Puerto Rico’s Act 22 Investors Bet on a Pierluisi and Romero Government

Old San Juan (Photograph: Brad Clinesmith, Wikipedia)

Spanish version here

Political party fundraising machines are in full swing in the run-up to Puerto Rico’s general elections, and a new and privileged group of investors that have benefited from Puerto Rico’s austerity regime have emerged as a significant set of donors.

LittleSis estimates that donations to the different campaign committees in this electoral cycle (2018-2020) exceed $18.6 million, according to data provided by the Office of the Electoral Comptroller. But one of the angles that has gone unnoticed so far is the influence of Act 22 investors in the country’s political arena. As a group, the beneficiaries of Act 22 have been donating consistently in all electoral cycles.

An examination of the reports of the Office of the Electoral Comptroller and the Act 22 list of beneficiaries published by the Department of Economic Development and Commerce (DDEC) shows that Miguel Romero, candidate for mayor of the Municipality of San Juan, and Pedro Pierluisi, candidate for governor, are the candidates who have received the most from these investors.

Act 22 of 2012, approved under the administration of Luis Fortuño and endorsed by the administrations of Alejandro García Padilla and Ricardo Rosselló, exempts investors who move to Puerto Rico from the payment of taxes on dividends and capital gains. In this way, the government encourages millionaires attracted by low taxes to move to the archipelago, in the hope that what they invest in Puerto Rico will help the economy.

According to a study commissioned by the DDEC and prepared by Estudios Tecnicos, 2,612 decrees were approved under Act 22 from 2012 to 2019 . We have no data regarding whether these individuals moved alone or in the company of their families, so it’s unclear how many people in total have moved to Puerto Rico as a consequence of this exemption. What we do know is that, during these same years, Puerto Rico lost around 440,000 inhabitants. In that sense, the long economic depression, combined with exemptions that only benefit investors, has helped create a kind of large-scale gentrification.

The DDEC still has not updated its database to include this year’s Act 22 beneficiaries.

Betting big on Romero and Pierluisi

A review of donations by LittleSis found that, in this election cycle, from 2018 to September 2020, Act 22 beneficiaries have donated about $203,000. This figure is significant if one takes into consideration that the law establishes a maximum amount of $2,800 per year for all donors. However, at the time of releasing this article the last quarter revenues of many campaign committees have not yet been published, so the final figure will be higher.

Between 2019 and 2020, Miguel Romero took in almost half a million dollars. Over $44,000  – or about 9% of his campaign income – came from beneficiaries of Act 22, according to his committee’s reports as of June 2020. Romero, among other things, is remembered for the approval of the notorious Act 7 at the beginning of the Luis Fortuño administration. Act 7 ordered the dismissal of thousands of public employees and had the support of the then Secretary of Labor, Miguel Romero, who requested its approval without amendments.

On the other hand, Pedro Pierluisi is the candidate who has received the most donations from these investors in this electoral cycle, raising just over $60,000 by September 2020. Until 2019, Pierluisi served as an attorney for the oversight board through the law firm O’Neill & Borges, where he billed up to $400 an hour.

Eduardo Bhatia was the Popular Democratic Party’s favorite candidate for Act 22 investors, but lost the primary to Charlie Delgado. The donations received by Resident Commissioner Jenniffer González campaign were made at the federal – not local – level.

Before his precipitous fall as a result of the massive mobilizations that took place in the Summer of 2019, Ricardo Rosselló had already raised $10,600 from Act 22 investors. In the previous electoral cycle, Rosselló raised over $69,000 from these investors, surpassing the rest of the candidates.

Two of the investors who have donated the most money in this election cycle are Mark Curry and Brian Tenenbaum, with $15,100 and $8,400 respectively. Curry is a recognized businessman, founder and partner of Sol Partners, a technology consulting firm that advises companies on risk management, consumer acquisition and customer service. In 2017, Curry acquired Noticel, one of the digital media with the largest presence in Puerto Rico. Curry sold Noticel in March 2020 to a local businessman.

Brian Tenenbaum is the chief operating officer of the Morgan Reed Group, a real estate investment firm with properties in the United States and Puerto Rico. An examination of the contracts of Puerto Rico’s Department of Transportation and Public Works shows that companies related to the Morgan Reed Group have purchased at least four of the schools closed by the García Padilla and Rosselló administrations, including a school in Puerta de Tierra, San Juan. The corporations related to the Morgan Reed Group (according to their certificates of incorporation) are Shinrai Holdings LLC, Mr Blue Ocean LLC and Mr Bull LLC,.

LittleSis was able to identify a total of $524,000 in donations from Act 22 investors from 2012 to the present. The New Progressive Party benefited the most from these donations, receiving around 70% of the total donated.

The donations to candidates from Act 22 investors represent yet another example of how corporate interests and wealthy elites are using their power and sway to safeguard their interests and maintain a status quo that benefits them at the expense of the Puerto Rican people. If the presence in Puerto Rico of Act 22 investors keeps growing in the coming years, organizations and people who believe in social justice should keep an eye on their expanding political influence.