Wednesday, May 29, 2013

British fund executives to go on trial in Cuba

Exclusive: British fund executives to go on trial in Cuba
By Marc Frank

HAVANA (Reuters) - The two top executives of a British investment fund
in Cuba are scheduled to go on trial in Havana on Thursday, according to
sources close to the accused men, as part of an unprecedented government
crackdown on corruption involving foreign businessmen.

In the second trial of foreign executives on the Communist-run island in
a week, Amado Fakhre, a Lebanese-born British citizen and chief
executive officer of Coral Capital Group Ltd, faces various bribery
charges related mainly to the fund's import business.

Chief Operating Officer Stephen Purvis, who headed up various investment
projects, reportedly faces lesser charges, such as operating outside the
bounds of the fund's license.

Fakhre has been jailed since the company's offices were raided and
closed in October 2011. Purvis was arrested and imprisoned in March 2012.

"We are providing consular assistance to them and their families and a
consular official will attend the trial," a British diplomat said.

The trial has not been announced to the public or media.

Coral Capital was one of only a handful of small foreign investment
funds in Cuba. It was caught up in a dragnet of Cuba's international
trading sector, which was part of a broader crackdown on corruption by
President Raul Castro, who replaced ailing brother Fidel in 2008.

In September 2011 authorities shut down one of the most important
Western trading companies in Cuba, Canada-based Tokmakjian Group, after
doing the same in July to another Canadian trading firm, Tri-Star Caribbean.

The closed trial of Sarkis Yacoubian, originally from Armenia and the
owner of Tri-Star Caribbean, was held last week. An associate of
Yacoubian, Lebanese citizen Krikor Bayassalian, was a co-defendant.

They were charged with bribery, tax evasion and damaging the economy. If
the court affirms their guilt, sentencing is expected within a week or so.

"The arrests are aimed at shaking the tree to get to corrupt Cuban
officials and purchasers," a local expert on state-run companies said,
asking that his name not be used.

Dozens of Cuban officials and businessmen have reportedly been arrested,
tried and sentenced in the anti-corruption sweep.

A number of other foreigners and Cubans who worked for the three foreign
companies remain free but cannot leave the island because they are
considered witnesses in the cases.

Cuban officials and lawyers for the defendants could not be reached for

Cuba's state-run media has not yet reported the trials, nor mentioned
the arrests and crackdown on foreign trade.


"If the Cuban government intends that such penalties serve as effective
deterrents to corruption, and not as deterrents to legitimate foreign
investment, it should clarify the precise nature of the alleged
infractions and make the entire legal process more transparent," said
Richard Feinberg, a non-resident senior fellow of the Washington-based
Brookings Institution and author of a number of studies on Cuba's economy.

The arrests were unprecedented for Cuba, where foreign businessmen
suspected of corruption are usually deported, and are viewed as a
measure of President Castro's determination to clean up a vice he views
as a threat to Cuba's socialist system.

But repression alone will do little, many observers believe.

"Real change would mean not only pursuing enforcement actions but also
coming up with meaningful internal controls for Cuban officials with
discretion in procurement and the licensing of business activity," said
Jose Gabilondo, associate professor of law at Florida International
University in Miami.

"These officials are paid little and face enormous temptation to cut
corners for the sake of themselves and their families," he said.

Coral Capital, registered in the British Virgin Islands in 1999, was
best known in Cuba as the joint venture partner in Havana's upscale
Saratoga Hotel and another hotel complex on the resort key of Cayo Coco.
It had plans to build golf courses and related real estate developments
near Havana, for which it had begun raising equity capital.

The fund diversified into trade financing and importing heavy equipment
and other merchandise and this, rather than its real estate ventures,
may have led to its problems, foreign business sources said.

The company represented various international brands in Cuba, among them
Liebherr Earth Moving, Yamaha Motor Corporation and Peugeot Motorcycles,
according to its now defunct Internet site.

The site said Coral Capital had invested some $75 million in Cuba, with
more than $1 billion of projects in the works.

(Reporting by Marc Frank; Editing by Jeff Franks and Bill Trott)

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