More on Title III

It appears likely from the State Department’s announcement that Title III of the Helms-Burton law will be allowed to go into effect around March 1. No U.S. President has permitted this: Since enactment in 1996, Clinton, Bush, Obama, and Trump have blocked it every six months.

As a result, those whose properties in Cuba were expropriated and who can identify a foreign business connected to that property, can sue the foreign business in U.S. courts – even if the plaintiff was not a U.S. citizen or resident at the time of the taking.

My opinion on all this is here. Some more info on Title III:

The law is presented as protection for claimants who were never compensated. But the right to sue is limited. Cuban Americans can’t sue for their homes. No one can sue for a property worth $50,000 or less when it was taken. And the right to sue expires if Cuba’s socialist government goes away, or if the President decides to suspend it again.

The law also shields two classes of business from Title III lawsuits.

First are those engaged in “the delivery of international telecommunication signals to Cuba.” In other words, companies delivering voice or data traffic to the Cuban network are protected, while those whose businesses extend into the Cuban domestic network are not.

Then there are those engaged in “transactions and uses of property incident to lawful travel to Cuba, to the extent that such transactions and uses of property are necessary to the conduct of such travel.” The House-Senate report accompanying the bill put it more simply: “any activities related to lawful travel to Cuba” are protected. Those who want to sue, for example, based on ownership of a port facility, are surely searching for ways to argue that this language should not apply.

In theory, the damages could be substantial; the law fixes them at three times the property’s current value, plus court costs and attorneys’ fees.

Finally, some U.S. businesses who lost property in Cuba were partially compensated through a tax deduction. In November 1962, the IRS allowed them to deduct Cuba confiscation losses from their business income.

MLB's good baseball deal

The opposition to MLB’s deal that will allow Cuban pro ballplayers to sign with big league clubs without fleeing Cuba and without the need to establish residency elsewhere, is in part understandable: If you support the embargo, you want to limit any financial flows to Cuba.

But I suspect there’s more to it. In Miami, some are surely rubbed the wrong way at the idea that Cuban players could play here without emigrating, without effectively breaking with the system, without joining el exilio.

It certainly shows that those who want to block the deal are not interested in encouraging some positive changes in Cuba that made it possible: the ability for Cubans to travel and return, and the ability of pro athletes to earn market-based pay abroad and return to Cuba with those earnings. They are not being called desertores anymore.

How do Cuban ballplayers see the deal that Senator Rubio wants to block?

Look at the math from a Cuban player’s point of view. Say he signs a one-year, $2 million deal (half the MLB average).

A “release fee” of $400,000 goes to Cuban baseball – paid by the club, not the player.

If IRS applies U.S. tax (30%), that’s $600,000 to Uncle Sam, and the player pockets $1.4 million.

Cuba decided recently to tax that income at 4%, not the 50% marginal rate applied to, say, a private restaurant or bed-and-breakfast with taxable income above $2000.

Senator Rubio complains about the “new tax” Cuba is imposing (4%), but if it applied the 50% rate on the books since 1996, the player would pay more than ten times more!

After paying the 4%, the player is left with $1.344 million – more than 2,600 times his salary in the Cuban national league.

More on all this in this column in Cuba Standard.

Odds and ends

• The Alan Gross case has provoked a lot of discussion for nearly five years, but until this new star of the Cuban opposition movement came along, it didn’t occur to anyone that Mr. Gross’ precarious health is apt for ridicule. Yesterday, “Let Alan rot!” And later, a joke on Twitter: “Alan Gross will be taken soon from Cuba to Africa to fight Ebola: if he survives, he'll be free. If he dies, USAID will take him to U.S.” If you set out to discredit the opposition movement from within, could you do any better?

• VOA: Cuban doctors practicing in U.S.-built hospitals in Liberia. Wait ‘til the Helms-Burton purists get on this one…

• Speaking of Helms-Burton, the President of Bacardi (!) talks about investing and doing business in Cuba when the embargo is lifted, without mentioning the law’s myriad conditions.

• El Nuevo Herald: In Miami, dissident Guillermo Farinas talks about the state of the opposition movement, the parts he views as legitimate and not, and he tells of his fear for his life. He also says, without naming names, that someone in Miami tried to buy him off and did the same with Oswaldo Paya years ago. Paya’s widow says it isn’t true. Farinas came to Miami to attend a workshop on human rights and nonviolent action.

• At the UN, how the Obama Administration defends the embargo.

• A top USAID official slams the Times for failing to note Cuba’s responsibility for jailing Alan Gross. Don’t hold your breath waiting for USAID to admit responsibility for sending him into a predictable disaster.

• Aron Modig, the Swede who was in the car in which Oswaldo Paya was killed, slept through the whole thing, and remembers nothing, is now a member of Parliament. The Herald recently asked the driver, Angel Carromero, about Modig; Carromero said: “There were times when he was asleep but he was the copilot. If he chose to remain quiet and turn the page, well I don’t share in that sentiment. I respect it but I’ve chosen a more complicated road and one with worse consequences for me but I couldn’t stay silent.”

Illegal, but was it wrong?

The French bank BNP Paribas will pay nearly $9 billion in penalties for violating U.S. sanctions against Iran, Sudan, and Cuba (Herald).

I’ll leave Iran and Sudan out of it and focus on Cuba for this latest case of our tax dollars at work in the application of the U.S. embargo.

There is no doubt that the bank’s actions were illegal. In the Treasury Department’s lingo, it moved funds “in which the Cuban government has an interest” through the U.S. banking system and it handled dollar transactions for Cuba. In the electronic tags attached to those transfers of funds, it concealed the fact that they involved Cuba transactions. Treasury tends to catch things like that, as some bank personnel warned, and it did catch them in this case. Hence the penalty.

But what did this bank actually do? Prosecutors explain in this summary.

The Cuba section explains that the embargo began with executive actions in 1960 and 1962 based on the U.S. government’s judgment that the Cuban government posed a threat to “U.S. national and hemispheric security,” and based on that, sanctions were applied under the Trading with the Enemy Act.

The “conspiracy,” the prosecutors explain, involved the bank’s operation of credit facilities for Cuban entities between 2000 and 2010.

Over the course of six years, from 2004 to 2010, $1.7 billion was transacted. That’s roughly the amount of U.S. farm exports to Cuba over a similar period.

Only two examples of transactions are given: “loans to a Dutch company to finance the purchase of crude oil products destined to be refined and sold to Cuba” and loans for “one of Cuba’s largest state-owned commercial companies,” which sounds like Cimex, but no detail is given about the company or the loan’s purpose. That’s it. There’s no suggestion of any commercial activity that threatens “U.S. national and hemispheric security.”

To prosecutors, the purpose of the transactions doesn’t matter because it’s illegal to move money connected to Cuba, period.

But as a foreign policy matter, for all we know the United States brought this case against a bank that was financing routine imports to Cuba – food, consumer goods, construction materials, etc.

This is the embargo at work under President Obama, who talks about the need to be “thoughtful” and “creative” in Cuba policy, and who likes to imply that our policy is an anachronism that needs to be fixed. Meanwhile, he mainly continues to carry out his predecessors’ policies. He continues to apply general pressure on the Cuban economy, with a special focus on international financial transactions. His policies make imports and credit more difficult and expensive for Cubans, and in this case he causes a conflict with a major European bank and an allied government, without even explaining how anyone’s interests were harmed by the credits extended to Cuba. Maybe one day he will explain how this serves our national interest.

Odds and ends

• Herald: Charlie Crist is having no second thoughts about opposing the Cuba embargo.

• Cuba Standard on former NFL player Pasha Jackson, now studying to be a doctor at Cuba’s Latin American Medical School.

• In the Herald, former Senator Bob Graham of Florida and former EPA chief William Reilly, back from Cuba, write that “Florida and neighboring states have a paramount interest in ensuring that Cuba’s drilling operators employ the highest safety standards and the best available technology,” and U.S. restrictions on equipment and training should be eased to that end.

• Washington Post: Former Rep. David Rivera is tanned, rested, and ready to run for the House seat he lost to Rep. Joe Garcia. First, he has to win a competitive primary.

• Senator Rubio in January, touring Asia and wishing the communists prosperity: “I’ve never accepted the idea that we wanted to contain China. We welcome a China that's richer and more prosperous.”