Opinion: Koch brothers eye Puerto Rico

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Weighed by an eight-year recession and crushing debt, Puerto Rico’s economy is sinking fast. Its government is staying barely afloat by cutting services, raising taxes, and borrowing to pay its estimated $73 billion debt. The northward migration continues and Puerto Rico is being depopulated for the first time in its territorial history.

Washington has yet to throw a lifeline. It has ruled out a bailout and offered no alternatives. Federal inaction has created a power vacuum that is being exploited by institutional investors. They are manipulating the market, public opinion, and even Congress at the expense of the Puerto Rican people.

Federal action is definitely needed but it should address the interests of all American citizens not just the ones with political and economic clout.

— Gretchen Sierra-Zorita

Groups of debt-holders and speculators are circling the Island like sharks looking for ways to improve their financial positions. One group is suing Puerto Rico over a new law allowing public corporations to restructure their debt. Another large group of hedge funds stands ready to finance the Puerto Rican government if it restructures some of its debt.

A third group, with ties to the conservative Koch brothers, has taken a radically different approach. They have launched an aggressive disinformation campaign to discredit the Puerto Rican government. The objective is to pave the way for Federal action should Puerto Rico refuse to pay its creditors by equating it to a semi-foreign rogue state.

The campaign started last summer when negotiations over a $230 million tax refund broke down between the Puerto Rican government and Doral Financial Corporation, a local bank that has not posted a profit since 2005. The response by the American Future Fund (AFF), a Koch-funded organization with no obvious ties to Doral or Puerto Rico, was fast and furious. The AFF ran ads in The Wall Street Journal and Politico likening Governor Garcia Padilla to presidents Kirchner of Argentina and Maduro of Venezuela, both heads of dysfunctional economies.

The defamation campaign continued into the fall. High-profile ads accused Garcia Padilla of running a corrupt rogue government that violates the U.S. constitution and has transformed Puerto Rico into a major drug transit point. These allegations might resonate with an uninformed American audience but they are not true.

In October a San Juan court ruled in favor of Doral on the tax dispute. The government filed an appeal. The Hispanic Leadership Fund, which has received Koch funding through one of their intermediary organizations, joined the fray, comparing Garcia Padilla to Cuba’s Castro.

Doral and its public relations firm, the DCI Group, claim to have no AFF ties. Yet DCI’s managing partner, Justin Peterson, is an AFF donor. DCI has contracted former Republican Congressman Connie Mack to lobby on behalf of Doral.

Since Mack came on board, Republican congressmen Jeff Duncan, Scott Garrett, Darrell Issa and Matt Salmon have inquired about the Doral case. All five have received Koch Industries PAC contributions and none had been previously involved in Puerto Rico.  There are only two democrats among Doral’s active supporters.

Many Puerto Ricans believe the Doral lawsuit stems from a partisan dispute between current Governor Garcia Padilla, head of the pro-Commonwealth party and a Democrat, and former Governor Luis Fortuño, statehood supporter and prominent Republican.  The Garcia Padilla government maintains that the $230 million tax refund agreed to during Fortuño's administration was based on misrepresentation. Fortuño's Treasury Secretary is currently a top Doral official. Fortuño is also tied to the Koch network as a Hispanic Leadership Fund board member.

What most Puerto Ricans do not realize is that the Doral case is part of a larger agenda. Conservative organizations and investors are using the Doral litigation to fabricate a picture of a rogue government that threatens U.S. business concerns. Whether they have a vested interest in Doral or not, their intent is to predispose the Federal government to act on their behalf should Puerto Rico show signs of defaulting.

Some Doral supporters are proposing a Federal financial control board like the one that oversaw Washington D.C.’s finances for six years. This mechanism would ensure that Puerto Rico pays its creditors, but it would not correct flaws in the territory’s outdated economic model and would impose even greater hardships on its people.

Puerto Ricans know they are responsible for their predicament. Every governor since the mid- 1970s has avoided making hard economic choices and borrowed money to balance budgets. But even under the best conditions, Puerto Rico’s economy is shackled by its territorial status and there are limits to what leaders can do.

With no powerful champions in Washington it has become clear to the people of Puerto Rico that their American citizenship is worth pennies on the dollar. It would be unconscionable for the Federal government to step in now to protect business interests with no regard for the people of Puerto Rico. Federal action is definitely needed but it should address the interests of all American citizens not just the ones with political and economic clout.