August 4, 2014
From 2010 to 2012 there was an increase of $ 50 million to over $ 300 million in the amount of assets of the Association of Employees of the Commonwealth (AEELA) managed by UBS, among these, bonds of the Corporation for Public Financing (PFC, for its acronym in English).
PFC bonds, maturing in early August, will be the first default in the history of the Government of Puerto Rico.
During that period, UBS AEELA acquired for about $ 179 million in bonds of Puerto Rico, which increased to $ 212 million the amount of related financial instruments of Puerto Rico in AEELA portfolio investments. This increase resulted in an increase in the concentration of assets in bonds AEELA Puerto Rico from 14% in 2010 to 30% in 2012.
The executive director of the organization, Claudio Paul Crespo said in a press release that “part of this additional investment in bonds, UBS was made AEELA acquiring for Puerto Rico bonds that were in your own portfolio. These bonds, which were transferred from the portfolio of UBS AEELA portfolio, remained lower than that of other instruments available in the credit rating market. In addition, UBS recommended AEELA purchase long-term bonds, which increased based on the fluctuation of interest and value of risk assets “.
He added that the investment portfolio by UBS AEELA proposal was substantially more risky than the “Barclays Aggregate Bond Index,” which was the model used for UBS investment AEELA. “UBS recommended to AEELA riskier than those in the investment model that these represented AEELA investments that were to follow,” he said.
The April 18, 2014, the Association lodged a complaint against UBS in the amount of $ 65.7 million. That complaint is based on actions that resulted in UBS alleged false representations, omissions, breach of contract, violation of fiduciary duty, unsuitable investment recommendations, neglect of portfolio diversification, negligent supervision of its employees, fraud, violations of the Financial Industry Regulatory Authority (FINRA), violations of the laws and regulations on investment and violations of the laws of Puerto Rico.
This claim was filed with FINRA in the US through the law Carlo Law Offices, PSC, represented by Mr. Osvaldo Carlo Linares, and Klayman & Toskes, PA, represented by Mr. Steven D. Toskes. “The law considers that the claim of AEELA is solid, it is based on a thorough study of investments and the applicable law,” said the Executive Director.
Association also referred three cases to the Justice Department on events in AEELA during the same period 2010-2012, among these purchases without auctions, possible violations of law and other irregularities linked to the Vacation Center Playa Santa, the program savings and loan origination system.
“As part of our commitment, we have assumed the duty to work for an impeccable administration, consistent with an institutional vision of sound administration. Employees and pensioners of the government of Puerto Rico can be confident that we have taken the steps to provide stability to the association and strengthen its financial position for the benefit of the heritage of all owners partners so that their savings will continue to grow and can receive no problems the services and benefits they so desperately need, “said Claudio Crespo.
AEELA has it taken steps to prevent the fiscal situation of the government affect the financial stability of the institution and its thousands of owners partners cleared.