Thursday, September 29, 2016

How Donald Trump's Company Violated the United States Embargo Against Cuba

How Donald Trump's Company Violated the United States Embargo Against Cuba
ON 9/29/16 AT 10:42 AM

Trump's Secret Business Dealings In Castro's Cuba
A company controlled by Donald Trump, the Republican nominee for
president, secretly conducted business in communist Cuba during Fidel
Castro's presidency despite strict American trade bans that made such
undertakings illegal, according to interviews with former Trump
executives, internal company records and court filings.

Documents show that the Trump company spent a minimum of $68,000 for its
1998 foray into Cuba at a time when the corporate expenditure of even a
penny in the Caribbean country was prohibited without U.S. government
approval. But the company did not spend the money directly. Instead,
with Trump's knowledge, executives funneled the cash for the Cuba trip
through an American consulting firm called Seven Arrows Investment and
Development Corporation. Once the business consultants traveled to the
island and incurred the expenses for the venture, Seven Arrows
instructed senior officers with Trump's company—then called Trump Hotels
& Casino Resorts—how to make it appear legal by linking it
after-the-fact to a charitable effort.

The payment by Trump Hotels came just before the New York business mogul
launched his first bid for the White House, seeking the nomination of
the Reform Party. On his first day of the campaign, he traveled to Miami
where he spoke to a group of Cuban-Americans, a critical voting bloc in
the swing state. Trump vowed to maintain the embargo and never spend his
or his companies' money in Cuba until Fidel Castro was removed from power.

He did not disclose that, seven months earlier, Trump Hotels already had
reimbursed its consultants for the money they spent on their secret
business trip to Havana.

At the time, Americans traveling to Cuba had to receive specific U.S.
government permission, which was only granted for an extremely limited
number of purposes, such as humanitarian efforts. Neither an American
nor a company based in the United States could spend any cash in Cuba;
instead a foreign charity or similar sponsoring entity needed to pay all
expenses, including travel. Without obtaining a license from the federal
Office of Foreign Asset Control before the consultants went to Cuba, the
undertaking by Trump Hotels would have been in violation of federal law,
trade experts say.

Officials with the Trump campaign and the Trump Organization did not
respond to emails seeking comment on the Cuba trip, further
documentation about the endeavor or an interview with Trump. Richard
Fields, who was then the principal in charge of Seven Arrows, did not
return calls seeking comment.

But a former Trump executive who spoke on condition of anonymity said
the company did not obtain a government license prior to the trip.
Internal documents show that executives involved in the Cuba project
were still discussing the need for federal approval after the trip had
taken place.

OFAC officials say there is no record that the agency granted any such
license to the companies or individuals involved, although they
cautioned that some documents from that time have been destroyed. Yet
one OFAC official, who agreed to discuss approval procedures if granted
anonymity, said the probability that the office would grant a license
for work on behalf of an American casino was "essentially zero."

'He's a Murderer'

Prior to the Cuban trip, several European companies reached out to Trump
about potentially investing together on the island through Trump Hotels,
according to the former Trump executive. At the time, a bipartisan group
of senators, three former Secretaries of State and other former
officials were urging then-President Bill Clinton to review America's
Cuba policy, in hopes of eventually ending the decades-long embargo.

The goal of the Cuba trip, the former Trump executive said, was to give
Trump's company a foothold should Washington loosen or lift the trade
restrictions. While in Cuba, the Trump representatives met with
government officials, bankers and other business leaders to explore
possible opportunities for the casino company. The former executive said
Trump had participated in discussions about the Cuba trip and knew it
had taken place.

The fact that Seven Arrows spent the money and then received
reimbursement from Trump Hotels does not mitigate any potential
corporate liability for violating the Cuban embargo. "The money that the
Trump company paid to the consultant is money that a Cuban national has
an interest in and was spent on an understanding it would be
reimbursed,'' Richard Matheny, chair of Goodwin's national security and
foreign trade regulation group said, based on a description of the
events by Newsweek. "That would be illegal. If OFAC discovered this and
found there was evidence of willful misconduct, they could have made a
referral to the Department of Justice."

Shortly after Trump Hotels reimbursed Seven Arrows, the two companies
parted ways. Within months, Trump formed a presidential exploratory
committee. He soon decided to seek the nomination of the Reform Party,
which was founded by billionaire Ross Perot after his unsuccessful 1992
bid for the White House.

Trump launched his presidential campaign in Miami in November 1999.
There, at a luncheon hosted by the Cuban American National Foundation,
an organization of Cuban exiles, he proclaimed he wanted to maintain the
American embargo and would not spend any money in Cuba so long as Fidel
Castro remained in power. At the time, disclosing that his company had
just spent money on the Cuba trip, or even acknowledging an interest in
loosening the embargo, would have ruined Trump's chances in Florida, a
critical electoral state where large numbers of Cuban-Americans remain
virulently opposed to the regime.

"As you know—and the people in this room know better than anyone—putting
money and investing money in Cuba right now doesn't go to the people of
Cuba,'' Trump told the crowd. "It goes to Fidel Castro. He's a murderer,
he's a killer, he's a bad guy in every respect, and, frankly, the
embargo must stand if for no other reason than, if it does stand, he
will come down."

'Its Stock Price Had Collapsed'

By the time Trump gave that speech, 36 years had passed since the
Treasury Department in the Kennedy administration imposed the embargo.
The rules prohibited any American person or company—even those with
operations in other foreign countries—from engaging in financial
transactions with any person or entity in Cuba. The lone exceptions:
humanitarian efforts and telecommunications exports.

The impact of the embargo intensified in 1991, when the collapse of the
Soviet Union ended its oil subsidies to the island and triggered a broad
economic collapse. By 1993, Cuba faced extreme shortages and Castro was
forced to start printing money solely to cover government deficits.
Three years later, the U.S. Congress passed the Helms-Burton Act, which
codified the embargo into law and worsened Cuba's economic decline. With
many financial options closed off, Cuba attempted to find overseas
investment to modernize its tourism industry and other businesses.

The first signs that American policy might be shifting came in March
1998, when President Bill Clinton announced several major changes. Among
them: resuming charter flights between the United States and Cuba for
authorized Americans, streamlining procedures for exporting medical
equipment and allowing Cubans in the U.S. to send small amounts of cash
to their relatives on the island. However, Americans and American
companies still could not legally spend their own money in Cuba.

That fall, as critics pressured Clinton to further loosen the embargo,
Trump Hotels saw an opportunity. Like the communist regime, the company
was struggling, having piled up losses for years. In 1998 alone, Trump
Hotels lost $39.7 million, according to the company's financial filings
with the Securities and Exchange Commission. Its stock price had
collapsed, falling almost 80 percent from a high that year of $12 a
share to a low of just $2.75. (After multiple bankruptcies, Trump
severed his ties with the company; it is now called Trump Entertainment
Resorts and is a subsidiary of Icahn Enterprises, run by renowned
financier Carl Icahn).

The company was desperate to find partners for new business which
offered the chance to increase profits, according to another former
Trump executive who spoke on condition of anonymity. The hotel and
casino company assigned Seven Arrows, which had been working with Trump
for several years, to develop such opportunities, including the one in Cuba.

On February 8, 1999, months after the consultants traveled to the
island, Seven Arrows submitted a bill to Trump Hotels for the $68,551.88
it had "incurred prior to and including a trip to Cuba on behalf of
Trump Hotels & Casino Resorts Inc."

The 1999 document also makes clear that executives were still discussing
the legal requirements for such a trip after the consultants had already
returned from Cuba. The government does not provide after-the-fact licenses.

"Under current law trips of the sort Mr. Fields took to Cuba must be
sanctioned not only by the White House but are technically on behalf of
a charity,'' the bill submitted to Trump Hotels says. "The one most
commonly used is Carinas Cuba."

The instructions contain two errors. First, while OFAC is part of the
executive branch, the White House itself does not provide licenses for
business dealings in Cuba. Second, the correct name of the charity is
Caritas Cuba, a group formed in 1991 by the Catholic Church, which
provides services for the elderly, children and other vulnerable
populations in the Caribbean nation. Caritas Cuba did not respond to
emails about contacts it may have had with Trump Hotels, Seven Arrows or
any individuals associated with them.

The invoice from Seven Arrows was submitted to John Burke, who was then
the corporate treasurer of Trump Hotels. In a lawsuit on a different
legal issue, Burke testified that Trump Hotels paid the bill in full,
although he denied recognizing the document.

'Totally False'

The Cuba venture was one of two assignments given to Seven Arrows at
that time, and the second has already emerged as an issue in the GOP
nominee's bid for the presidency. Trump Hotels also paid the consulting
firm to help develop a deal with the Seminole tribe of Florida to
partner in a casino there. Knowing that the Florida governor and
legislature opposed casino gambling in the state, Trump authorized
developing a strategy to win over politicians to get the laws changed in
an effort named "Gambling Project." The law firm of Greenberg Traurig
was retained to assemble the strategy. A copy of the plan prepared by
the lawyers showed the strategy involved hiring multiple consultants,
lobbyists and media relations firms to persuade the governor and the
legislature to allow casino gambling in the state. The key to possible
success? Campaign contributions.

The plan states "the executive and legislative branches of Florida
government are driven by many influences, the most meaningful of which
lies in campaign giving." For the legislature, it recommends giving to
"leadership accounts" maintained by state political parties, rather than
to individual lawmakers, because "this is where the big bucks go and the
real influence is negotiated." Records show that Seven Arrows also
incurred $38,996.32 on its work on the Gaming Project, far less than it
spent for the Cuba endeavor.

Aside from deceiving Cuban-Americans, records of the 1998 initiatives
show that Trump lied to voters about his efforts in Florida during that
period. At the second Republican presidential debate in September, one
of Trump's rivals, Jeb Bush, said the billionaire had tried to buy him
off with favors and contributions when he was Florida's governor in an
effort to legalize casino gaming in the state. "Totally false,'' Trump
responded. "I would have gotten it."

The documents obtained by Newsweek give no indication why the $39,000
spent on Seven Arrows' primary assignment—arranging for a casino deal
with the Seminole tribe—was so much less than the $68,000 expended on
the Cuba effort. The former Trump executive could not offer any
explanation for the disparity.

Though it has long been illegal for corporations to spend money in Cuba
without proper authorization, there is no chance that Trump, the company
or any of its executives will be prosecuted for wrongdoing. The statute
of limitations ran out long ago, and legal analysts say OFAC's
enforcement division is understaffed, so the chances for an
investigation were slim even at the time.

And perhaps that was the calculation behind the company's decision to
flout the law: the low risk of getting caught versus the high reward of
lining up Cuban allies if the U.S. loosened or dropped the embargo. The
only catch: What would happen if Trump's Cuban-American supporters ever
found out?

Source: How Donald Trump's Company Violated the United States Embargo
Against Cuba -

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