Local companies part of $7 billion claim against Cuba - Pittsburgh

Local companies part of $7 billion claim against Cuba
November 1, 2015 12:00 AM
By Tracie Mauriello / Post-Gazette Washington Bureau

WASHINGTON — When Cubans fled Fidel Castro's regime more than five
decades ago, corporations fled too, leaving behind factories, equipment,
inventory, office furniture, bank accounts and more.

Companies with local ties — including Westinghouse and PPG Industries —
are among the corporations and individuals that lost more than $1
billion in property seized by Cuba. According to federal law, Cuba must
make restitution before Congress can end a 55-year-old trade embargo,
one of the last and most important steps in normalizing relations with
the communist nation.

The U.S. Foreign Claims Settlement Commission, which certified claims
against Cuba between 1965 and 1972, says the losses are now worth more
than $7 billion, including interest.

The State Department raised the issue with Cuban officials last month
during bilateral talks in Havana.

"The resolution of outstanding U.S. claims remains a priority for the
U.S. government," said an agency spokeswoman, who declined to say when
or if an agreement is expected.

If Cuba agrees to pay, distribution of settlements won't be easy.

After so many years some companies have folded and others have changed
hands so many times that it isn't clear who is eligible to collect on
the claims.

"It's going to be quite an undertaking," said Mauricio Tamargo, a former
chairman of the settlement commission. "It will be a problem for the
Treasury Department, which will be in charge of figuring out who is the
rightful holder of each claim."

Westinghouse Electric Corp., for example, claimed $405,000 — not
including interest — for dozens of unpaid invoices for goods sent to
numerous Cuban customers in 1959 and 1960. In some cases, the buyers
issued payments but the Cuban government blocked them from being
forwarded to Westinghouse, according to a claims document signed in
1970. A year later, the commission also certified a separate $22,000
claim for Westinghouse Electric for loss of furniture and equipment.

Since then, Westinghouse has been involved in so many mergers,
acquisitions and splits that it's no longer clear who has a right to the
claims. That's the case with many of the companies that filed original
claims before some of their current CEOs were even born.

The former Koppers Co., which was a Fortune 500 conglomerate, has been
through numerous ownership changes. Since a hostile takeover in 1988,
various divisions of the company have been bought and sold in a long
series of transactions. That could make it difficult to sort out just
who is entitled to collect on a $32,000 claim for nonpayment of invoices
for goods shipped to customers in Cuba between 1959 and 1960.

"It would be great if that claim reverted to us. I'd like to think it
does, but this is the first I've heard of it," Michael W. Snyder, the
director of investor relations, said Thursday.

Millions in claims

The biggest claims — for as much as $268 million at the time of
certification — were filed by large corporations including Exxon,
Texaco, Coca-Cola, Colgate-Palmolive and IBM. Thousands of claimants are
individuals and families whose homes, small businesses, cars, bank
accounts and other assets were lost when Fidel Castro rose to power and
seized foreign assets.

Among companies with local ties, PPG Industries has the largest claim,
$1.1 million. It stems from Columbia-Southern Chemical Corp., which
became part of PPG's chemicals business that spun off in 2013.
Fifty-five years later, that claim is worth $4.7 million based on 6
percent simple interest.

Columbia-Southern lost $845,000 in bank accounts and unpaid invoices
along with an $85,000 caustic storage tank, pipe line, office furniture,
fixtures and improvements to office space it leased in Cuba.

Meanwhile, the commission certified a $232,000 claim for the National
Union Fire Insurance Co. of Pittsburgh, which had business in Cuba
through a local agent. Claim documents show losses from stocks, bonds
and unpaid debt incurred by the Cuban agent. National Union Fire
Insurance is now part of AIG Insurance.

The commission also certified a $69,000 claim for Pittsburgh Nipple
Works, a steel conduit manufacturer that went bankrupt in the late 1990s
after plastic fittings began to replace metal ones. The claim stems from
two unpaid bills for goods ordered in 1960 from customers in Cuba, where
the company had a small plant.

Ann Griffin, widow of Nipple Works co-owner Bill Griffin, remembers when
the claim was filed and still has a copy of it.

"I don't think it was ever anything he was ever counting on getting,"
said Mrs. Griffin, who is a Pittsburgh real estate agent.

Still, a payment now — even a partial one — would be welcome.

"I'd assume it might be a few pennies in my pocket," she said. "It's
owed but I'm not counting on it."

Harbison-Walker Refractories Co., which manufactures heat-resistant
materials for furnaces, has a claim originally certified at $65,500.
According to claim records, the Cuban Exchange Board refused to release
funds paid by Harbison-Walker customers.

Similarly, Gulf Oil Corp. has a $15,000 certified claim for unpaid
invoices for shipments of petroleum products. Gulf disappeared from
Pittsburgh after it merged with Chevron Corp. in 1982.

Cuba's negotiating tactic

Nationwide, the commission has certified 5,913 claims against Cuba in
all. Whether and how Cuba will make good on them is the subject of
bilateral negotiations that began earlier this year when President
Barack Obama announced an effort to normalize relations with the island
country.

CLAIMS MADE
• Nipple Works 69
• National Union Fire Insurance Company of Pittsburgh
• PPG
• Westinghouse bigger claim
• Westinghouse smaller claim
• Harbison-Walker
• Koppers

American law is clear, Mr. Tamargo said. Cuba has to make restitution
before the trade embargo can end.

That's a condition of the Cuban Liberty and Democratic Solidarity Act.
More commonly known as the Libertad Act or Helms-Burton, for its
congressional sponsors, the 1996 law codified the embargo, which had
already been in effect since 1961 through a series of executive orders.

"Cuba does not get a free ride. If you wish to do commerce with the
United States, you must respect the property rights of its citizens,"
said Mr. Tamargo, now an attorney with Poblete Tamargo, a Virginia firm
that represents several individuals with claims for homes and small
businesses taken from their families during the revolution.

Carmelo Mesa-Lago, former director of the University of Pittsburgh's
Center for Latin American Studies, said Cuba can't afford to pay $7
billion. "I have followed the Cuban economy and Cuban-U.S. relations for
more than half a century, and I know they don't have it," he said.

Mr. Tamargo isn't so sure. The World Bank's latest report put Cuba's
2013 exports at $18.6 billion.

"Cuba clearly has the money, and even if it didn't, it could easily
finance [$7 billion] because once the trade embargo gets lifted Cuba
will make a lot of money," Mr. Tamargo said.

In any case, Cuba is likely to dispute the Foreign Claims Commission's
valuations and to negotiate for lower restitution during bilateral
talks. Under international law, foreign governments can negotiate
settlements and the individual claimants must accept the terms.

One negotiating chip is Cuba's claim that it, too, suffered when
commerce with its No. 1 trading partner abruptly stopped in 1961. By
some Cuban estimates, damages are as high as $180 billion.

That figure was "pulled out of the air as far as I can tell," Mr.
Tamargo said. "It's simply a posturing tactic by the Cuban government to
minimize and to give it some sort of negotiating tool."

It's unlikely that the counterclaim will fully absolve Cuba of its
responsibility to repay its U.S. debts, said Patrick J. Borchers,
professor of international law at Creighton University.

"Cuba isn't likely to just accept the valuation of every claim and say,
'OK, here you go. Here's the check," Mr. Borchers said. "It seems
unlikely that the big claims in particular are going to get paid off at
anything close to their stated value."

That could result in claims being settled for just pennies on the
dollar, said Mr. Borchers, who examined Cuban claims resolution as part
of a 2007 study commissioned by the U.S. Agency for International
Development. That's why Mr. Borchers and his team recommended creative
solutions that are less burdensome to Cuba and perhaps more beneficial
to claimants.

"Starwood Hotels owns the old AT&T claim and Starwood probably doesn't
want an old radio tower back. What they would rather have would be
development rights to beachfront property. If we could do that, the
claimants would get economic benefit and it would help the Cuban
economy, too," Mr. Borchers said.

That doesn't help Cuban-American claimants who have sentimental
attachments to family homes they or their ancestors were forced out of
during the revolution. Some of those properties are now occupied by
other families while others have been demolished and at least one family
home now serves as a government facility.

"Imagine being shoved out of your home with nothing and having to watch
for the next 55 years as the Castros stayed in power. It's incredibly
emotional," Mr. Borchers said.

Mr. Obama has been working with the Cuban government to fulfill all the
diplomatic, humanitarian and economic conditions of Helms-Burton, but in
the end it will be up to Congress, not the White House, to lift the embargo.

Mr. Tamargo is optimistic.

"There are forces at work that give both sides a window of opportunity
that may not come again for a while. The Cuban government sees that, and
the Obama administration sees that," Mr. Tamargo said. "Cuba knows the
Obama administration is its best chance to get a good deal."

Washington Bureau Chief Tracie Mauriello: tmauriello@post-gazette.com;
703-996-9292 or on Twitter @pgPoliTweets.

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