A politically active nonprofit that spent more than $25 million on ads to help Republicans in the 2012 elections has stepped into a messy dispute between the government of Puerto Rico and a bank that claims the commonwealth owes it money — not something that fits neatly with the group’s activities in previous election cycles.
Doral Financial Corp., which has had financial and regulatory woes in recent years, sued the Puerto Rican government in June for voiding a 2012 agreement to pay the company nearly $230 million. The money is due as a tax refund in connection with Doral overstating its earnings from 1998-2005, according to a lawyer for the firm.
In Doral Financial Corp. v. Commonwealth of Puerto Rico, the company demands reinstatement of the agreement, which was signed by the government under the previous governor, Luis Fortuno, a Republican. Administration officials under Democratic Gov. Alejandro Garcia Padilla, who took office in 2012, nullified the contract.
Taking Doral’s side, American Future Fund is sponsoring an ad that goes after Padilla with a sledgehammer and ran in Politico on Thursday and the Wall Street Journal today, Superimposed on a large photo of the governor are the words “Puerto Rico’s Culture of Corruption.” It goes on to accuse him of running the country in a way that resembles “the rogue governments” of Argentina and Venezuela; turning Puerto Rico into a major transit point in the drug trade; destroying the rights of creditors and pensioners with “an illegal bankruptcy law”; and “trumping up charges against a private bank,” among other misdeeds.
Why does AFF suddenly care about the interests of a bank in a U.S. commonwealth? And why now, since Padilla, a Democrat, isn’t even up for re-election until 2016?
The timing question is easiest to answer: The bank’s lawsuit heads to court next week, on Sept. 17. As for motive, that’s less clear. Messages left on AFF’s phone asking whether it was being paid for its involvement on behalf of the bank went unanswered.
But why? A possible answer, Padilla’s allies suggest, is that Doral hired a top Republican lobbying and PR firm, DCI Group, to help make its case earlier this year. DCI is well-known in GOP circles and to AFF, which previously contracted with a fundraising firm run by a former top executive at DCI.
“The links between Doral and AFF have become clear to us,” said Luis Vega Ramos, a member of the Puerto Rico House of Representatives, who accused Doral and its surrogates of “trying to prevail through the dissemination of false information” about the commonwealth. Vega Ramos, who is leading a legislative investigation of the circumstances leading to the original agreement, noted that the previous Treasury Secretary went to work as an executive vice president for Doral shortly after the deal was struck. In addition, he said in an interview, Doral’s claims rest on tax filings later shown to be inaccurate, and if anything the company should have been given a tax credit of a much lesser amount, rather than a reimbursement.
Like many groups in the Koch network, Iowa-based AFF has been far less involved helping federal candidates in this election cycle than in previous years. And the Center to Protect Patient Rights, which doled out hundreds of millions of dollars to those groups, seems to have virtually vanished from the scene. American Commitment, also a Koch-linked group, has also pared back its spending on federal elections, but has been extremely active in fighting proposed FCC rules on net neutrality, which it calls a “full federal takeover” of the Internet.
Both AFF and CPPR were involved in a scheme to funnel funds into two California ballot issue campaigns in 2012; the California Fair Political Practices Commission uncovered the scheme, in which money was passed through several 501(c) groups that don’t have to disclose their donors, and said it was a form of “money laundering.”
AFF is not required to disclose the names of its donors. But IRS documents filed by it and other organizations showed that it received almost all its 2012 funding — 92 percent — from two groups that were hubs of the network of 501(c) organizations closely linked to the conservative billionaire Koch brothers: The Center to Protect Patient Rights provided $49.2 million of AFF’s $67.9 million in income that year, while Freedom Partners Chamber of Commerce gave another $13.6 million.
Whether DCI Group, Doral or anyone related to those companies is helping prop up AFF this year is unknown, and may remain that way. However, AFF has become involved in only three congressional races in the 2014 cycle — two House and one Senate. The group has also spent money to help a Republican candidate for governor in Nebraska.