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Seth Klarman Secretly Holds Puerto Rican Debt, Supported Charter Schools

Seth Klarman Image by Getty Images

By Nathan Guttman October 8, 2017

This week an online investigative magazine revealed that Jewish mega-donor Seth Klarman owns nearly $1 billion in Puerto Rican debt, a fact he tried to hide by holding the asset in layers of shell companies. Klarman has also made some secretive political donations, using “dark money” groups to support charter schools and fight teachers’ unions.

Klarman, 60, founded The Baupost Group in 1982 and since has gained a reputation as one of the most successful investors in America. His personal fortune is estimated at $1.55 billion. He supports various philanthropic causes, such as Boston’s Combined Jewish Philanthropies, Birthright-Israel and media watchdog group CAMERA, through the Klarman Family Foundation, which he established with his wife Beth. In 2012 he entered the media business, co-founding the Times of Israel, an independent pro-Israel online publication, with centrist journalist David Horovitz as founding editor.

His firm hid its investments in Puerto Rico’s distressed debt, the Intercept showed.

“What’s incredible about this is these people were actually hiding,” an anti-hedge fund activist, Julio López Varona, told The Intercept. “Our work right now will be about activating our community in Boston, letting them know this person has been hiding and making sure we go to his houses and his companies to hold them accountable.”

Likewise, Klarman supports political groups that are legally allowed to conceal their backers — earning them the descriptor “dark money” — which means their funders can maintain their anonymity while shaping the public debate.

Klarman has a special interest in charter schools, which he sees as a solution to the public education system’s problems. Klarman grew up in the Pimlico neighborhood of Baltimore, a majority African-American area with a struggling school system. He attended a magnet school before attending Cornell University and Harvard Business School.

University of Massachusetts professor Maurice Cunningham, who keeps tabs on the role Klarman’s dark money plays in the state’s education debates, wrote on the website of local public TV station WGBH that Klarman was the largest donor to the pro-charter group Families for Excellent Schools, giving $3 million for its Massachusetts campaign. Cuningham knew this only because a Massachusetts regulator forced Families for Excellent Schools to disclose its donor list.

He also helped support the group’s efforts in New York state, according to a list of donors the Nation magazine published in 2015.

However, Klarman has been open about other donations. The 2016 election cycle saw donations of over $3.2 million from Klarman and his investment firm. Most donations supported the presidential runs of Republicans Jeb Bush, Chris Christie and Carly Fiorina. Notably, Klarman was one of few top GOP donors who persisted in their opposition to Donald Trump even after Trump won the nomination. Calling Trump “unqualified” to serve as president, Klarman made a point of writing a $100,000 check for a pro-Hillary Clinton PAC.

Trump’s qualifications were not the only issue on which Klarman has broken with the Republican Party. He has also sometimes supported Democratic members of Congress known for their pro-Israel positions, such as Cory Booker, Steve Israel, Brad Sherman and Eliot Engel. And he has provided financial backing to pro-gay marriage initiatives, describing Republicans who opposed equal marriage rights as “neanderthals.” Most of Klarman’s work on LGBT issues was done with fellow Republican Jewish billionaire Paul Singer.

Contact Nathan Guttman at [email protected] or on Twitter @nathanguttman

Nathan Guttman, staff writer, was the Forward’s Washington bureau chief. He joined the staff in 2006 after serving for five years as Washington correspondent for the Israeli dailies Haaretz and The Jerusalem Post. In Israel, he was the features editor for Ha’aretz and chief editor of Channel 1 TV evening news. He was born in Canada and grew up in Israel. He is a graduate of the Hebrew University of Jerusalem.

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