Decree may affect foreign companies caught up in corruption trials

Decree may affect foreign companies caught up in corruption trials

CUBA STANDARD — Saying it wants to avoid confiscated properties sitting
idle for extended periods of time, the Cuban government published a
decree regulating seizure of personal assets in cases of "illegal
enrichment and drug-related events, corruption, or other unlawful conduct."

Amid a slew of anti-corruption investigations and trials, Decree No.
313/2013 impacts both Cubans and foreigners caught up in the
anti-corruption campaign. The decree, published in the Gaceta Oficial
Aug. 21 and effective Oct. 1, describes procedures to be followed with
assets seized in judicial trials and administrative confiscations.

More than answering questions about what happens to the assets of
foreign companies that have been caught up in less-than-transparent
corruption trials, the publication of the decree raises more questions.

The new regulations talk about "personal goods" and do not mention
corporate assets. Even so, the examples listed in the decree cover a
broad range, from cash to securities and other financial instruments, to
emergency power generators and high-tension cables. They only cover
"movable assets"; however, since there is no outright real estate
ownership by foreigners and foreign companies in Cuba, many of these
companies' assets may be considered "movable."

At least four foreign companies in Cuba — Alimentos Río Zaza, Coral
Capital Group, Tokmakjian Group and Tri-Star Caribbean — have been
subject to corruption investigations and shut down while company
executives were in prison or abroad.

The Cuban government has not announced how it proceeds with the assets
of these companies. Nor has it publicly described the exact nature of
the allegations, causing speculation among foreign businesspeople.

"Your intrepid reporters could usefully investigate the individuals and
cliques who are benefitting from the market reorganization and newly
nationalized assets resulting from this 'war on corruption'," wrote
Stephen Purvis, former chief operating officer of Coral Capital, in a
recent letter to Britain's Economist magazine. Purvis returned to his
native Britain this summer after 15 months at the infamous Villa Marista
prison in Havana, including eight months of interrogations over alleged
acts of corruption. A Cuban court, according to Purvis, finally
convicted and sentenced him on minor issues, such as "breaches of
financial regulations."

In his letter, Purvis suggests that Canadian and European businesspeople
are being harassed by the Cuban government, while their Chinese,
Brazilian and Venezuelan competitors aren't. The Cuban government has
established strategic economic partnerships with China, Brazil and
Venezuela.

In the case of Coral Capital, a Chinese consortium reportedly took over
a golf course project East of Havana that had been planned by the
British group; no public announcement has been made. Coral Capital also
was the foreign joint venture partner in the Saratoga hotel in Old
Havana; Cuba Standard was unable to obtain information as to the current
ownership of that hotel.

The new rules establish that, depending on the type of assets, the
Central Bank of Cuba, and the ministries of Interior, Energy and Mines,
Communications, Health, Agriculture and Domestic Trade will manage the
"deposit, storage and disposal" of these assets. All assets that are not
returned to their owners become state property.

In 2010, Max Marambio, the Chilean citizen who co-owned Alimentos Río
Zaza with the Cuban government, filed legal proceedings against Cuba
before the international court of arbitration of the Paris-based
International Chamber of Commerce (ICC). Marambio, who in 2011 was
convicted of fraud and sentenced in absence by a Cuban court to 20 years
of prison, asked for $143 million in lost profits and $10 million for
"moral damage."

Independent of the criminal proceedings against Marambio by Cuban
courts, in 2012 the arbitration court declared the joint venture between
Marambio and Cuban state company Coralsa dissolved and ordered its
liquidation. In July this year, it found that Coralsa owed him $18
million for "lack of good faith" in the dissolution of Río Zaza.

The court consisted of one judge suggested by Marambio, a Cuban judge,
and a third agreed upon by both parties.

Source: "Decree may affect foreign companies caught up in corruption
trials « Cuba Standard, your best source for Cuban business news" -
http://www.cubastandard.com/2013/08/23/decree-may-affect-foreign-companies-caught-up-in-corruption-trials/