\t\t\t\tA third bond insurer is now suing Puerto Rico over the way its government officials diverted tax money to fulfill certain bond payments that were due while defaulting on other payments. The latest plaintiff is Financial Guaranty Insurance Company (FGIC). Its complaint has been consolidated with a lawsuit brought by Ambac Assurance Corporation (Ambac) and Assured Guaranty Corp. (Assured) that makes similar allegations. <\/p>\n
FGIC contends that government officials violated the U.S. Constitution when they diverted over $164 million to pay off some of the Commonwealth’s general obligation debt. As a result of the diversion, Puerto Rico defaulted on $37 million in interest on bonds and FGIC says that because of this it had to pay over $6 million in claims.<\/p>\n
The fund diversion lets the territory avoid default on general obligation bonds, which, under its own Constitution, are the priority in terms of making payments. However, according to the three insurance companies, the island expects to make about $9 billion in the fiscal year that ends in June and this goes beyond its debt-service costs. The insurance companies do not believe that money had to be redirected away from the government agencies. <\/p>\n