Congress

Have U.S. property claims in Cuba been forgotten in normalization rush?

As the process of normalizing with Cuba surges forward, some worry the government is failing to make progress settling some $8 billion of certified property claims. In this photo, President Barack Obama delivers a speech during a historic visit to Havana on March 22, 2016.
As the process of normalizing with Cuba surges forward, some worry the government is failing to make progress settling some $8 billion of certified property claims. In this photo, President Barack Obama delivers a speech during a historic visit to Havana on March 22, 2016. AP

When Javier Garcia-Bengochea opened his morning newspaper in 1996, the last thing he expected to see was a mention of his family’s former property.

But, near the bottom of a Wall Street Journal article on foreign business investment in Cuba, there it was. An Italian shipping line with which the U.S. did business would be developing the Santiago shipping port La Maritima Parreño as a new destination for its cruise ships.

The port and its warehouses were once part of a privately held corporation headed by Garcia-Bengochea’s cousin, Albert J. Parreño, who’d become an American citizen in 1943. If the family had sold, given away or even abandoned the property, its development might not have been shocking news.

However, the Cuban government had confiscated the Santiago land from the family in 1960, and the family had never been paid for its stake in the company, as international law requires.

“Every American venture in Cuba involves stolen property,” said Garcia-Bengochea, a neurosurgeon who lives in Jacksonville, Florida. “It’s one of the most disgraceful things I’ve ever seen.”

Garcia-Bengochea is one of almost 6,000 U.S. citizens who hold interest in certified property claims against the Cuban government. His cousin’s is No. 1231, according the U.S. Foreign Claims Settlement Commission. Cubans who became American citizens after their property was expropriated by the Castro regime are not eligible to take part in the U.S. claims process.

With diplomatic relations restored, some travel restrictions lifted and legislation in the pipeline that would lift even more constraints on trade, Garcia-Bengochea and his fellow claimants are growing increasingly concerned that their claims – valued today at $6 billion to $8 billion – may remain unsettled forever.

“They are really running out of time to do this,” said Mauricio Tamargo, former chairman of the Foreign Claims Settlement Commission. “I understand some gestures of opening the process to begin discussions, but we’ve gone well beyond what we should be doing.”

More than half a century has passed since Fidel Castro’s rise to power and his subsequent confiscation of property in the name of the revolution. Since then, the Foreign Claims Settlement Commission, an independent agency within the Department of Justice, has evaluated 8,821 claims by American parties and validated 5,913 of them with certifications.

Most of the claims are held by corporations. Others were filed by individuals, such as Garcia-Bengochea’s cousin, who were American nationals at the time of the confiscation. Though the property was originally valued at $1.9 billion, interest brings that estimate as high as $8 billion.

Under international law, the U.S. government is supposed to negotiate a settlement for the claims with the Cuban government. But as the process of normalization has surged – last week, the Obama administration proposed authorizing eight airlines to fly nonstop to Havana – there’s been no public progress on settling the claims, and claimants’ advocates are feeling frustrated.

“I am quite distressed at the level of commerce that is occurring between the two countries,” Tamargo said. “Stop giving these trade concessions; start forcing them to make an offer and settle these claims.”

Tamargo’s parents and uncles also were certified claimants, he said. A farm in Oriente province, a house in Havana and various other properties are among the items the Cuban government confiscated.

Experts remain optimistic that the claims can be settled, but they worry that the easing of travel restrictions and the change in other limitations on trade with Cuba have depleted U.S. leverage.

“The administration is making it harder and harder for things to be done with Cuba,” Roy Smith, a professor at New York University Stern School of Business, said of administration moves to rebuild relations. “But I don’t think they’ve missed a window of opportunity.”

Diplomats from both countries met in Cuba on Dec. 8 to discuss the claims for the first time, but they merely gave presentations and agreed to meet later in 2016 before heading home.

Since then, no further negotiations have taken place, according to the State Department.

“We hope to have another dialogue on claims in the coming months, which would be the next step in what we expect to be a complex process that may take time,” a department spokesperson said in an email Monday, speaking only on the condition of anonymity as part of department protocol. “Resolving claims of U.S. nationals is a top priority for normalization.”

The longer the U.S. waits, the more difficult it will be, Smith said.

“The claims are among the more difficult problems that exist between these two countries, and I think they will be among the last to be solved,” Smith said. “If indeed they are solved at all, which I suspect they may not be.”

The process is not straightforward; many complications exist, Smith said. The Cuban government has counterclaimed with over $800 billion in damages it says were caused by the U.S. trade embargo, while some of the American claimants have received tax breaks for their losses.

Perhaps more complicating is the Cuban government’s ability to pay only “about 2 cents on the dollar,” said Patrick Borchers, a professor at Creighton University who’s an investigator in a U.S. Agency for International Development study on the claims.

But that doesn’t mean it’s a hopeless case. Settling the claims would be “in the interests of both countries,” said Richard Feinberg, a nonresident fellow in the Latin America Initiative at the Brookings Institutions in Washington who’s a professor at the University of California San Diego.

Cuba would boost its business climate and escape legal consequences, he said, and the U.S. would maintain “the principle of compensation” in the normalization process.

Any action by the administration will likely fall between the November elections and the January inauguration, experts said.

“If something dramatic is going to happen, I can just about guarantee it’s after the election,” said Borchers, noting that Florida’s swing-state status and the political awareness of the state’s large Cuban-American community make it difficult for Obama to act without affecting presumptive Democratic presidential nominee Hillary Clinton.

It doesn’t matter when something happens, as long as it does, Garcia-Bengochea said.

“It’s disgraceful,” Garcia-Bengochea said. “This process has found a way to not follow the law.”

Since Garcia-Bengochea saw that Wall Street Journal story in 1996, multiple international corporations have continued doing business on his family’s former property, including Carnival Cruise Line, the China Harbour Engineering Co. and Fred Olsen Cruise Lines, Garcia-Bengochea said. The property includes the Santiago port and its accompanying warehouses.

Garcia-Bengochea inherited the claim from his cousin Parreño, a New York attorney and American citizen at the time of the property’s confiscation. Originally valued at $547,365, the claim’s 6 percent annual interest rate means its value today is almost $8 million.

Rep. Jeff Duncan, R-S.C., held a June 2015 Capitol Hill hearing at which Garcia-Bengochea testified. Since then, he and his fellow lawmakers “really haven’t seen any significant progress on this issue,” Duncan said.

“Here we are, looking at normalizing relations with Cuba, and we’ve still got all these . . . unresolved property claims,” he said. “It’s not a precondition; it’s not even a condition.”

In a June 24 letter, Duncan and Rep. Albio Sires, D-N.J., requested an update on the State Department’s progress on the issue. As of July 8, they’d not received a response, Duncan said.

“This was important at one time,” Duncan said of the claims. “The fact it has yet to be addressed is one of the most egregious items that’s out there in regards to normalizing with Cuba.”

“They’re getting everything they want, and we’re not getting anything in return.”

Eleanor Mueller: 202-383-6033, @eleanor_mueller

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