CDA readies legal action against CUC
Two major government agencies in the Northern Marianas are likely to face each other in court as the Commonwealth Development Authority prepares strong legal actions against the Commonwealth Utilities Corporation.
Executive Director MaryLou S. Ada disclosed yesterday that all legal avenues are now being explored by CDA’s legal counsel Vicente Salas, after CUC stubbornly insisted that it is not obliged to pay anything to the government-controlled lending agency.
In fact, Mr. Salas has already established a strong court case against the power corporation regardless of its claims that the existing loan agreement is not binding.
Ms. Ada said there is a loophole in the Special Representatives Agreement which CDA can use in order to collect from CUC. She added that the court battle will force CUC to pay its outstanding loan amounting to $150 million.
CDA is awaiting for the second part of the oversight committee meeting to be slated next week before it initiates formal moves to file the case in court.
“Our counsel said there is a strong case against CUC. He found that loophole in that agreement and we will make them pay,” said Ms. Ada in an interview with reporters.
CUC earlier challenged CDA after legal counsel Brien Sers Nicholas assessed that the utility company has no financial obligation to the financing institution, noting that a management takeover in operations is unlikely to happen.
He said all loan agreements entered into by the two agencies have no legal effect and are not binding.
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.
The counsel further stressed that House Bill 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.
House Committee on Public Utilities, Transportation and Communication chair Rosiky Camacho said that with the documents submitted by CUC, the committee can easily decide on whether or not to retire the agency’s 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.
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)
