A group of hedge funds sued Puerto Rico Gov. AlejandroGarcía Padilla for allegedly violating a recently law meant to aid in restructuringthe Commonwealth's $70 billion debt, TheNew York Times reported.

The Puerto Rico Oversight, Management and Economic StabilityAct halted potential creditor lawsuits, but it also has a provision prohibitingthe use of public funds or assets "outside the ordinary course ofbusiness, or that are inconsistent with the Constitution or laws of theterritory."

The hedge funds alleged that Padilla is taking advantage ofa two-month lag in the law meant for the formation of a federal oversight boardto spend public dollars on political projects. The hedge funds, which includeMonarch Alternative CapitalLP, Stone LionCapital Partners LP, Aurelius Capital Management LP, Autonomy Capital(Jersey), Covalent Capital Partners and Fundamental Credit Opportunities, areall holders of Puerto Rico's general obligation bonds.

Puerto Rico Chief of Staff Grace Santana said theadministration is preparing for more lawsuits and would fight them.