Yesterday, I referred the readers of DailyKos to a Washington Post article of how the co-director of Barack Obama's presidential campaign in Puerto Rico is a Washington-based federal lobbyist for the government of Puerto Rico. I have dug up more information that shows the web of lobbyist ties in which Obama has either purposefully or inadvertently been tangled up in. Obama's lobbyist problems are much deeper than I ever thought.
Jeffrey H. Birnbaum wrote in the Washington Post yesterday that ethic watchdogs had noted that the...
...high-profile role of Francisco J. Pavía appears to contradict the Obama campaign's ethics guidelines, which forbid federal lobbyists from working on staff.
Obama has refused contributions from federal lobbyists and excluded them from the payroll. In the case of Pavía, they claim he is a simple "volunteer." Yet as Birnbaum notes:
Pavía is not on leave from his law firm, Winston & Strawn, according to the managing partner of its Washington office, Thomas L. Mills. But he has been an important part of the Obama campaign in Puerto Rico, which holds its Democratic primary Sunday. Obama wrote to Puerto Rico's State Elections Commission in March to designate Pavía and Andres Lopez as "our local representatives" to the commission. In May, Pavía and Lopez signed a posting on Obama's campaign Web site that identified them as co-directors of the Puerto Rico effort and solicited volunteers.
In fact, he wasn't just a nominal head; he is an active organizer on behalf of Mr. Obama:
(translation)
Come and mingle with the Barack Obama campaign on Tuesday, May 20, as we watch the results from the Oregon and Kentucky primaries and we prepare ourselves for the battle in Puerto Rico. We will be at the Drums Restaurant in Isla Verde all night celebrating and supporting our next President of the United States. Don't forget to bring your family, friends and colleagues -- we will have food, live music and raffles. The person who brings the largest number of people to the event will win a personal meeting with New Mexico Governor, Bill Richardson.
Andrés López and Francisco Pavía
Co-Directors, Puerto Rico with Obama
And Mr. Pavía is not a cheap lobbyist either. Check this out:
Pavía has been a registered lobbyist for various arms of the Puerto Rican government since 2001, according to disclosure reports filed with the U.S. Senate. His firm's total compensation for lobbying for the commonwealth over that period was more than $3 million. For the first three months of this year alone, Winston & Strawn was paid $110,000 by the Puerto Rico Federal Affairs Administration, which is the government's primary lobbying entity in Washington. Pavía is listed as the firm's primary contact.
It seems Mr. Pavía has had a longstanding interest in politics and the education and experience to boot:
Mr. Pavía received an A.B. in Politics from Princeton University in 1986... Mr. Pavía received a J.D. from Harvard Law School in 1990...
According to Winston & Strawn's website, Mr. Pavía was Deputy Director and General Counsel for the Puerto Rico Federal Affairs Administration during the end of pro-commonwealth fmr Gov Rafael Hernandez Colon's term. Mr. Pavía represents the government of the Commonwealth of Puerto Rico on all federal relations matters, the former pro-commonwealth City of San Juan on congressional issues, and Fortune 500 companies on devising tax legislation strategy (presumably dealing with the now defunct 936 tax exemption that allowed companies to pay a reduced taxload for establishing operations in Puerto Rico; read below for the loopholes). But wait, there is more, he has also represented the Puerto Rico Industrial Development Company (which coordinated 936), Puerto Rico Federal Affairs Administration, Puerto Rico Highways and Transportation Authority, Puerto Rico Department of Labor and Human Resources, Puerto Rico Ports Authority and the Puerto Rico Infrastructure Finance Authority, all presumably under pro-commonwealth administrations. He is also a member of the Board of Directors of the Puerto Rico Tourism Company, I assume, so he can get discounted tickets to the island and sip pina coladas, I mean, mobilize voters for Obama.
In 2007, as reported by Huffington Post, Mr. Pavía gave $2,000 to Congresswoman Nydia Velasquez and made multiple $1,000 contributions to Senator Menendez in 2006, both of whom have claimed at times to be neutral on Puerto Rico status issues, yet surprisingly raise a lot of money from Mr. Pavía's pro-commonwealth friends.
In exchange, they -- along with Congressman Luis Gutierrez from Chicago, who serves on Obama's National Campaign Committee and was at one time a "neighbor" of Mr. Pavía in Chicago -- blocks any legislation pertaining to Puerto Rico that could in any way be construed to be positive towards resolving the status issue. One wonders what is the supposedly pro-statehood candidate for resident commissioner Pedro Pierluisi doing supporting Obama? (By the way, it should be noted that if we were doing a network analysis, we would find Congressman Gutierrez as the major link between Mr. Rezko and Mr. Obama.)
Melanie Sloan of the Citizens for Responsibility and Ethics in Washington said the following of Mr. Pavía's activities:
"It sounds like a conflict with Obama's policy. They need to provide an explanation."
The explanation seems pretty simple, as the Dallas Morning News reports:
"The Obama campaign has been active for some time," said Francisco Pavía, a Harvard law school classmate of the senator, who leads his campaign. He said the campaign opened an office three weeks ago and has a substantial number of volunteers.
But wait, it doesn't end there. We already know that Obama's chief surrogate on the island is pro-commonwealth Governor Anibal Acevedo Vila who has been indicted on 19 counts of corruption dealing with campaign finance irregularities and tax fraud. These scandals have been widely reported in the Puerto Rican and mainstream US press. As the New York Times reported it:
Among the 19 criminal counts he faces are tax fraud and using campaign money to pay for family vacations in Miami; Orlando, Fla.; and China; to pay for $57,000 worth of "high end" clothing; and to pay personal credit card bills... The indictment, from a grand jury investigation that lasted more than two years, also charged 12 associates of Mr. Acevedo on the island and in the United States mainland with participation in illegal fund-raising... He faces up to 20 years if convicted on all counts, the authorities said. Most of the other defendants were arrested, and federal officials said they were seeking the remaining few... The 27-count indictment accuses the defendants of conspiring to raise money illegally to pay off large debts stemming from Mr. Acevedo’s successful campaigns in 2000 and 2002 to be the commonwealth’s nonvoting member of Congress, a position he held from 2001 to 2005, when he became governor. The reported campaign debt in 2000 was $545,000, the indictment says. In the scheme, the indictment adds, Mr. Acevedo, with the help of other defendants, solicited and then reimbursed illegal campaign contributions from members of Mr. Acevedo’s family and staff and from the family members and staff of a group of businessmen in and around Philadelphia. To circumvent contribution limits, the governor and his associates disguised the sources of the contributions by listing them under other people’s names, the indictment states. In return for the contributions, the indictment says, Mr. Acevedo helped the businessmen obtain contracts from Puerto Rican government agencies for them and their clients. In the governor’s 2004 campaign, the indictment says, Puerto Rican businessmen made large and unreported donations to the campaign, as much as $50,000 each, by disguising them as corporate payments to a public relations and media company that the campaign had contracted. In fact, those payments were covering campaign expenses. The indictment accuses Mr. Acevedo of using campaign money for personal use and illegally failing to report it on income tax returns.
Of course, none of this deterred Mr. Obama from picking Gov. Acevedo as his chief surrogate on the island. It is admirable that Mr. Obama values the loyalty of his Harvard law school buddy Mr. Pavía and the Congressman of his district Luis Gutierrez, but why would he knowingly choose such a Governor as his chief surrogate on the island? It is indisputable that the top strategists in the Obama campaign knew, and as one campaign staffer told me:
We knew about the allegations. The office is a buzz. Now with the indictments, we are trying to figure out what to do about it.
But they never quite got around to it. Given the accusations leveled against the Governor, could it be that the pro-commonwealth supporters had managed to raise considerable sums of money and guarantee high level endorsements at a time when Mr. Obama was a long-shot at best in the US presidential election? In June 11, 2007, WAPA TV -- a local television network -- reported that Roberto Prats, the Chair of the Puerto Rican Democratic Party, had warned Mr. Obama of going to the island for the sole purposes of fundraising for it could hurt his political chances on the island. But no matter, following the advice of Congressman Gutierrez and Governor Acevedo Vila, Mr. Obama went anyway and raised $200,000. There was, however, considerable mystery about these contributions:
(translation)
Obama... made a quick visit on Monday to raise $200,000, he came and left without making any public statements, and he also did not allow local journalists to take a picture of him with Governor Aníbal Acevedo Vilá... The activity was an effort of lawyers and private individuals, some of whom are not affiliated to any Puerto Rican political parties... "A group of citizens organized who are not affiliated to any of the political parties on the island. They are lawyers who litigate in federal court, and I know them only from my private practice," Prats said... The Democratic pre-candidate met with the Governor for around 20 minutes... The American politician walked in and out without talking to the press corps, who were not allowed to get close to him... According to Puerto Rican newspapers, Obama spent a short time with the guests who paid $1,000 and $2,300 each to spend time with him at the Puerto Rican Art Museum in Santurce (San Juan). The Nuevo Dia (the most widely circulated newspaper on the island) reported that the journalists who were there to cover the event had to stand on the sidewalk because they were not allowed in. In fact, one Obama campaign staffer told the press corps that they must abandon the sidewalk immediately, even though it was a public place, and threatened them if they did not move from there.
Given the allegations against the Governor, you may think that Mr. Obama would not have wanted to meet with him. But I guess when an indicted super delegate puts together a $200,000 fundraiser for you, you show up, regardless of the charges levied on the person organizing the fundraiser. Plus, what better reunion for the two Harvard Law School buddies -- Mr. Obama and Mr. Pavia (and perhaps Gov. Acevedo Vila, who also graduated from Harvard Law School, albeit earlier in 1987)?
You might also think that the Governor would have reacted to the scandals by resigning. But he didn't. Instead, he was defiant and blamed the investigation on a political witch hunt by the federal investigators in cahoots with his rival in the gubernatorial race, as ABC News reported:
Acevedo dismisses the probe as Washington's retribution for his criticism of a September 2005 FBI raid in which a fugitive militant independence leader was killed when agents came to arrest him at a remote hillside farmhouse on the island. Acevedo also says Rosa Emilia Rodriguez, the top federal prosecutor on the island, is aligned with one of his main opponents in this year's race for governor, a candidate from the party that favors making Puerto Rico the 51st U.S. state.
Yet previously, when federal prosecutors had investigated fmr pro-statehood Gov Pedro Rossello and his cabinet members for similar allegations, Gov. Acevedo had responded on the House floor condemning those who dared to suggest that the federal authorities had not acted in the best interest of bringing the offenders to justice:
In 1997,the statehooders came to Washington to push for a statehood bill. They used millions of dollars in lobbying and in political support to convince Congress that all Puerto Ricans wanted to become a state and used millions to silence the other voices from Puerto Rico... Now we know that this campaign was partially financed by illegal money. I wonder how much more of that money was dirty money! Fortunately the federal authorities did their job in investigating and prosecuting the criminals... It is amazing that even today the leaders of the statehood party are unwilling to recognize the depth of the corruption, and continue to try to spin the issue as one of political persecution. They have gone as far as accusing the US District Attorney's Office for the District of Puerto Rico of promoting prosecutions just for political reasons... They showed no remorse!
So it turns out that the federal authorities do a good job as long as they are not investigating Gov. Acevedo-Vila. And while some observers on the island say this has been good for him because now he can forge a coalition of separatists on the island against the federal government, polls suggest he has a 30% approval rating and is running 34 points behind his Republican and pro-statehood gubernatorial rival.
But wait, there's more to this story! It turns out that Obama's Campaign Co-Chair and sometime pro-commonwealth candidate Eduardo Bhatia, who heads the DC office for Gov. Acevedo with "$1 million of lobbying money", is working to block the confirmation of Ms. Rosa Emilia Rodriguez, which as you may remember was overseeing the federal investigation into Gov. Acevedo's activities. How is he doing this? Bhatia has enlisted none other than big Republican lobbyist Charlie Black -- now a top adviser to Senator McCain (and under fire for his own lobbying ties) -- and John Culver -- former Democratic Senator from Iowa -- to work against the confirmation. When it was discovered, both men claimed that their work was pro bono and not the result of the hundreds of thousands of dollars that the Government of Puerto Rico had paid them over the years to lobby against resolving the status issue (and God knows what else?). For the time being, Rodriguez-Velez's confirmation appears to be on hold. As the Washington Post covered the story under "Puerto Rican Lobby Mess":
A political kerfuffle in Puerto Rico has landed on K Street. Supporters of Anibal Acevedo Vila, the commonwealth's governor, have complained that the interim U.S. attorney there, Rosa Emilia Rodriguez-Velez, has been conducting a witch hunt into alleged campaign finance irregularities. The Democratic governor denies any wrongdoing, and his government's representative in Washington, Eduardo Bhatia, says the lengthy and politically damaging probe should be looked into by senators who are thinking of confirming Rodriguez-Velez as U.S. attorney. He's raised the matter with more than a dozen Senate offices... He is not alone. Two longtime lobbyists for Puerto Rico, Charles R. Black Jr. of BKSH & Associates and former senator John C. Culver (D-Iowa) with the law firm Arent Fox, said they also contacted Senate offices to raise questions about Rodriguez-Velez. They did so as volunteers, they said, and did not charge Puerto Rico for the service.
Beyond this case, the FBI recently referred Bhatia to the PR Justice Department in connection with campaign finance violations related to the indictment of Gov Acevedo-Vila.
So to recap, Mr. Obama is a candidate running on change and against special interests. But what do we find in Puerto Rico? His top surrogate is indicted on 19 counts of corruption. His campaign co-director on the island is a lobbyist. And his co-chair is working with Charlie Black and John Culver to obstruct a federal investigation plus is being investigated by the FBI for campaign finance irregularities. Nice. I guess that is one way for Obama to effect change.
Now you may wondering how it is that the pro-commonwealth PDP is able to mobilize so much money to do all these things? How do they get a room of unknown personalities unaffiliated to any of the local political parties to raise money for Obama? Remember that Roberto Prats, the Democratic Party Chairman on the island, mentioned that he knew many because they were lawyers. And he could have added corporate lawyers. That is the big clue. The key is a little known provision in the US tax code known as 936, which has been phased out but with a loophole. As Dan Caterinicchia from the Associated Press wrote on March 22, 2007:
More than half of the Fortune 100 companies operate there (Puerto Rico), with billions invested in factories and trained workers. Eli-Lilly & Co., Abbott Laboratories and others, including Microsoft Corp. and Coca-Cola Co., don’t want to lose Puerto Rico’s tax-free commonwealth status, politicians and academics say... The island’s tax-free status remains a key factor for big business. Congress recently eliminated a credit allowing companies to avoid taxes on material produced on the island. Concerns arose that Merck & Co. Inc. and Pfizer Inc., among others, might leave, and there was a "little pullback" after the credit expired... U.S. companies stay because they have re-registered as controlled foreign corporations and still pay no federal taxes as long as the profits remain offshore, he said. Numerous companies with Puerto Rican operations declined to comment on the subject.
So while Puerto Ricans consistently and overwhelmingly favor a permanent union with the United States (e.g., 93% in the 1993 referendum) with slightly more than 50% hovering in favor of statehood in local polls (as well as 56% of all Latinos according to Univision and 68% of all Americans according to Opinion Dynamics), it is in the interest of the beneficiaries of 936 to keep the island as it is, so they pour money into the pro-commonwealth PDP and their supporters, who then spend the money making strategic campaign contributions to senators, members of Congress and presidential candidates to preserve the status quo and move more towards separation from the United States, particularly in terms of favorable tax laws. And by separation I do not mean independence for independence would beat the purpose. The goal, in the eyes of these corporate activists, is to maintain Puerto Rico as a perpetual territory so it remains as one of those unique places inside the United States where companies can go to reap tax benefits, while still having the protection of US laws. For the pro-commonwealth separatists, this is trickle down economics at its best. The corporate benefits then trickle down to the (often Puerto Rican) corporate lawyers who work for them. With this money, they can then teach their kids English at elite private schools on the island (but not the poor Puerto Ricans who are destined to learn at best a poor English) and send them to Harvard Law School to meet the Kennedys and Obamas of the world, those who might some day become President of the United States and help them to perpetuate the cycle.