FULL STORY: Walmart v. Puerto Rico Trial, Day 1

by Gil Hall gil@prnewsroundup.com @gillamhall

San Juan, Puerto Rico

On the opening day of the Walmart v. Puerto Rico trial, the fireworks began after lunch, when a Walmart attorney asked a government official about events of the last year.

Walmart attorney Neal S. Manne queried Melba Acosta-Febo, the head of the Government Development Bank of Puerto Rico, on three main topics.

  • He asked Acosta to verify a series of public statements she has made in the past year about the dramatic worsening of the Puerto Rican economy.
  • He asked her about her work as a member of the Government Working Group, which group has released a series of documents in the last six months that paint a bleak picture of the Puerto Rican economy’s present and short-term future.
  • He asked about a series of documents sent by Rafael Blanco, who heads the Oficina del Comisionado de Instituciones Financieras, to other government officials in which Blanco questions the very liquidity of the development bank. OCIF is the government agency that regulates banking on the island.

Ms. Acosta’s answers were brief, and she frequently asked that Mr. Manne clarify the precise scope of his question and to point to the exact places in the documents he was referring to for cited quotations.

Ms. Acosta is an attorney, a CPA, and has a MBA from Harvard.

Walmart is suing the Commonwealth in federal court for what it alleges is an unconstitutional transfer tax. In spring 2015 Puerto Rico approved Act 72, which raised the tax–for taxpayers with revenues above $2.75 billion (only Walmart fits this criterion)–on merchandise purchased from affiliated companies outside Puerto Rico from from 2% to 6.5%.

Walmart balked at the tax law, saying that such a tax would reduce its net revenue to an unacceptable level. In the original complaint in December 2015, the figure cited was 91% of net revenues. Documents Walmart cited in court on Tuesday the figure of 114% of net revenues.

Walmart employees 14,300 people on the island, and, as such, is the island’s biggest employer.

The Commonwealth has argued that the correct forum for the lawsuit is in local courts.

Walmart took its claims in federal court, however, arguing that it could not get a speedy resolution in the Puerto Rican judicial system. Further, Walmart says that due to Puerto Rico’s precarious economic position, the government would not be in a position to refund any taxes paid to the Commonwealth during a multi-year set of legal maneuvers.

The most sensational event of the day surrounded a “targeted liquidity review” in which the head of the OCIF questioned  whether the development bank has sufficient funds to continue operating. Acosta said Mr. Blanco’s documents had fundamental errors in its data, that she disagreed with his analysis, and that he had failed to respond adequately to objections raised.

The Commonwealth made every effort in court to prevent the document’s release into the public record of the trail. Federal judge José A. Fusté, however, brusquely denied the request.

The trial continues Wednesday in San Juan, and is expected to last a total of four to seven days.

About Gil Hall

Currently writing book on PR crises. Working title: “Los Pertrechos: the Story of an Economy”. Polyglot prone to prolixity in English, German &, Spanish. Based between San Juan and North Carolina. MBA/MHA.

2 comments

  1. From El Vocero:

    He stressed that during the spring of last year, he and other executives of the multinational met with legislators Eduardo Bhatia, Rafael Nadal Power Angel Rosa, Rafael “Tatito” Hernandez, Luis Vega Ramos, one of the proponents of the measure-and Minority spokeswoman Jennifer Gonzalez.

    He said that although he was not present, company executives also met with the team of Governor Alejandro García Padilla.

    Asked by Manne, Walker said most lawmakers referred to the tax as “Walmart tax” and felt that they were more concerned with getting of money to government coffers and not whether the measure was unfair or not.

    http://elvocero.com/walmart-se-iria-de-puerto-rico-si-prevalece-la-ley-72/