John McConnico / AP Photo

US property claims in Cuba: The next hurdle for normalized relations

After embassy announcement, US compensation for lost property on the island becomes a primary concern for stakeholders

When Carolyn Chester Lamb was growing up in Mount Dora, Florida, in the 1960s, her parents often talked about Cuba, the island they had grown to love after her father was deployed there in 1933 as Havana bureau chief for The Associated Press.

Edmund Chester reported on the political turmoil of 1930s Cuba, later becoming executive director of the AP’s radio broadcasts aired throughout Latin America. After a stint in New York City as director of news for CBS television and radio in the 1940s, Chester returned to Havana in 1952 to open a public relations agency, with then-President Fulgencio Batista as prominent client.

Chester loved the island and its people so much, Lamb says, that he and his wife bought an 80-acre farm on Isle of Pines off Cuba’s southern coast. They also acquired $250,000 worth of Cuban Telephone Co. stock.

Cuban Commander in Chief of the Armed Forces Fulgencio Batista is interviewed by Edmund Chester, AP Havana bureau chief, on Aug. 28, 1934.

Fidel Castro’s Cuban Revolution ransacked those investments. After Castro ousted Batista on Jan. 1, 1959, his regime seized private property across the country and nationalized the country’s oil, sugar and other industries, including all foreign-owned properties, which at that point made up an estimated 75 percent of the nation’s arable land.

Chester’s family, Lamb says, was left without its nest egg. Her father died when she was 15 years old after a series of strokes, which she believes were brought on from the stress of losing his assets, worth about $500,000.

“He was a man of honor and was cheated out of his place in history,” said Lamb on June 18 in front of the House Subcommittee on the Western Hemisphere. (PDF) The legislators had gathered to discuss the future of U.S. property claims in Cuba as relations between the two countries thaw after more than half a century of animosity. And with Wednesday’s announcement that Cuba and the U.S. will reopen their embassies, Americans such as Lamb wonder if they’ll finally be compensated for their losses.

Lamb, a single mother, says she makes less than $30,000 a year at her job as an event coordinator in Omaha, Nebraska. “I live in a $60,000 home,” she said. “I drive a 16-year-old car. So any money to me is money.”

And she has made it her mission to spread the word about what has happened to her family and other certified U.S. claimants who lost their Cuban property.

Starting in 1964, an independent arm of the Justice Department called the Foreign Claims Settlement Commission (FCSC) registered a total of 5,913 certified American claims — some from families, others from corporations — of lost property in Cuba, to the tune of $1.9 billion. With an annual 6 percent interest rate set by the FCSC, they are worth about $7 billion today.

In fact, in 1960 President Dwight Eisenhower imposed the U.S. economic embargo of Cuba, now stretching into its sixth decade, expressly because of Cuba’s seizure of U.S.-owned factories and businesses there. The 1996 Helms-Burton Act codified the embargo into law, stipulating that certain conditions be met before the restrictions are lifted, including the settlement of Americans’ property claims.

'Ambigious at best'

After Wednesday’s embassy announcement, and with attention shifting to the embargo itself, how U.S. compensation for lost property will be addressed becomes a primary concern for stakeholder and experts alike.

“Most of the time, you aren’t going to get everything back,” said Patrick Borchers, a professor at the Creighton University School of Law in reference to these types of property claims.

Borchers was a principal investigator on a 2007 study commissioned by the U.S. Agency for International Development (USAID) (PDF) examining how the outstanding U.S. claims might be resolved.

Earlier, he had traveled to Cuba and selected four certified claims at random to determine what had become of them. What he and his team found was ambiguous at best, he said. One claim was listed as a business located on a certain corner, but when they got there, it was impossible to tell which corner. Another described a “wharf-front property,” he says. But what he found was more akin to a junkyard. “There were just heaps of rusted old machinery and you couldn’t tell where anything began,” he said.

His team estimated that Cuba has the hard currency to pay a few pennies on the dollar for all U.S. claims. “The amount that Cuba can realistically afford to pay is so low that we had to propose some kind of alternative to money that they frankly just don’t have,” Borchers said.

Borchers proposed that the claims be sorted into tiers, and that Cuba could pay off the smaller, individual ones in lump sums, as it has done for Canada, France, Spain and Switzerland. The larger ones, owned by corporations such as ExxonMobil Corp., and Coca-Cola Co., could perhaps be settled through opening development zones in Cuba and offering these companies the rights or tax forgiveness, while employing Cubans so as to benefit both countries, he suggested. For example, Starwood Hotels and Resorts, Borchers said, has inherited a $50 million claim through its acquisition of International Telephone and Telegraph Corp., and it might prefer, say, beachfront property and the development rights “rather than rusted old telephone lines.”

This kind of arrangement is exactly what Timothy Ashby, a London-based attorney who served as deputy assistant Secretary of Commerce for the Western Hemisphere in the late 1980s, attempted to do on his own. He says that during his stint with the Commerce Department, Cuban officials first broached the U.S. property issue with him.

“They wanted to settle the claims,” he said.

In 2006, Ashby formed a corporation and raised funds to buy nine of the U.S. claims in Cuba from their original owners as proof of concept, and then attempted to broker private settlements directly with the Cuban government. The idea, he said, was to swap those claims with government assets and allow the claimants to develop them in joint ventures that would employ ordinary Cubans.

But in 2009 he was blocked by the George W. Bush administration, which said it was illegal for him to make the swaps without a license. He tried again when President Barack Obama came into office, and was similarly rejected.

“When the deal was shut down, I was furious,” Ashby said, adding that he knows he was within his legal rights. “For policy reasons, they just wouldn’t listen to us. It’s a sad situation because we could have settled the claims. We probably could have moved the normalization process ahead by two years.”

Some U.S. claimants like Lamb, however, are having none of it. When Ashby’s group approached her to buy her family’s claim at what she said was a steep discount, she got angry. She finds it suspicious that they wanted to pay her a fraction of what her property was worth, yet turn around and make presentations to investors that Cuba is a future investment paradise.

“I’ve sunk my life into this, and I’ve realized people have been trying to screw me over on this,” Lamb said. “Had everybody just concentrated on paying the claims, then we wouldn’t be going through this.”

Her attorney, Mauricio Tamargo, who is the former head of the FCSC, agrees.

In his testimony to the House of Representatives Subcommittee on the Western Hemisphere on June 18, he said the U.S. should not lift the embargo until U.S. claimants are paid in full.

“Cuba keeps crying poverty, saying it has no money,” Tamargo said. “That is just not true. … It is just that Cuba’s leadership have other plans for their revenue.”

Geoff Thale, a Cuba expert at the Washington Office on Latin America, said that while Cuba will likely be willing to settle the claims, given that it has already done so with other countries, it "is not hoarding money — it has enormous outstanding debts, especially to European governments, and it has just recently reopened discussions with the Paris Club about how to reduce the value but guarantee the payment of those debts, so that Cuba can get renewed access to international credit." 

Thale added that in most similar settlements around the world, claimants historically receive a fraction of the estimated value of their claims.

"The eventual outcome will probably provide less to the claimants than many of them would like, but will offer some kind of final resolution, and offer the U.S. and Cuba both the opportunity to move forward in their economic and political relations," he told Al Jazeera via email.

A recipe for chaos

Nicolás J. Gutiérrez, a Miami-based consultant who helped the U.S. government draft the Helms-Burton Act, feels that if the U.S. doesn’t resolve the claims, Americans could start suing fellow citizens who are, say, stopping at ports or airports that were seized from them. “It’s going to be a recipe for legal chaos,” said Gutiérrez.

He has spent the last 25 years helping Cuban-Americans — those who fled the Castro regime but were not yet U.S. citizens when they left Cuba — to compile the paperwork on their own property claims. These claimants have not been permitted to register those losses through the FCSC.

“They’re not fanciful or made up,” says Borchers, who estimates the Cuban-American property claims are worth four times those of the American ones. “People have got deeds to houses they left behind.”

Cuba, however, views them as exiles, and international law doesn’t recognize their right of recovery.

But Gutiérrez, who is also president of the National Association of Sugar Mill Owners of Cuba, which represents the owners of sugar mills expropriated without compensation, has created an informal registry of more than 500 Cuban-American claimants to be ready if and when the opportunity arises.

That includes his own family, which owned several properties in the Cienfuegos area: two sugar mills, 15 cattle ranches, a coffee mill and plantation, and other commercial properties, all of which were appraised at about $35 million in 1950, he says.

“Serious investment is not going to go into Cuba unless and until Cuba rectifies the takings of Cuban-Americans and other Cubans in Cuba,” Gutiérrez said. “Who’s going to trust that their investment was treated any better than ours was back then?”

However the property claims issue is resolved, Borchers, for his part, says it could be a drawn-out process.

“I think we’ll get there with Cuba, but we need to get there in a way that really makes things better for ordinary Cubans,” he said. “Unfortunately, that’s not like flipping a light switch. It’s not like rolling the clock back to Jan. 1st, 1959 and saying everybody gets a do-over.”

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