her power: the Financial Oversight and Management Board, whose members were appointed by Congress.
Unlike Swain, the board is widely unpopular.
There’s a widespread perception in Puerto Rico that the board favors the big Wall Street creditors. Ironically, creditors are not happy with the board either. Many of the firms that own Puerto Rico bonds thought the board would bring greater discipline to Puerto Rico’s finances. Instead, they feel the board and government leaders are angling to pay them back as little as possible.
With so much discord, it is going to be difficult to resolve Puerto Rico’s bankruptcy. That means Judge Swain likely will be overseeing the case for years to come.
Vera Carothers contributed reporting to the series; It was produced in partnership with Latino USA.
Puerto Rico: The Future of Debt is supported in part by The Jacob and Valeria Langeloth Foundation, the Park Foundation, and Chasing the Dream, a WNET initiative on poverty, jobs and economic opportunity in America. Additional support is provided by the Corporation for Public Broadcasting as part of a collaboration between APM Reports, KCUR in Kansas City, KPCC in Southern California, WABE in Atlanta, and WNYC.
The series is also supported by the McGraw Center for Business Journalism at the CUNY Graduate School of Journalism.
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