The Right-Wing Web Lobbying for Puerto Rican Statehood

During a House Natural Resources subcommittee hearing last month, held to debate two competing visions for determining Puerto Rico’s future, Rep. Ritchie Torres, D-N.Y., denounced the “single most egregious example of colonialism” in Puerto Rico: the Financial Oversight and Management Board. Created by the federal government in 2016 to police Puerto Rico’s budget, the board has imposed sweeping austerity and privatization to secure payments for the vulture funds that have bought up the territory’s debt. According to Torres, the board “represents a cardinal sin against the sovereignty and self-determination of Puerto Rico.”

An original co-sponsor of the Puerto Rico Statehood Admission Act, one of the two bills up for discussion at the April 14 hearing, Torres went on to assert that making Puerto Rico a U.S. state as expeditiously as possible is the only just path to decolonization and the best way to make up for abuses by the federal government. Decrying “powerful interests” that exploit “Puerto Rico as a tax haven,” he said that “if Puerto Rico were a state, there would be no financial control board.”

What Torres failed to mention, however, was that the forces advocating hardest for the statehood bill are some of the same that pushed Congress not only to pass the law that created the financial oversight board in the first place, but also to expand the use of tax-deferment schemes in Puerto Rico.

According to an Intercept review of federal lobbying records and corporate financial statements, over the past decade, advocacy groups tied to Puerto Rico’s pro-statehood New Progressive Party, the Republican Party, and one of the territory’s wealthiest families (whose company held tens of millions of dollars in Puerto Rican government debt) have hired high-profile corporate and anti-tax lobbyists — to the tune of nearly $12 million since 2013 — to advocate for Puerto Rican statehood. But they also hired many of those same lobbyists to develop the Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA, in 2016, which created the financial board, and to promote the expansion of Puerto Rico’s “opportunity zones,” or areas where investors can avoid taxes by stashing their capital gains in real estate and business projects.

Such ideological inconsistencies are coming to a head as decolonization has become an increasingly mainstream demand in U.S. politics. The term often pops up without context or consensus as to its meaning, and gaps are especially visible when it comes to Puerto Rico, where competing visions for decolonization have emerged. The other legislation under discussion on April 14 leaves room for Puerto Ricans to decide from a number of potential political statuses, with statehood as just one option.

The Puerto Rico Self-Determination Act — reintroduced this year by Rep. Nydia Velázquez, D-N.Y., Rep. Alexandria Ocasio-Cortez, D-N.Y., and Sen. Bob Menendez, D-N.J. — would set up a special decolonization assembly, or “status convention.” Puerto Ricans on the territory would elect delegates to the convention to debate all possible status options, at least including statehood, full independence, and a “free association” agreement with the U.S., and the delegates would present the options to the territory for a binding vote. The idea has been met with ire from many statehood proponents.

“The way that [pro-statehood officials] govern in Puerto Rico is pro-privatization, pro-bondholder,” said Federico de Jesús, a senior adviser to the Power 4 Puerto Rico coalition, which supports the Self-Determination Act. “But with liberal groups, grassroots people, people in the diaspora, new parties on the island … the diversity of those who don’t support ‘statehood my way or the highway’ is growing.”

To many on the U.S. mainland, statehood for Puerto Rico is seen as a cause of the left. But many of the Statehood Admission Act’s advocates in Washington form a web of right-wing and pro-corporate ties.

That web is centered on two nonprofit advocacy groups: the Puerto Rico Statehood Council and the Puerto Rico Equality Forum. Both have ties to Puerto Rico’s New Progressive Party, or PNP, which advocates for statehood and counts both Democrats and Republicans among its members. (In Puerto Rico, political parties are mostly organized by the political status they advocate for rather than on a traditional left-right spectrum.)

The Puerto Rico Statehood Council is chaired by José Fuentes-Agostini, a former PNP and GOP-affiliated justice secretary, a Trump campaign adviser, and one of four witnesses at the House Natural Resources subcommittee hearing to testify in favor of the Statehood Admission Act.

According to federal lobbying records, Fuentes has earned nearly $2 million since 2009 as a personal lobbyist for Empresas Fonalledas Inc., a conglomerate of agriculture, manufacturing, real estate, retail, and finance companies owned by one of Puerto Rico’s wealthiest families. Through one of its subsidiaries — Plaza Las Américas, which owns the largest shopping mall in the Caribbean — the company was a significant holder of Puerto Rican public debt, owning more than $23 million in Puerto Rican bonds pre-PROMESA, according to financial statements filed with the Puerto Rico Department of State.

Empresas Fonalledas is also a large and frequent donor to PNP and Republican candidates. Zoraida Fonalledas, who is married to the company’s president and CEO, is a longtime Republican politician and current committeeperson of the Republican Party of Puerto Rico.

The other advocacy organization at the heart of the pro-statehood push, the Puerto Rico Equality Forum, is headed by former PNP secretary of state and Sen. Kenneth McClintock, who affiliates with mainland Democrats. According to lobbying records, the Equality Forum has spent nearly $3 million since 2014 for McClintock to personally lobby on behalf of the group.

As 501(c)(4) organizations, the Statehood Council and Equality Forum are not required to publicly disclose their donors. (The Statehood Council declined to share its donor list with The Intercept, and the Equality Forum did not respond to the request.) But since 2013, the two organizations have shared an outside lobbying firm, Akin Gump Strauss Hauer & Feld LLP, with Empresas Fonalledas. And the three entities have repeatedly hired an overlapping core group of Akin Gump lobbyists, mainly to address a set of related and at times identical issues.

Since 2009, the three entities have paid Akin Gump $13.7 million for federal lobbying. The core group of lobbyists they have used have also represented DCI Group, one of the primary consulting firms representing Puerto Rico’s bondholders; Mammoth Energy, the parent company of a shady contractor whose work after Hurricane Maria led to island-wide blackouts; and CoreCivic, the country’s second-largest for-profit prison corporation.

In addition to Akin Gump, the Statehood Council has since 2015 contracted with Navigators Global, another lobbying firm with deep ties to the upper echelons of the conservative anti-tax movement. One of the firm’s co-founders and a main Statehood Council hire, Cesar Conda, boasts in his company bio that he was “instrumental in devising the Bush tax cuts” and that he has been described as one of former House Speaker Paul Ryan’s “conservative mentors.” Six others hired by the Statehood Council joined Navigators Global after working in the federal government — in the Bush and Trump White Houses and Republican Senate offices, including one Republican senator — and they count GEO Group, the nation’s largest for-profit prison corporation, and BAE Systems, the British arms manufacturer, among their other clients.

This year, the Statehood Council also hired a third lobbying group, Michael Best Strategies, the government affairs arm of the firm headed by Trump’s former White House chief of staff Reince Priebus.

Through their lobbying efforts, the Statehood Council and the Equality Forum have pushed U.S. legislators to support Puerto Rican statehood, while the advocacy groups and Empresas Fonalledas have fought for the expansion of federal programs and tax breaks to the territory. But the three entities have also called on their K Street ranks to push for some of the signature policies that characterize what journalist Juan González has called Puerto Rico’s “uber colonialism phase” — that is, the current “domination” of the territory’s economy by mainland capitalists.

In 2015 and 2016, as the territory’s financial crisis mounted, all three organizations hired their lobbyists to seek debt relief for Puerto Rico via municipal bankruptcy. (Current U.S. law excludes U.S. territories from this practice.) According to the company bio of Phil Anderson, president and co-founder of Navigators Global and a former lobbyist for the Statehood Council, the efforts “succeeded in reframing the discussion surrounding [Puerto Rico bankruptcy legislation] and garnering conservative support for the bill by positioning it as a free market solution to Puerto Rico’s debt crisis.”

But Congress didn’t end up extending bankruptcy relief to Puerto Rico. Instead, it passed PROMESA and installed the Financial Oversight and Management Board — a move on which the Statehood Council, the Equality Forum, and Empresas Fonalledas were eager to engage. In the six months before PROMESA was enacted on June 30, 2016, the two advocacy organizations and Empresas Fonalledas ramped up their lobbying spending, shelling out nearly $2.4 million for an army of two dozen lobbyists to work on the bill. One of the Statehood Council and Empresas Fonalledas’s hires from that period, Geoffrey Verhoff of Akin Gump, brags in his company bio that he “significantly contributed to the passage of [PROMESA], which gave Puerto Rico the necessary tools to restructure its debt.”

That restructuring has taken the form of mandated pension cuts, furloughs, social service reductions, privatization, and other austerity measures implemented to pay off and bail out bondholders — like Empresas Fonalledas. After the passage of PROMESA, Plaza Las Américas, the Empresas Fonalledas subsidiary, was able to unload its highly devalued Puerto Rican debt: The company went from owning $23.5 million in Puerto Rican government bonds at a projected $14.4 million loss in 2015 to $2.7 million at a nearly quarter-million-dollar gain in 2018, according to financial statements.

Since the passage of PROMESA, representatives of the groups that once pushed for it, including McClintock of the Equality Forum, have publicly criticized the financial oversight board’s austerity mandates. In a statement emailed to The Intercept, the executive director of the Statehood Council, George Laws García, argued that “PROMESA became necessary because of the arbitrary and colonial treatment of Puerto Rico under the U.S. bankruptcy code.” McClintock did not respond to a request for comment.

“Everyone should keep in mind that when our goal of statehood for Puerto Rico is achieved the island will no longer be subject to PROMESA or the Oversight Board,” García said.

In September 2017, Puerto Rico was reeling from initial negotiations with the financial board. Then Hurricane Maria hit. It was the deadliest and costliest storm in the territory’s history, killing an estimated 3,000 people. The devastation set off a wave of “disaster capitalism” in the territory, with the PNP government encouraging private capital and tech companies to take advantage of the “blank canvas” and deregulatory environment.

It was around this time that the Statehood Council, the Equality Forum, and Empresas Fonalledas set their lobbyists’ eyes on another windfall for financiers: so-called opportunity zones.

On the mainland, the massive Republican tax cut bill of 2017 nationalized a scheme for investors that allowed them to delay paying capital gains taxes if they diverted their earnings into real estate and business projects in specially designated low-income areas. The idea was to incentivize investment in communities that needed it. Predictably, however, the program became a “once-in-a-generation bonanza for elite investors,” who dumped billions of dollars in investment earnings into luxury apartment buildings and hotels and nearly unused commercial facilities, according to a New York Times report.

States and territories are limited to designating 25 percent of their census tracts as opportunity zones, but in 2018, Congress passed a spending bill that exempted Puerto Rico from the limit. Currently, about 98 percent of the territory is an opportunity zone, making it an even greater boon for rich investors who already saw it as an income and property tax haven. In 2017 and 2018, lobbying disclosures from the Statehood Council, the Equality Forum, and Empresas Fonalledas that included mention of Puerto Rico’s opportunity zones totaled about $2.2 million, making the groups the top lobbyists on the topic, according to Puerto Rico’s Centro Periodismo Investigativo, or CPI.

And as the CPI report pointed out, the “godmother” of Puerto Rico’s opportunity zones is Rep. Jenniffer González-Colón, Puerto Rico’s PNP and Republican congressional delegate. González, a former chair of Latinos for Trump, is also one of the most forceful proponents of the Statehood Admission Act. At last month’s hearing, members deferred to her to lead much of the questioning. According to OpenSecrets, Empresas Fonalledas has been the third-highest donor to González’s congressional campaigns. Other major González campaign donors include Akin Gump and the law group King & Spalding, which has charged Puerto Rico’s heavily indebted power authority as much as $1,426 an hour, the highest rate of any firm, according to the Institute for Energy Economics and Financial Analysis.

Now, in Congress, the debate between the Statehood Admission Act — which has 64 co-sponsors, including 14 Republicans — and the Self-Determination Act, with 76 Democratic co-sponsors in the House, is heating up. And the web of powerful proponents of immediate statehood are mobilizing. In the first quarter of this year, the Statehood Council and the Equality Forum spent $320,000 on lobbying. And members of the groups’ right-wing network are embarking on a messaging campaign aimed at convincing Capitol Hill that statehood is a foregone conclusion.

They point largely to a nonbinding, yes-no statehood referendum held in November, during which 52.5 percent of participants voted in favor of becoming a state, and assert that the Self-Determination Act’s status convention would be another unnecessary, federally imposed delay on equality for Puerto Rico.

“What’s the point of a status convention?” Fuentes, the Statehood Council chair, said at the subcommittee hearing. “The people know what the options are, and statehood has won.”

But Self-Determination Act advocates argue that there has never been a truly democratic or participatory process for Puerto Ricans to decide their political future.

They assert that the situation is especially messy given that the referendum efforts have been driven mostly by the status-oriented political parties. The November status referendum was the seventh in Puerto Rico’s history and the first to not include multiple status options, instead offering “yes” or “no” answers to a question about statehood. It was announced and organized by officials in the pro-statehood PNP and drew a turnout of 55 percent, one of the lowest ever. Referenda in 2017 and 2012 were boycotted to some degree by statehood opponents, leading to inflated support for statehood, while referenda in the 1990s yielded no majority.

Self-Determination Act supporters also contend that the PNP is tipping the scales in Washington. After a widespread boycott led the 2017 referendum to show artificially high statehood support, PNP officials in 2018 formed a “shadow delegation” to meet with members of Congress to convince them to make Puerto Rico a state. (Among the delegation’s members is Zoraida Fonalledas, the Republican politician and spouse of the Empresas Fonalledas CEO.) PNP Governor Pedro Pierluisi dug up at least a million dollars to hold a special election for six “statehood lobbyists” on Sunday. With results still pending, preliminary numbers show a low turnout — about 18 percent of those who voted for statehood in November.

“Unfortunately, political parties in Puerto Rico have found ways to cancel each other on the status question for many decades, by legislating locally referendums that from the get-go are designed to favor the status preference that’s supported by the party in power,” said Manuel Natal Albelo, head of the Citizen Victory Movement, or MVC, a new political party that supports the Self-Determination Act and is driving much of the energy behind a possible status convention.

Founded in 2019 as a progressive party dedicated to good governance and an inclusive decolonization process, the MVC has gained traction among advocates of all status options. In the 2020 elections, the MVC’s first time on the ballot, it had candidates of varying opinion on Puerto Rico’s future political status win two seats in the House of Representatives, two seats in the Senate, and seats on 24 city councils, according to Natal.

“There is a new political discussion going on in Puerto Rico, about not only how we address the status question, but also how we organize politically,” said Natal.

On the U.S. mainland, however, the politics are different — leading to a thorny debate in Congress. A language barrier and lack of context in mainland media coverage of Puerto Rico lead many to come to uninformed conclusions about Puerto Rico’s future status, said Natal and de Jesús of Power 4 Puerto Rico, which allows representatives to toe the statehood lobby line without much pushback. For many Democrats, for instance, the issue of Puerto Rico’s status is a partisan one, as they assume, likely incorrectly, that statehood would give them two additional Senate seats. And despite the statehood lobby’s right-wing and pro-corporate roots, some progressives likely default to advocating for immediate statehood because one of the most commonly cited colonial issues is Puerto Rico’s lack of voting representation in Congress — a narrative Statehood Admission Act proponents have seized on.

“It’s natural and completely understandable for a true liberal, a progressive, to be on the side of voting rights,” said de Jesús. “So if you only get that side of the story, the natural inclination of any liberal is, of course, ‘A group of citizens are being deprived of the right to vote.’”

But with the Self-Determination Act, status convention advocates hope that Americans on the mainland can grasp a more complex narrative.

“It’s really about the will of the people,” de Jesús said, “and [figuring out] the solution that comports to the reality of the island.”

Correction: May 17, 2021
This article inaccurately attributed the organization of status referenda held in the 1990s to the pro-commonwealth Popular Democratic Party. The reference has been removed.