CUC unfazed by takeover threats • Counsel says CUC-CDA loan accord not binding

The Commonwealth Utilities Corporation has no financial obligation to the Commonwealth Development Authority thus a planned take over of the management operation is unlikely to happen.

In fact, all loan agreements entered into by the two agencies have no legal effect and are not binding, CUC legal counsel Brien Sers Nicholas declared in a written comment submitted to the Legislature with regard to proposed House Bill 12-320.

Mr. Sers Nicholas said CDA has no legal authority to claim ownership of the bond proceeds and subsequently loan portions of the same to CUC. These bonds were considered as public funds and subject to appropriations by law, the counsel added.

Citing statutes under the Special Representatives Agreement, Mr. Sers Nicholas said the funds floated by CDA were nothing but annual direct grant assistance to the Northern Marianas without any liability to pay back the United States.

“No agreement is legally enforceable unless the same is in full compliance with the laws regardless of who are the parties to the agreement,” said the counsel.

The government-controlled lending agency served only as a conduit to float the $140 million bond, a public debt, repayments of which were fully secured by the CNMI with the Capital Development Funds from the Special Representative Agreement, the submitted report reads.

Said the lawyer, “given the foregoing and the fact that the same were not appropriated to CDA, the loan agreements entered into by and between CUC and CDA are of no legal force of effect.”

The counsel further stressed that HB 12-320 should be re-drafted to reflect the foregoing and once and for all resolve the problem by canceling the debt obligations from CUC to CDA.

“The particular problem with CDA can ultimately result in an economic chaos of immense proportion to our people unless specific and constructive Legislative intervention is made. This Legislative intervention, however, must be guided by existing laws and not politics,” the CUC counsel further stressed.

The utility corporation submitted documents pertaining to the loan agreements entered into by the two agencies particularly the Special Representative Agreement where the US Congress appropriated some $228 million to cover funding for an additional seven-year period ending in 1992.

Of the $228 million appropriation, $126 million was allocated for Capital Development, $100.5 million reserved for government operations, and $1.5 million for special programs.

The report further explained that CDA’s sole purpose is limited in the financing of the capital improvement projects and other endeavors undertaken by the CNMI and its autonomous public agencies.

“As would be seen, by having paid off the bond with the funds from the Special Representative Agreement, it is further affirmed that said funds were public funds and not belonging to CDA,” said Mr. Sers Nicholas.

The committee is now reviewing the documents submitted by the utility corporation after a 30-day allowance. The Legislature ordered CUC to submit all needed documents to shed light on allegations of breach of fiduciary responsibilities.

House Committee on Public Utilities, Transportation and Communication chair Rosiky Camacho said that with the documents, the committee can easily decide on whether to retire the CUC obligations as proposed under the house bill.

Under the proposed legislation, the indebtedness of the CUC from CDA will be transferred to the Department of Finance to relieve the utility company of all obligations to pay accrued interest.

The bill also proposed to provide CUC with credit against such indebtedness for all capital expenditures made from its revenues subsequent to the date of such loan from the CDA.

Reports earlier disclosed that CUC has amassed funds to afford across-the-board salary increase, anniversary increases and travel tabs accorded to CUC board members.

CDA warned that it will be forced to take legal action against CUC if the public power corporation failed to come up with a concrete debt restructuring plan.

Under the Special Representatives Agreement reached between CDA and CUC, the lending agency has the power to investigate the utility corporation’s financial management.

The same agreement allows CDA to remove officials who cannot properly operate the utility corporation and relegate the responsibilities to CDA’s appointees. (EGA)