September 23, 2015
Counselor to the Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Counselor Weiss:
On behalf of the 13 undersigned national and community organizations, representing more than 9 million Americans, we are writing to ask you to recuse yourself from all Treasury activities relating to the debt crisis of the Commonwealth of Puerto Rico.
The accelerated vesting and deferred compensation agreement given to you upon entering government service by your previous employer, Lazard Frères & Co., has already created questions about your impartiality at Treasury. These “golden parachute” compensation packages are so controversial that a bill to outlaw them – the “Financial Services Conflict of Interest Act” introduced by Sen. Tammy Baldwin and Rep. Elijah Cummings – currently has the support of all three major Democratic presidential candidates. In addition, the same bill would, according to the Washington Post, “extend to two years the time those executives must recuse themselves from government decisions involving their private sector employers.” We are writing to ask you to comply with the spirit of this proposal through recusal because the outcome of Puerto Rico’s debt crisis will undoubtedly impact Lazard’s business, and your acceptance of a golden parachute from Lazard creates at least the appearance of a lack of impartiality. In the fight for an equitable resolution of this crisis, the residents of the Commonwealth of Puerto Rico deserve to have the Unites States Treasury be represented by an individual free of such conflict.
Given Lazard’s ties to the Puerto Rico debt crisis, your recusal is necessary to preserve the appearance of neutrality in Treasury’s actions. Lazard’s advisory and asset management business have strong ties to the Puerto Rico debt crisis that clearly bias them against an equitable restructuring:
- Lazard’s advisory business’s marketing of Puerto Rico’s debts to hedge funds in 2013, at a meeting that included former Governor Luis Fortuño and 75 outside asset managers.
- Lazard Asset Management’s investments in BlueMountain Capital, a hedge fund that is reported to own $400 million worth of Puerto Rico bonds, and who has sued to prevent the Island from restructuring its debts.
- Lazard Asset Management’s investments in Pine River Capital Management, a hedge fund revealed to be a member of the Ad Hoc Group on Puerto Rico.
- Lazard’s role in advancing Puerto Rico’s indebtedness in the 1990s, prior to the firm winding down its municipal underwriting practice due, in part, to allegations that its top employees were bribing the Governor of Puerto Rico.
An equitable and successful resolution of the Puerto Rico debt crisis will require Treasury to act in the best interests of the residents of Puerto Rico. To do so, Treasury officials must not appear to be beholden to the moneyed speculators who seek to profit from the Island’s financially instability. The generous compensation arrangement you received from Lazard upon entering government service creates suspicions about your loyalties. If you do not recuse yourself, your involvement will cast a pall over the entirety of the actions taken by Treasury in the resolution of this crisis.
We hope that you will do the right thing.
Center for Popular Democracy
Democracy for America
Florida Institute for Reform and Empowerment
Make the Road Connecticut
MoveOn.org Civic Action
New York Communities for Change
ReFund America Project at the Roosevelt Institute
Strong Economy for All
Organizational affiliations of projects listed for identification purposes only.