Bank fights Puerto Rico in D.C.

A big bank is fighting Puerto Rico — in Washington.

Doral Financial is duking it out in a San Juan court over a tax refund worth nearly $230 million — a figure so great that they’ve brought the fight all the way to the mainland to put pressure on the Puerto Rican government to pony up the cash to help the strapped financial institution.


The bank has contracted with top PR, crisis management and lobbying firms to build . At the same time, the opponents have been fighting it out in San Juan with a judge expected to rule on the matter as soon as this week. No matter the result, whichever side loses is expected to challenge the outcome.

The intense PR and lobbying effort underscores how important Washington is when it comes to big business. So far, just a few lawmakers have weighed in on the matter, but Doral could push for Congress to investigate the matter further if they lose in court. And the campaign is looking to show government regulators and potential business partners that its Puerto Rico that made a bad deal, not Doral.

DCI Group is leading the financial services giant’s public affairs multi-pronged campaign. In addition to setting up an English and Spanish language website “Doral Puerto Rico Facts,” DCI Group has also subcontracted lobbying work to former Rep. Connie Mack. The former Florida Republican lawmaker billed $20,000 in July after his firm International Liberty registered to “address a financial dispute between Doral Financial Institution and the Government of Puerto Rico,” according to a federal lobbying filing.

The American Future Fund, a 501c4 nonprofit, has also gotten in on the action. The group, which has spent tens of millions of dollars to support Republicans, launched ads earlier this month in the Wall Street Journal and POLITICO attacking Puerto Rico Gov. Garcia Padilla.

“Governor Padilla and his cronies control a secret slush fund known as the Government Development Bank of Puerto Rico,” the ad states. “To the unwitting investors, Governor Padilla sells the [Government Development Bank] as a safe place to invest, even as it has amassed billions in debt.”

Other ads have likened Puerto Rico as the “Argentina of the Caribbean” and asserted that the commonwealth is “behaving more like the rogue nation to the south.”

AFF did not respond to a request for comment.

Some Puerto Rico advocates have gone so far as to link AFF and DCI Group.

“The timing of the campaign, the nature of the false arguments and accusations that are out there and the people connected to both Doral and the AFF strongly suggest they are linked,” said Rep. Luis Vega Romas, a state lawmaker who is leading an investigation into Doral and the advertising campaign.

“The sad part of it is there are millions of dollars in Doral’s accounts that are the small savings of people who work in Puerto Rico. By supporting this awful campaign, Doral is jeopardizing the jobs of thousands of Puerto Rico workers,” Romas said.

DCI Group’s Craig Stevens said his firm and AFF aren’t working together.

“I could not speak to why AFF got involved in this,” Stevens said.

Since Mack came on board, three lawmakers have sent letters to Puerto Rico Gov. Garcia Padilla over his decision to not pay Doral. The subcommittee Mack formerly chaired — the House Subcommittee on Foreign Affairs on the Western Hemisphere — also held a hearing in late July.

“These actions do not encourage private investors to take on financial risks in these countries when considering investments in this hemisphere,” wrote Reps. Matt Salmon (R-Ariz.) and Jeff Duncan (R-S.C.). “As such, we are concerned about the reports that we have heard regarding PR’s recent actions.”

House Oversight and Government Reform Chairman Darrell Issa also weighed in on the matter. The California Republican Issa went so far as to ask for a congressional staff briefing.

Mack confirmed in an email that he does work for Doral, but did not respond to questions about the scope of his work or AFF. Further he said, “I cannot and do not speak for other independent groups or individuals.”

Robert Shapiro, a former Clinton administration official, has also weighed in on the matter. Shapiro put out a report earlier this year and has continued to comment that by nullifying the tax agreement Puerto Rico is just increasing its economic problems.

The bank’s lawsuit against the Puerto Rico Department of Treasury kicked off last week after settlement talks stalled. Doral claims that it overstated earnings for several years and is entitled to some taxes that it paid during that period. The Puerto Rican Treasury Department has said that it doesn’t owe the money and that a 2012 deal was not legal. The matter came to a head after the Federal Deposit Insurance Corporation told Doral it needed to get its balance sheet in order.

Puerto Rico isn’t without representation in Washington. The commonwealth has Podesta Group, SDA, Prime Policy Group and Roth Group on retainer. None of these firms have lobbied on the Doral issue, according to a source familiar with the situation.

Puerto Rico’s PR firm SKDKnickerbocker has been engaged in messaging and coordinating a response to Doral’s push.

Puerto Rico business groups, including the Puerto Rico Chamber of Commerce and the Puerto Rico Manufacturers Association, are launching their own counteroffensive against Doral following the AFF ads.

The Chamber’s Jose Izquierdo said he is “deeply troubled” over the ads and that they are planning to take Puerto Rico’s case to the mainland. The business groups are putting together a delegation to meet with business interests and investors in New York City and Washington, D.C.

“We cannot get ourselves involved in politics,” Izquierdo said. “We need to fight our fight in the business arena.”

This article tagged under: Money