In Talks Over Seized U.S. Property, Havana Counters With Own Claim


DEC. 13, 2015


MIAMI — Some of the thorniest conversations in the long road toward full relations between Cuba and the United States have only just begun in recent days: The two sides are sitting down for the first time to discuss the American properties Cuba confiscated decades ago.

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The very idea of compensation for property and businesses seized in the wake of the Cuban revolution sent a quiver of excitement down the backs of the thousands of people who lost everything from sugar mills to family homes to oil refineries.


People started dusting off yellowing deeds. Lawyers were called.


But what if Cuba approaches these historic talks with a rather different unsettled claim in mind?


In 1999, a Cuban court found the United States government liable for deaths and damages caused by America’s “aggressive policies” against the island — namely, the Bay of Pigs invasion and the trade embargo prohibiting American citizens and companies from doing business in Cuba.


Arguing that the United States had strangled Cuba’s economy and caused irreparable harm, the court ordered the United States to pay $181 billion in damages.


An American mobster’s grandson is interested in compensation for the Riviera hotel in Havana. Credit Reuters


So while legal representatives from the State Department flew to Havana last week to make the case for American claims against Cuba, the Cubans made a presentation of their own.


“We know that they believe that they have billions of dollars of claims relating to human damage and economic damage resulting from the embargo,” said a State Department official who briefed reporters on the condition that she not be named. “And I think we can expect that we will hear more about that as we proceed with these discussions.”


The official would not say whether the Cubans demanded an exact figure in reparations. It is unclear how the Cuban government arrived at any of the many damage estimates bandied about.


At the United Nations this year, Cuba said it was owed about $121 billion. The Cuban government-run news media says the amount owed is $833.75 billion.


“This is an extremely complicated subject,” Josefina Vidal, head of United States affairs in the Cuban Foreign Ministry, told The Associated Press after the first meeting of the bilateral commission this fall. “I imagine that when the two countries begin to meet, one of the first things we will have to do is to clarify all the accounts.”


(She noted that the Cuban court verdict was 15 years old, suggesting there were fresh numbers to crunch.)


The State Department official said last week’s meeting was both preliminary and professional, but she emphasized that the issue of compensation for the confiscated properties was crucial. More meetings are expected in the coming months.


“This meeting is the first step in a complex process that may take some time, but the United States views the resolution of outstanding claims as a top priority for normalization,” the American official said.


In Havana, the American delegation detailed how the Foreign Settlement Claims Commission arrived at the $1.9 billion in 5,913 certified American claims, which are estimated to be worth $8 billion with interest. Most of the money is owed to American companies, experts say. The claims do not include any from the many thousands of Cubans who lost property before leaving the island and becoming American citizens.


The State Department also laid out the 10 state and federal court judgments American courts have levied against the Cuban government, totaling another $2 billion or so, as well as “some claims of the U.S. government against Cuba,” the official said.


Experts said that American claimants should not be too worried about Cuba’s daunting counter-demands.


“Those are the opening positions,” said Richard E. Feinberg, a Latin America adviser during the Clinton administration who published a study on the claims issue this month for the Brookings Institution. “This is a negotiation.”


Mr. Feinberg noted that Cuban officials should be motivated to make a deal because they had no doubt paid close attention to the legislative elections last weekend in Venezuela, where the leftist government that keeps Cuba afloat financially took a beating at the polls for the first time in 17 years.


Cuba needs the United States to lift the trade embargo, and the best way to get that done is by settling the property claims, he said. The embargo was put in place in 1962 after a dispute that began precisely because Fidel Castro expropriated American oil companies that had refused to process Russian crude.


With an end to Venezuela’s financial aid a greater possibility, Cuba needs a new revenue stream. Soon.


“The fuse has been lit,” Mr. Feinberg said. “Time is running out.”


Hundreds of Cubans lined up outside the United States embassy in Havana to apply for visas on July 20, the day the embassy reopened after more than a half-century of Cold War estrangement. Credit Meridith Kohut for The New York Times


Mauricio J. Tamargo, a Washington lawyer who chaired the Foreign Settlement Claims Commission for eight years, said the two sides must come up with a bargain that is fair, or Congress would not vote to lift the embargo.


The claims have also been a stumbling block to re-establishing direct air travel between the two countries, because Cuba fears its planes could be seized to satisfy court judgments, Mr. Feinberg said.


Should the talks advance, there are plenty of models negotiators could look at.


Past examples of such settlements have varied considerably, with claimants receiving as little as 10 percent of their claims, with no interest. When the Berlin Wall fell, American claimants got 100 percent of the value of their properties, plus interest.


In Latvia, Estonia, Lithuania, the Czech Republic and Slovakia, confiscated properties were sometimes returned to their original owners.


Poland, Hungary, Bulgaria and Romania offered compensation, “usually inadequate, and often symbolic and not necessarily monetary,” said Nicolás J. Gutiérrez, a consultant in Miami who has worked on the issue for decades after his family lost a $35 million empire in Cuba.


The Cuban case is trickier: Not only does the government have its own counterclaim, but the people who did the confiscating are still in power.


In that sense, the Cuba’s situation is more parallel with Vietnam and China.


In 1979, China agreed to pay $80 million to a China Claims Fund, which allowed American claimants 39 percent of the value of their lost properties, according to the Brookings study. Vietnam, to normalize relations with the United States, agreed in 1995 to apply its assets frozen by the United States government to pay claimants 100 percent of the principal and 80 percent of the interest they were owed.


Mr. Gutiérrez believes the claims should have been settled before the embassies were opened. He now fears that the two lists of demands are so lopsided that the American claimants will walk away with nothing.


The State Department negotiates on behalf of American claimants and does not have to seek their approval before reaching an accord.


“You can almost imagine Obama negotiators saying: ‘Look, we got them to drop the fantasy $120 billion!’” Mr. Gutiérrez said. “We drop the $8 billion, and no one gets anything.”


The George W. Bush administration paid the Creighton University School of Law in Nebraska $375,000 to come up with proposals. The university recommended creating a special tribunal — as President Jimmy Carter did in Iran. Cuba could pay with development rights, tax incentives encouraging foreign investment in Cuba, or in a lump settlement, which could be financed by the international community, said Michael J. Kelly, who co-wrote the report.


Mr. Kelly said the Cuban counterclaim for reparations should not be taken seriously.


“Those claims are not supported by international law,” he said in an email. “The property claims are.”


More are sure to surface. Already, a Tampa resident, Gary Rapoport, has publicly inquired about compensation for the Riviera, a 352-room waterfront hotel in Havana that was inaugurated in 1957 by Ginger Rogers. It was owned by Mr. Rapoport’s grandfather, Meyer Lansky, an organized crime figure.


In an interview with The South Florida Sun-Sentinel, the mobster’s grandson, put it like this: “Cuba owes my family money.”