Fight between Paulson, Ghaffar now involves FTZ property in San Juan
The latest round in the fight between Act 60 beneficiaries and former business partners John Paulson and Fahad Ghaffar is taking shape in the U.S. District Court in San Juan, over the use of a plot of land designated as a foreign trade zone on Kennedy Avenue in San Juan.
Plaintiffs PCI DE LLC, PCI PR LLC, and Better Puerto Rico LLC — managed by Ghaffar — filed a complaint on Dec. 20 at the San Juan Superior Court against defendants Paulson & Co., F40 LLC, V12 Land LLC, and Rafael Cedeño-Paulson.
The plaintiffs seek a possessory injunction against the defendants to continue using a section of FTZ No. 61, Site 10, on Blay Street, Bechara Sector, where they store recently imported luxury vehicles before they are moved out for retail sale at one of the adjacent dealerships, including Porsche Center Puerto Rico.
The plaintiffs allege that the defendants are obstructing them from freely entering and removing vehicles from that portion of the FTZ and are hindering their shared use of showrooms for Alfa Romeo-branded vehicles.
According to the lawsuit, the plaintiffs argue that “the defendants launched a scheme to forcibly remove more than 250 cars from the plaintiffs that are currently in the Free Zone. As part of this scheme, the defendants have already forcibly removed the Alfa Romeo cars from the showroom that they shared with the Maserati brand, just as they have already begun to deny that cars owned by the defendants continue to use the Free Zone.”
The lawsuit states that the defendants set a deadline of Dec. 22, 2023, for the removal of some 250 cars from the FTZ.
“Otherwise, as has happened in the past, the defendants will take the law into their own hands. If that were to happen, the plaintiffs would have to pay approximately $2 million in taxes, which would be disastrous for their businesses,” according to the claim.
On Jan. 3, the defendants requested the case be transferred from San Juan Superior Court to federal jurisdiction on the grounds that the issue at the heart of the complaint pertains to the use of an FTZ, which involves various federal agencies, such as U.S. Customs and Border Protection and the U.S. Department of Commerce, both of which have oversight over FTZs.
In their motion to the federal court, the defendants laid out an argument presented by the plaintiffs that they previously agreed to share an FTZ owned by V12 Land LLC and requested unrestricted access to it at the local court.
“The local court set an injunction hearing for Jan. 17, 2024, and in the meantime, granted plaintiffs an ex parte order that encroaches the federal government’s powers over the FTZ at issue for a period that exceeds the time limit [10 days] applicable to TROs [temporary restraining orders] under the procedural rules,” Paulson & Co. and the other defendants stated in their petition to move the case to the U.S. District Court for Puerto Rico.
U.S. District Judge Raúl M. Arias-Marxuach has been assigned to the case.
Paulson & Co. and the other defendants said the plaintiffs filed the action to “force the entry and storage of their vehicles in the FTZ to avoid paying duties, taxes and excise taxes. The issue is plainly related to both customs and commerce activity because the FTZ furthers the objective of encouraging economic activity in the automotive industry, requires the direct involvement of the CBP in the formal entry procedures to allow vehicles into and out of the FTZ and the corresponding payment of duties, and particularly because the purpose of Plaintiffs’ actions to gain unrestricted access to the FTZ is to avoid the payment of customs duties, which is a tax exemption provided exclusively by the FTZ Act in this case.”
“As the plaintiffs would have the court believe, they would retain and override possession over an FTZ area that they never operated because the law and regulations clearly have F40 as the operator of the zone,” the defendants stated.
