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HavanaJournal.com: Cuba Business

Clarinbridge files for OFAC license to buy Cuban seized US property claims

Posted January 06, 2010 by publisher in Cuba Business.
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Juan O. Tamayo | The Miami Herald

A group of foreign investors is seeking a U.S. government license to buy claims against Cuba, for American-owned properties seized in the 1960s, then swap them with Havana in a debt-for-equity exchange.

The settlement would resolve one of the oldest U.S.-Cuba disputes and perhaps open the way for other improvements in bilateral relations, according to the investors’ company, Clarinbridge LLC.

Clarinbridge requested the license in a July 17 filing with the Treasury Department’s Office of Foreign Assets Control, which enforces U.S. sanctions on Havana. OFAC has not yet replied, said Tim Ashby, a Miami lawyer who represents Clarinbridge and other firms considering business opportunities in Cuba.

Clarinbridge investors have also presented the idea to Cuban officials in Havana, Ashby told McClatchy Newspapers. “I understand the Cubans took it seriously and took a wait-and-see attitude.”

Clarinbridge’s request to OFAC, provided by Ashby, says the company hopes to acquire “600-700 of the U.S. claims ... (that represent) 85 percent of the aggregate certified monetary value of all U.S. claims.”

The claims would then be transferred to a fund that would negotiate with Havana to settle the claims in exchange for equity in Cuban properties, bonds or through other means, Ashby said. U.S. law allows Cuba to make payments to settle the claims.

“That’s a good idea. If OFAC permits it, we would consider doing the same thing,” said Thomas Herzfeld, head of a Miami investment fund, the Herzfeld Caribbean Basin Fund, created in anticipation of the day that political changes would open Cuba to U.S. investments.

“It’s a creative idea, but can you trust the Cuban government not to confiscate these investments again?” asked Jaime Suchlicki, director of the University of Miami’s Institute for Cuban and Cuban-American Studies. “You’re dealing with an arbitrary government, in a country where there’s no legal system to protect investments.”

Clarinbridge is a wholly owned subsidiary of Siboney Ltd., based in the Isle of Man, a low-tax British dependency. Ashby identified some of the main investors as: Charles Guthrie, former chief of the British Defense Staff; Canadian Peter Munk; Felipe and Jose Vicini of the Dominican Republic; Israeli billionaire Beny Steinmetz; and Roberto Servitje of Mexico’s Grupo Altex.

The U.S. government officially recognizes some 5,900 claims for American-owned properties seized by the Castro government in the 1960s, initially valued at about $1.82 billion. With interest, the claims now would be worth about $6 billion. Cuba also alleges that U.S. sanctions caused the island $236 billion in damages over the past half-century.

Cuba, which has settled the 1960s claims from all other countries, recognizes it owes compensation for the U.S. properties and at times has offered bonds to settle those cases, Ashby added. None of the U.S. claims appear to have been settled, though a few have changed hands.

In the late 1990s, ITT leased its claim for seized Cuban telephone assets to Telecom Italia, so the Italians could invest in Cuba and avoid possible complications under the Helms-Burton law. ITT received $25 million over 10 years, according to reports.

And in early 2008, Clarinbridge paid more than $1 million to St. Louis-based Siboney Corp. for its claim to oil exploration rights seized by Cuba and valued at $2.4 million, Ashby said. Siboney Corp. is not related to Clarinbridge’s parent company.

But on July 31 2008, OFAC issued a regulation requiring licenses for all such deals. Regulations are not law and can be changed by administrative decision.

Ashby said Cuban officials have expressed interested in settling the U.S. claims privately, without government-to-government negotiations, because that would clear the way for other investments. Some foreign firms have expressed concerns about possible disputes over property rights in Cuba.

Clarinbridge’s request to OFAC said its proposal could help clear the way for improved U.S.-Cuba ties because U.S. laws require the American claims be settled before full relations can be resumed.

Settling Clarinbridge’s claims, it argued, would significantly reduce the amount of remaining U.S. claims that would need to be negotiated between the two governments “as a prerequisite for a new beginning with Cuba.”

It would also “significantly support the emergence of a private sector” in Cuba, “providing jobs to ordinary Cubans and facilitating (the) de facto privatization of the economy,” the document said.

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