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Viewing cable 09MANAGUA1052, 2009 Bilateral Review of Nicaragua's Section 527 Process
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09MANAGUA1052 | 2009-10-26 17:51 | 2011-07-27 20:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua |
VZCZCXYZ0001
RR RUEHWEB
DE RUEHMU #1052/01 2991752
ZNR UUUUU ZZH
R 261751Z OCT 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0023
INFO WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
UNCLAS MANAGUA 001052
SENSITIVE
SIPDIS
STATE FOR WHA/CEN, EB/IFD/OIA, AND L/CID
STATE ALSO FOR WHA/EPSC
E.O. 12958: N/A
TAGS: ECON EINV NU
SUBJECT: 2009 Bilateral Review of Nicaragua's Section 527 Process
REF: SECSTATE 79312; 08 MANAGUA 1546; MANAGUA 465; MANAGUA 921
MANAGUA 877; MANAGUA 953; 08 MANAGUA 564; MANAGUA 975; MANAGUA 235
SUMMARY
-------
¶1. (SBU) In the Secretary's letter to Foreign Minister Samuel
Santos announcing a Section 527 waiver for 2008-2009, she proposed
holding another bilateral review of the Government of Nicaragua's
(GON) claims processes and procedures. The bilateral review is an
opportunity to articulate USG views on issues that adversely affect
the resolution of U.S. citizen claims, and also to press for better
cooperation between the Embassy Property Office and the GON. Post
proposes that the delegation composed of WHA, EEB, and L that
conducted the 2008 bilateral review lead this year's consultations
in Nicaragua in December 2009 or December 2010.
2009 BILATERAL REVIEW
---------------------
¶2. (SBU) The Secretary's July 29 letter to Foreign Minister Santos
granted a Section 527 waiver to Nicaragua for the 2008-09 waiver
period, but also proposed another bilateral review of property
issues (Ref A). Her letter specifically mentioned over 130 U.S.
citizen property claims dismissed under Decrees 3/1979 and 38/1979
and for administrative reasons. We also see the bilateral review
as an opportunity to articulate USG views on claims for property
that are under GON control, claims that languish in the courts, new
confiscations of U.S. citizen property, issues related to the
transparency of compensating U.S. claims, and the importance of
addressing all U.S. citizen claims, even those not covered by the
waiver.
¶3. (SBU) Post proposes that the WHA, EEB, and L officials who
conducted the 2008 bilateral review lead this year's consultations
in Nicaragua (Ref B). This team is familiar with the obstacles to
resolving U.S. claims in Nicaragua and knows Attorney General
Hernan Estrada and other GON officials. Post recommends that the
bilateral review occur in December 2009 or January 2010 to allow us
to 1) emphasize the importance that we place on meeting the
Secretary's benchmarks, 2) address new issues that have arisen
during this waiver year, and 3) establish the framework for
cooperation with the GON during the rest of the waiver year.
BILATERAL REVIEW ISSUES
-----------------------
¶4. (SBU) We recommend that this bilateral review include the
following agenda items:
--Provide a clear explanation of how Section 527 applies to U.S.
citizen claims against the GON;
--Receive updates on 70 claims dismissed under Decrees 3 (1979) and
38 (1979);
--Review the 52 claims dismissed by the Attorney General for lack
of documentation;
--Discuss new confiscations of U.S. citizen property;
--Evaluate progress on resolving U.S. claims for property
controlled by the government, including the Nicaraguan Army;
--Urge fairness and transparency in determining compensation;
--Seek the repeal of new regulations affecting due process;
--Advocate for U.S. claims that languish in Nicaraguan courts; and
--Press for the resolution of all U.S. citizen claims regardless of
whether they fall under Section 527.
MISINTERPRETATION OF SECTION 527
--------------------------------
¶5. (SBU) In July, Attorney General Estrada met with members of the
U.S. Congress to complain that the USG was not properly applying
paragraph (h) of Section 527 of the Foreign Relations Authorization
Act of Fiscal Years 1994 and 1995. Paragraph (h) defines a United
States person as a U.S. citizen, corporation, partnership, or
association at least 50 percent beneficially owned by United States
citizens. In August, GON officials stated that they were reviewing
26 U.S. citizen claims to determine whether they met the definition
provided in paragraph (h). The Embassy has told GON officials
repeatedly that at this time, the only operable paragraph of
Section 527 is (g), which authorizes the USG to grant a waiver to
Nicaragua based on national interest. In addition, the criteria
applicable in evaluating Nicaragua's progress in resolving U.S.
citizen claims during this waiver year are the benchmarks laid out
in the Secretary's letter to Foreign Minister Samuel Santos.
DECREE 38 AND 38 DISMISSALS
---------------------------
¶6. (SBU) Since 2007, the GON has dismissed a total of 98 claims
through the application of Decrees 3 (1979) and 38 (1979), which
authorized the GON to confiscate property belonging to the Somoza
family, former members of the National Guard, and their "allies."
On March 12, Estrada told the Ambassador that he would review 70 of
the claims dismissed under the decrees. Estrada kept his word, and
during the 2008-2009 waiver year, the GON resolved 16 claims
previously dismissed under Decrees 3 and 38 and six more during
this waiver period. Despite this progress, there remain a total of
76 claims dismissed under Decrees 3 and 38. In addition, on
October 19, we received information that the National Confiscations
Review Commission (CNRC) dismissed one non-waiver claim belonging
to a U.S. citizen under Decree 38.
ADMINISTRATIVE DISMISSALS
-------------------------
¶7. (SBU) Since 2007, Attorney General Estrada has notified us on
several different occasions that the GON had dismissed waiver
claims for administrative reasons -- for example, because claimants
could not demonstrate proof of ownership or confiscation and/or
because they never filed a claim with the CNRC. Estrada sent the
latest list in May to notify us that the GON would dismiss 52
claims. After the Embassy Property Office contacted claimants to
ask them to provide the necessary paperwork to the Attorney
General's Office to defend their claims, Estrada revised this list
in August and alleged that 24 claimants never filed claims with the
CNRC. So far, one claimant representing one claim has acknowledged
that he did not file with the CNRC. He has subsequently withdrawn
his claim from the Property Office's registry. We are working with
the Attorney General's Office to provide the remainder of our
claimants with sufficient time to provide the necessary paperwork
to defend their claims.
NEW PROPERTY CONFISCATIONS
---------------------------
¶8. (SBU) In 2009, the GON confiscated three properties belonging to
three separate U.S. citizens and their families. The Embassy has
warned GON officials that any confiscation of U.S. citizen property
weakens Nicaragua's chances of receiving a Section 527 waiver. One
of the properties belonged to U.S. citizen claimant Leonidas
Guadamuz. He filed a claim with the Property Office in April 2003
because the GON had taken possession of his property in July 1979,
but the government never went through the process of transferring
ownership of the land to the beneficiary. The legal representative
of Mr. Guadamuz informed us that the GON formally confiscated the
property under Decree 3 in April 2009 (Ref C). In March 2009, U.S.
citizen Lydia Mayorga received information that the GON had
confiscated her property and offered indemnification bonds (BPIs)
as compensation (Ref D). Mrs. Mayorga has refused the government's
offer but she is willing to negotiate a settlement, including the
return of her property. In July 2009, the Attorney General's
Office published a resolution in the Official Gazette expropriating
the land on which an open-air landfill known as "La Chureca" is
located in Managua (Ref E). The GON transferred title to the City
of Managua. Three U.S. citizens of the same family claim to own
41.66 percent of the property. The government offered BPIs with a
face value of about $2 million, worth half that on the secondary
market and far below the $5 million in cash compensation agreed
upon in 2008.
CLAIMS UNDER GON CONTROL
------------------------
¶9. (SBU) During the 2008-2009 waiver period, the GON resolved two
U.S. citizen claims under the control of the Nicaraguan National
Police. One claimant received bonds as compensation while the
other agreed to lease his property in Jalapa to the police. With
regard to U.S. citizen claims under the control of the Nicaraguan
Army, the municipal court in Masaya evicted a former Army officer
from property owned by a U.S. citizen. During the 2009-2010 waiver
period, the GON has not resolved any claims under the control of
the government or the Army. On September 24, GON officials said
that the case of U.S. citizen Juan Barreto, whose 28 properties are
under control of the Nicaraguan Army, was close to resolution
pending the submission of his family's corporate charter (Ref F).
There are 51 claims under GON control, 36 of them are under control
of the Army.
LACK OF TRANSPARENCY FOR SETTLEMENT OFFERS
------------------------------------------
¶10. (SBU) The Office of Assessment and Indemnification (OCI)
settles claims through a process that lacks transparency. The
Attorney General's Office has published the procedures for
determining compensation, but OCI refuses to provide claimants a
clear explanation of how it calculates settlement offers.
Specifically, OCI provides no information on how it determines
property values or, in some instances, why it reduces settlement
offers made by previous governments. Attorney General Estrada has
asserted that the law does not require him to negotiate
compensation. Instead, he makes a "take it or leave it" offer. In
addition, claimants are not allowed to review their files or
retrieve information on property values from the National Cadastral
Registry Office or its regional offices to assess government
offers.
RESOLUTION OF CLAIMS THROUGH OFFICIAL PUBLICATION
--------------------------------------------- ----
¶11. (SBU) For those claimants who do not accept the government's
offer, OCI deposits the bonds in an escrow account and publishes
notice of the compensation in the Official Gazette. The government
has used this approach since June 2008, arguing that claimants had
exhausted recourse through the administrative process and should
file their cases with local courts if they disagree with the
compensation offered. Thirty U.S. citizen claimants, including one
claimant whose case was being decided in court, have been affected
by this measure (Ref G). The Ambassador has told Attorney General
Estrada that the USG does not consider these cases resolved.
CLAIMS IN COURT AWAITING A DECISION
-----------------------------------
¶12. (SBU) There are 82 U.S. citizen claims in Nicaraguan courts
awaiting a decision. All of the claimants seek the return of their
property. Under Nicaraguan law (Law 278/1997), the Attorney
General is required to support claimants who seek the return of
property that was not confiscated under statutes 85/1990 and
88/1990, also known as the "pinata" laws. In August 2008, Attorney
General Estrada announced that his office would no longer provide
that support (Ref H). On three occasions, the Attorney General's
Office withdrew a petition filed with a local court in support of a
U.S. claimant and instead filed a petition on behalf of the illegal
occupants.
NEW REGULATIONS FOR ADMINISTRATIVE PROCESS
------------------------------------------
¶13. (SBU) On September 9, 2009, the GON issued a regulation that
gives property claimants 45 days, or until October 26, to provide
their mailing addresses to the Attorney General's Office. The GON
claims that this regulation was necessary because the Attorney
General's Office has been unable to notify claimants regarding the
status of their claims. If a claimant does not provide the
Attorney General's Office with the correct address within that
period, any future administrative resolution will be posted at the
Attorney General's Office. Absent an appeal during the allotted
timeframe, the GON will consider the claim settled. Claimants
still have the right to go to court to contest administrative
decisions, but the GON will argue that claimants were already
afforded due process according to Nicaraguan law. We are concerned
that the Attorney General's Office will abuse this regulation to
finalize claims (Ref I). As of October 1, 2009, 272 U.S. citizens
await the resolution of 563 Embassy-registered claims. We have
been able to contact 93 percent of our claimants, which represents
524 U.S. citizen claims.
DEFENDING ALL U.S. CITIZEN PROPERTY CLAIMS
------------------------------------------
¶14. (SBU) The GON wants to focus only on waiver claims, but we have
reminded government officials that the Embassy advocates on behalf
of all U.S. citizen property claims regardless of whether their
cases fall under Section 527. The Embassy maintains a separate
database listing 22 property claims that 16 U.S. citizens
registered after August 1, 2005 [Note: According to Nicaraguan law
and as announced by the GON in 1998, claimants of any nationality
had to have filed new claims before December 23, 2000, to be
considered for compensation. End Note].
¶15. (SBU) Since the beginning of 2009, more than 16 U.S. citizens
have sought Embassy assistance to deal with legal and extra-legal
disputes. In addition, several U.S. landowners report that GON
officials and local politicians are systemically infringing on and
rescinding the property rights of foreign and local investors.
Weak enforcement of property rights property rights and protracted
court cases increasingly worry U.S. property owners and frighten
potential investors (Ref J).
CALLAHAN