Government Contractor Subsidizing Calderon Candidate’s Fundraising… Acevedo Sponsors Bill Inconsistent With His Trade Policy… Acevedo Contradicts Prats Again On Federal Plans: This Time Taxes… Puerto Rico To Get Crayon In Crayola Promotion

May 10, 2004
Copyright © 2004 THE PUERTO RICO HERALD. All Rights Reserved.

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Government Contractor Subsidizing Calderon Candidate’s Fundraising

A law firm reportedly paid $1 million a year in Puerto Rico taxpayer funds by Governor Sila Calderon ("commonwealth" party/no national party) is raising funds for her party’s candidate for mayor of San Juan.

Winston & Strawn is using its offices and personnel for a May 27 Washington fundraising reception and dinner for candidate Eduardo Bhatia, a Calderon protégé. Attendance at the reception requires a minimum contribution of $150. Dinner attendees are to give $1,000.

Soliciting funds is Francisco Pavia, a Winston & Strawn lawyer, now based in

San Juan. Other lobbyists with contracts with Puerto Rico’s territorial government are being asked by him to buy tickets.

Pavia is being assisted by a woman in the firm’s Washington office, who has reportedly said that she is not a regular employee. The two are using the firm’s offices and equipment, including telephones and computers.

It is not known whether these ‘in-kind’ contributions to the "commonwealth" campaign are being reported to Puerto Rico election authorities.

Pavia is one of Calderon’s closest advisors on federal affairs. He was the city of San Juan’s chief representative in Washington while she was San Juan’s mayor.

Rather than join her gubernatorial administration in a top post, he opted for a lucrative contract for his law firm.

Bhatia, then a territorial senator, was then San Juan Mayor Calderon’s candidate to replace her in 2000. With her help, he won a viscous campaign for their party’s nomination. He then lost the general election to fellow senator Jorge Santini (statehood party/R). This year’s election will be a rematch between the two with Senator Fernando Martin (Independence Party) expected to run a strong race.

Acevedo Sponsors Bill Inconsistent with His Trade Policy

A bill to require federal officials to consult with territorial officials when negotiating trade agreements was introduced in the U.S. House of Representatives May 6th by Representative Jeff Flake (R-AZ). It was co-sponsored by the representatives of the four of the five populated, unincorporated territories of the United States that have representatives in the House, including Puerto Rico.

The legislation would correct an oversight in current law. Two provisions of law require consultation with State and local governments but do not require it with territorial governments.

Flake is one of the Congress’ most outspoken advocates of free trade. His new bill takes the opposite approach to territorial trade concerns from the one advocated by Puerto Rico Resident Commissioner Anibal Acevedo Vila ("commonwealth" party/D). Acevedo nonetheless co-sponsored the bill.

One of Acevedo’s main "commonwealth" objectives is to convince the president -- or the entire federal government -- to cede to the insular government the power to make trade agreements concerning Puerto Rico. Trying to implement the goal is in Acevedo’s plans for the governorship he hopes to inherit this year from his political mentor, incumbent Sila Calderon ("commonwealth"/no national party)

Federal officials have uniformly opposed Acevedo’s proposal. They have pointed out that the federal government does not have the power to abdicate its authority to determine the foreign policy of the United States and its territories, short of granting independence to a territory. They have also explained the practical problems that would arise if individual areas of the United States had different trade or other policies from those of the nation as a whole.

These problems would, for example, require Puerto Rico’s exclusion from the U.S. market -- a central foundation of the territory’s economy. Exclusion would be necessary to prevent the territory from being used as a ‘pass-through’ for foreign goods that are restricted or prohibited from direct entry into the United States.

It was unclear Friday whether Acevedo was reversing his stance on the issue by co-sponsoring the bill.

Acevedo Contradicts Prats Again on Federal Plans: This Time Taxes

"Commonwealth" party gubernatorial candidate Acevedo Friday contradicted his running-mate to succeed him as resident commissioner on plans for federal tax legislation if the two are elected.

This is the second time in recent weeks that Acevedo has contradicted Senator Roberto Prats on their agenda in Congress. The cases involved Puerto Rico’s two major federal issues.

In this case, Acevedo said that they are not committed to continuing his failed effort to seek 85-100% federal tax exemptions for profits that companies based in the States take from manufacturing subsidiaries in Puerto Rico. He also said that the decision of whether to seek the federal taxpayer additions to the companies’ profits would not necessarily be determined by the findings of studies being conducted now by two offices of the Congress as a whole.

Just days before, Prats had promised representatives of eight large national and multinational drug companies that he would continue to seek the federal subsidies to boost their profits if the results of the studies made approval at all a possibility. He made the promise in seeking financial support from the company representatives for his campaign for office.

The studies are being conducted by the General Accounting Office and the Joint Committee on Taxation. They are examining Puerto Rico’s economy, its treatment under federal tax and social program laws, how its treatment compares with the treatment of the States and the other U.S. territories. They are also probing Puerto Rico’s tax laws, how companies based in the States have used federal and territorial tax laws, and the impacts on Puerto Ricans and the territory’s economy. The investigation is also to consider various ideas for federal measures to address any needs the agencies identify.

The studies were requested by U.S. Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Minority Member (senior Democrat) Max Baucus (MT) after the Committee formally rejected the Acevedo tax exemptions proposal for the second time. Grassley and Baucus led the opposition to the proposal, which has also been rejected by: the administration of President George Bush; his Democratic rival for the presidency this year, Senator John Kerry (MA), and the chairman of the House Ways and Means Committee, Bill Thomas (R-CA).

The studies are expected to expose the flaws in the proposal, which was developed by Governor Calderon and her husband, who was her economic development and commerce secretary at the time. (The two were then married to other individuals.)

With the widespread federal rejection of the proposal being among Acevedo’s greatest failures in Washington, the "commonwealth" party gubernatorial candidate has tried to distance himself from it to eliminate it as a negative issue in his campaign.

Prats’ promise regarding the proposal in seeking financial support from companies that would obtain tax breaks worth billions of dollars a year threatened to remind voters of one of Acevedo and Calderon’s biggest failures in Washington and for Puerto Rico’s economy.

It also threatened to open another front in the growing scandal regarding Acevedo’s fundraising. Pledging to seek billions of dollars in unneeded federal tax subsidies for companies in the States while seeking thousands of dollars from their representatives could be considered influence peddling.

Acevedo has recently been embarrassed by revelations regarding two large contributions that he took while he was minority leader of Puerto Rico’s House of Representatives, at least one as he was preparing the campaign that resulted in his election to Congress. The donations -- which he initially denied -- were $20,000 and $10,000 respectively and made by a prominent businessman. Although Acevedo claimed that the $20,000 check was to pay "commonwealth" party expenses, it wound up in a bank account that he and his sister personally controlled. The account was associated with a mysterious "Friends of Anibal Acevedo" entity.

Recently, Acevedo also contradicted Prats on plans for federal legislation to authorize a locally elected convention in Puerto Rico to propose their vision of Puerto Rico’s future political status. They are committed to seeking federal transfers to the "commonwealth" of the powers to determine the application of federal laws and to enter into agreements with foreign countries. Under the scheme, the territory would be recognized as a sovereign nation to which the United States is bound. The U.S. Government would be required to continue to grant citizenship to individuals born in Puerto Rico and all federal assistance now granted Puerto Ricans, plus other economic assistance.

Acevedo said that federal approval of the convention ("constituent assembly") would not be sought shortly after publicly proposed the idea of legislation for the purpose.

Federal officials have uniformly rejected Acevedo’s "commonwealth" proposal, saying that it is impossible and contradictory as well as unwanted. For this reason, Acevedo does not want it to be reconsidered by the federal government at this stage -- which Prats effectively suggested.

Instead, Acevedo wants to obtain a local, elected assembly’s approval of the plan before it is again considered by federal officials. Acevedo hopes that presenting the proposal as representing the ‘self-determination’ will of Puerto Rico will convince federal officials to go along with it in spite of their constitutional and policy objections.

Puerto Rico to Get Crayon in Crayola Promotion

Spurred by the quick work of Puerto Rico Senate Minority Leader Kenneth McClintock (statehood/D), Puerto Rico will be honored with a crayon color as part of Crayola’s "State Your Color" promotion.

The promotion, which was announced just last month, will name a crayon color after all 50 States of the United States. Recognizing that, as a territory Puerto Rico was being left out of the promotion, McClintock contacted Crayola, seeking representation for Puerto Rico. Earlier this week, the company let McClintock know that his efforts had secured Puerto Rico a place in the special box of crayons that will be issued later this year.

The "Washington Update" appears weekly.

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