As U.S. and Cuba Dispute Compensation for Seized Property, Those Who Lost Look to Future

Vintage cars pass by the Riviera hotel at the seafront Malecon in Havana December 9. The heirs of American organized crime legend Meyer Lansky want compensation for his nationalized hotel, the Riviera, the seaside home to one of the last casinos built in swinging Havana of the 1950s. REUTERS/Stringer

Sandwiched between a McDonald's and a Starbucks on E Street in Washington is a functional brown brick building of the sort the United States government stamped out by the hundreds in the latter half of the 20th century. On the sixth floor is the headquarters of the ambitiously named Foreign Claims Settlement Commission of the United States. Despite its name, the purpose of the FCSC is not to settle claims by U.S. nationals against foreign governments, but to attach dollar values to seized property in the hope that, one day, recompense will be made. The commission's goal is simply to make sure what's owed is written down, somewhere, for when it's needed.

A few feet past the reception desk, on the left, is a small library, with titles like LA REPARATION DES DOMMAGES DE GUERRE AUX BIENES (by A.W. Vranckx, dated March 1949) and Transnational Legal Problems (a stout black tome by Steiner, Vogts and Koch, no date) occupying about a quarter of the space.

The rest is tenanted by outsize books bound in kaleidoscopic acrylic. These are the claims. What's been taken, what's been seized, what's been nationalized or otherwise deprived of an American. Soon after the U.S.-backed dictator of Cuba, Fulgencio Batista, fled to the Dominican Republic in 1959, the revolutionary government of Cuba began confiscating property, including all belonging to U.S. citizens and companies. The claims against Cuba are bound in 70 blue volumes. Each is thousands of pages long.

In all, the government of Cuba seized $1.9 billion in U.S. assets, the FCSC has ruled: farms, factories, mines, homes, livestock and more. Utilities, which up to that point had been provided by private companies, were nationalized as well. The Cuban Electric Company, a Florida corporation, provided more than 90 percent of Cuba's electricity at the time its assets were nationalized in 1960. Those assets included a utility plant, numerous generating stations and substations and more than 6,600 miles of power lines, not to mention 230 miles of mains that delivered gas to Havana. The Cuban Electric Company's claim is the largest the FCSC has assessed, but other American companies were hit, too.

In all, with simple 6 percent interest, carried over a period of more than 50 years, the assets seized by the Cuban government in the late 1950s and early '60s are worth around $7 billion today. That amounts to around 20 percent of Cuba's GDP.

On December 8, in what one state department official called "the first step in a complex process that may take some time," U.S. and Cuban officials met in Havana for the first round of talks aimed at putting these claims to rest. It is a small step, but a significant one, in mending a wound that has festered for more than half a century. "We would like to get these claims resolved as soon as possible," the official said. For some of those whose relatives lost property, resolution can't come soon enough. William Powe, who died in the early '80s, was one such. Powe owned half a dozen businesses in Cuba. "He told me he had gotten along with [many] Cuban dictators," says Robert Jackson, a Mississippi attorney and friend and relative of Powe's. "He thought he would get along fine with Castro."

He was wrong.

"He was in New Orleans when Castro took over his business and they shot his vice president," Jackson says. "They might have shot him if he'd been there. He never went back to Cuba again."

Sumner Pingree is another who stands to gain if the U.S. and Cuba can settle their differences. His family owned a sugar mill and most of the surrounding land, on which sprang up a mill town called Ermita. "We were asked to leave," Pingree says. "The family left and then my father and some people that worked for the family." He was 5 years old, his brother 6, at the time. "I think dad was actually picked up and tossed in a jail in Havana just overnight and then released," he says. They returned to their home north of Boston. Today, Pingree lives in New York City and is a conservationist. He says he thinks it's "a great thing" that the U.S. and Cuba might make amends, but, for him, "what's owed the Pingrees has never been part of the calculation," he says.

Claimants like the estates of Powe and Pingree likely won't see their property again, says Michael Kelly, associate dean at Creighton University's School of Law. Kelly, who recently testified before the U.S. Congress over the issue of the U.S. embargo of Cuba, says small claimants "probably won't get restitution because either the property isn't there anymore—it has been half a century with lots of typhoons—or someone lives there now." And the likelihood for the Cuban-American community, which is strongly represented in Congress by the likes of Marco Rubio, Bob Menendez and Ted Cruz, is even slimmer. "The Cuban-Americans fled Cuba often with just the shirts on their backs in rickety boats," Kelly says. "They didn't bring their deeds with them. You go to Miami and everyone's uncle had a sugar mill. If that were the case, all you'd have is sugar mills throughout the island."

Erika Moreno, a professor of political science at Creighton, agrees. "It would be a hornet's nest," she says. "You'd have folks coming in with unsubstantiated claims on all sorts of things. The little guys and the large corporations. And because these properties have been distributed and redistributed a couple times over, you might have multiple claimants on a single piece of property. It would be a mess."

Plus, "under international law, this is a matter of Cuban governmental sovereignty," according to William LeoGrande, a specialist in Latin American politics at American University and the author of Back Channel to Cuba: The Hidden History of Negotiations Between Washington and Havana. "They used their power of eminent domain to nationalize the property of Cuban citizens and"—legally speaking—"it's none of the U.S.'s business."

But that probably won't sit well with the exile community, and Kelly says Washington would be unwise to move forward in the negotiations without at least trying to get Havana to acknowledge them. "The level of animosity that still exists within the Cuban-American community towards the Castro regime needs some acknowledgement to assuage them," he says.

The affluent Cuban-American community, which is mostly based in Florida, has a lot to offer a resurgent Cuba, he adds. "I think it would be really smart for whatever government comes after Castro to reach out to them and take advantage of that huge economic booster shot."

In February, Cuban exile and sugar tycoon Alfonso "Alfy" Fanjul told The Washington Post he would be willing to re-invest in Cuba "under the right circumstances." Norwegian Cruise Lines CEO Frank del Rio, who was born in Cuba, has also signaled his openness to Cuban investment.

Even so, Cuba is likely to rebuff the exiles' claims, according to LeoGrande: "At the end of the day, I don't think the Cuban government will be willing to recognize those claims because it's a sovereignty issue and the Cubans are very sensitive about their national sovereignty." More likely is that the Cuban government will agree to compensate those whose property was nationalized. But those hoping for a $7 billion payout are dreaming, he says. "The Cubans are not going to say, 'Yes, course, here's $7 billion,' which they don't have anyway." Rather, claimants are likely to get "cents on the dollar."

Settling claims would be good for the Cubans, even if they end up having to pay the U.S. a substantial amount, Moreno says. Under the U.S. embargo, buying and selling property claimed by a U.S. national is a crime. If Havana can "clean" the titles to those properties by settling with U.S. claimants, it could re-sell them, Moreno says.

In exchange for foreign direct investment, the government might also consider tax breaks and debt-equity swaps, LeoGrande says.

There is also the issue of Cuban claims against the U.S. At the December 8 meeting, Cuban officials raised claims of "human and economic" damages arising from the embargo—more than $120 billion, according to some reports. Fidel Castro has said the U.S. owes his country "millions and millions of dollars" stemming from the embargo. And, at 2015 meeting with President Barack Obama in New York, Rául Castro said the embargo has cost Cuba $1.1 trillion—a number most experts say has no basis in reality.

The U.S. is unlikely to honor those claims. "I think that would be political suicide for whoever did that," Kelly says. "What we could do is back a loan to Cuba from the World Bank or the IMF or the Inter-American Development Bank that Cuba could then use to settle these claims. That would go a long way symbolically toward telegraphing to the Cuban people that settling these claims isn't necessarily coming out of your pockets."

For the U.S., clearing up the claims issue means scabbing over a wound that's never been allowed to heal. And, for the Cubans, resolving the claims issue is arguably even more important, because, most experts say, it's a prerequisite for Congress to lift the embargo. "I think it would be tough to get Congress to lift the embargo if you hadn't had some movement on the issue of claims," LeoGrande says. "The embargo can't be lifted without those claims being settled," Kelly agrees. But, for the first time in 50 years, there is hope—on both sides of the Florida straits.