On the heels of its legal victory last week, Doral Financial Corp.’s Economic Advisor Robert Shapiro on Monday urged the government of Puerto Rico to honor the tax agreement upheld by a local court, “for the sake of its credibility.”
“The courts have spoken and validated Doral’s tax claim. I hope that the Government of Puerto Rico will respect this ruling and the rule of law, and pay Doral the money it is entitled to,” he said, referring to a $229 million tax refund the bank is seeking as established by an agreement signed in 2012.
On Friday, the Court of First Instance ruled against the Treasury Department’s decision earlier this year to null the agreement. Immediately after Friday’s decision, the government confirmed it would appeal.
“The Puerto Rico Department of the Treasury has vigorously defended the interests of the People of Puerto Rico in Doral’s claim against the government. We respectfully disagree with the court’s ruling in this matter, which is inconsistent with the Internal Revenue Code, applicable laws and regulations. This ruling sets a dangerous precedent, and we plan to pursue all legal options available to appeal the Court’s decision,” Treasury Secretary Melba Acosta said in a statement issued Friday.
The refund payment is to be paid in five installments over a five year period, and will remain contested by the Commonwealth of Puerto Rico until appeal processes within the judiciary system are resolved. Also, applicable law allows for longer payment plans for payment of judgments, the agency said.
“Unfortunately, Gov. García-Padilla may not have gotten the message. The statements that his administration will not at this time abide by the court’s decision is a warning to investors about the willingness of Puerto Rico’s current government to honor its commitments,” said Shapiro, former Undersecretary of Commerce for the Clinton Administration hired by Doral to lobby on its behalf during its battle against the government.
“This is a dangerous step. Today Puerto Rico’s government refuses to pay Doral. Should Puerto Rico’s bondholders and investors be worried about tomorrow? They need to know they can trust that the commonwealth government will pay its bills and honor its commitments. Right now, Gov. García-Padilla is damaging that trust,” he said.
“My research has demonstrated that Puerto Rico and its government have the financial capacity to pay Doral. For the sake of its credibility and the Puerto Rican economy, it should do so now,” Shapiro concluded.