Tag Archives: Corruption

Canadian, British executives face corruption charges in Cuba

By Mark Frank, Havana — Reuters, Globe and Mail, May 15, 2013

Canadian and British executives of three foreign businesses shut in 2011 by Cuban authorities, ostensibly for corrupt practices, have been charged after more than a year in custody and are expected to go on trial soon, sources close to the cases told Reuters.

The arrests, part of a broad government campaign to stamp out corruption, sent shock-waves through Cuba’s small foreign business community where the companies were among the most visible players.

Until then, expulsions rather than imprisonment had been the norm for those accused of corrupt practices.

The charges against the executives involve various economic crimes and operating beyond the limits of their business licenses on the communist-run island, according to the sources, who asked to remain anonymous and who include a close relative of one of the defendants. Some of the foreigners are alleged to have paid bribes to officials in exchange for business opportunities.

Dozens of Cuban state purchasers and officials, including deputy ministers, already have been arrested and convicted in the investigation into the Cuban imports business that ensued.

Cuba has mounted a crackdown on corruption in recent years as part of a gradual reform process to open up the state-run economy to greater private sector activity. Under Cuban law, trials must begin within a month of charges being filed, though small delays are common and postponement can be sought by the defendants’ lawyers.

“There is definitely movement and the trials could begin soon,” a Western diplomat said.

The crackdown began in July 2011 with the closure of Canadian trading firm Tri-Star Caribbean and the arrest of its chief executive, Sarkis Yacoubian.

In September 2011, one of the most important Western trading firms in Cuba, Canada-based Tokmakjian Group, was also shut and its head, Cy Tokmakjian, taken into custody.

In October 2011, police closed the Havana offices of the British investment and trading firm Coral Capital Group Ltd and arrested chief executive Amado Fakhre, a Lebanese-born British citizen. Coral Capital’s chief operating officer, British citizen Stephen Purvis, was arrested in April 2012.

All four men are being held in La Condesa, a prison for foreigners just outside Havana, after being questioned for months in other locations.

A number of other foreigners and Cubans who worked for the 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 comment.

The legal limbo of the foreign executives has put a strain on Cuba’s relations with their home countries, where the legal process protects suspects from lengthy incarceration without charges, diplomats told Reuters.

Cuba says the cases are being handled within the letter of Cuban law. Attorney General Dario Delgado told Reuters late last year that the investigation had proved complex and lengthy.

“These cases, which involve economic crimes, are very complicated. They do not involve, for example, traffic violations or a murder,” he said.

Comptroller General Gladys Bejerano has said the length of investigations depended on the behavior of those involved.

“When there is fraud, tricks and violations … false documents, false accounting … there is no transparency and the process becomes more complicated because a case must be documented with evidence before going to trial,” she said.

Transparency International, considered the world’s leading anti-graft watchdog, last rated Cuba 58 out of 178 countries in terms of tackling corruption, ahead of all but eight of 33 nations in Latin America and the Caribbean.

Soon after taking over for his ailing brother Fidel in 2008, President Raul Castro established the comptroller general’s office with a seat on the ruling Council of State, even as he began implementing market-oriented economic reforms.

The measure marked the start of the anti-corruption campaign. Since then, high-level graft has been uncovered in several key areas, from the cigar, nickel and communications industries, to food processing and civil aviation.

Rodrigo Malmierca, the minister of foreign commerce, last week delivered a report to the cabinet highlighting “irregularities” in foreign joint venture companies, according to state-run media.

Malmierca blamed “the lack of rigor, control and exigency” of the deals “as well as the conduct and attitudes of the officials implicated,” the reports said.

Castro has been less successful, however, in tackling low salaries and lack of transparency, which contribute to the problem, according to foreign diplomats and businessmen.

There is no open bidding in Cuba’s import-export sector and state purchasers who handle multimillion-dollar contracts earn anywhere from $50 to $100 per month.

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Raúl Castro crea organismo para combatir la corrupción

Por Redacción CaféFuerte,  25 Marzo 2013

Gladys Bejerano, Contralora General de Cuba

El gobernante Raúl Castro prosiguió su cruzada contra la corrupción y el desorden administrativo en el país con la creación de un órgano estatal de control que estudiará y dictaminará sobre los casos significativos de ilegalidades y las medidas disciplinarias para enfrentarlas.

Un decreto del Consejo de Estado, publicado por la Gaceta Oficial  anunció la designación de la Comisión Estatal de Control (CEC), que funcionará en los niveles nacional y provincial, y tendrá por objetivo “frenar y liquidar la corrupción administrativa”. La CEC  procederá al análisis y estudio de casos en los que se manifiesten “ilegalidades, presuntos hechos delictivos y de corrupción para profundizar en las deficiencias detectadas, los modos de operar, características, causas y condiciones y los efectos producidos”, señala el decreto, publicado el pasado 14 de marzo.

Además buscará “alertar y recomendar medidas de carácter preventivo y de otra índole en el interés de eliminar o disminuir, en lo posible, la reiteración de tales hechos”, y dará seguimiento a las medidas adiministrativas y disciplinarias adoptadas con los responsables directos y colaterales del acto delictivo.

Contralora General al mando

El organismo estará presidido a nivel nacional por la Contralora General, Gladys Bejerano, vicepresidenta del Consejo de Estado, y deberá nombrar como vicepresidente al Primer Vicecontralor General, según el documento.

El resto de los integrantes de la CEC serán los ministros de Finanzas y Precios, Lina Olinda Pedraza, y de Justicia, María Esther Reus; y representantes de la Fiscalía General y los ministerios del Interior, Fuerzas Armadas, Economía y Planificación, Relaciones Exteriores, Comercio Exterior y la Inversión Extranjera, y Trabajo y Seguridad Social, así como del Banco Central de Cuba, la Oficina Nacional de Administración Tributaria y la Aduana General de la República.

La CEC sustituye a una comisión gubernamental con similares fines que había sido instituida en julio del 2008 como órgano asesor del gabinete de Raúl Castro. La creación del nuevo organismo anticorrupción se suma a la batalla declarada por Raúl Castro contra este flagelo, que desangra la vida económica y social del país.

Durante la sesión de la Asamblea Nacional del Poder Popular del pasado 24 de febrero, Raúl Castro llamó a mantener el enfrentamiento a las indisciplinas e ilegalidades de todo tipo, incluyendo el combate a la corrupción que atentan contra las bases mismas del sistema socialista.

Orden, disciplina y exigencia

“Sin la conformación de un ambiente de orden, disciplina y exigencia en la sociedad, cualquier resultado será efímero”, recalcó el gobernante, que anunció que en la sesión del parlamento del próximo julio se trataría el tema a pronfundidad.

Las indisciplinas sociales e ilegalidades administrativas serán también objeto de análisis en las asambleas provinciales del Poder Popular, previas a la sesión parlamentaria.

A mediados de este mes, en una reunión amplada del Consejo de Ministros, Castro insistió en que trabajar con disciplina y exigencia es imprescindible para restablecer el orden en todos los escenarios de la sociedad cubana. La prensa oficial se ha volcado al combate de las ilegalidades y la corrupción mediante reportes y artículos sobre el tema.

“El control es parte del trabajo y no una tarea adicional”, tituló este lunes el diario Granma una entrevista conDarma Carina Solá, Contralora Jefe de la Dirección Integral de Control de la Contraloría General.

Desde comienzos de año la Contraloría General realiza auditorías en organismos y empresas estatales, lol que ha arrojado múltiples deficiencias en el funcionamiento y control de recursos, así como en el cumplimiento de los contratos.

 

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Foreign Business in Cuba: Beware the Dangerous Embrace: Havana is at the same time attracting and terrifying entrepreneurs

by Nancy Macdonald and Gabriela Perdomo

Original Article is located here: Maclean’s Magazine, August 8, 2012

Until this spring, Stephen Purvis had it all. The British architect, who’d helped launch the Saratoga, Cuba’s poshest hotel, was one of the more prominent figures in Havana’s business community. As chief operating officer of Coral Capital, one of Cuba’s biggest private investors, he was overseeing a planned $500-million resort in the sleepy fishing village of Guanabo. The Bellomonte resort, which would allow foreigners to buy Cuban property for the first time, was part of Havana’s ambitious, multi-billion-dollar plan to attract high-end tourists and badly needed foreign exchange. Everything he touched seemed to turn to gold. The musical Purvis produced in his spare time, Havana Rakatan, had a run at the Sydney Opera House last year before moving on to London’s West End. But in April, the 51-year-old was arrested on suspicion of corruption as he prepared to walk his kids to school in Havana.

Purvis’s arrest could have been anticipated. Coral Capital’s British-born CEO, Amado Fakhre, has been held without charges ever since his arrest in a dawn raid last fall. The investment firm is being liquidated, and both men have faced questioning at Villa Marista, Cuba’s notorious counter-intelligence headquarters. They are not alone. Since last summer, dozens of senior Cuban managers and foreign executives, including two Canadians, have been jailed in an investigation that has shocked and terrified foreigners who do business in the country.

Since replacing his brother Fidel as president in 2008, Raúl Castro has painted himself as a reformer, and Cuba as a place where foreign businesses can thrive. Over the last year, he has relaxed property rights, expanded land leases and licensed a broad, if random, list of businesses—everything from pizza joints to private gyms. And he’s endorsed joint venture golf courses, marinas and new manufacturing projects. Canadians are chief among those heeding Raúl’s call to do business with Havana. Hundreds have expressed interest in the Cuban market in the last year alone, according to Canada’s Trade Commissioner Service. Flattering reports in Canadian media have praised Raúl’s efforts. Yet they seem to overlook troubling signs that Cuba appears to be moving backwards.

Raúl’s sweeping changes were meant to pave the way for massive foreign investment in Cuba. The country, which was forced to lay off 20 per cent of its public workforce last year, is barely as developed as Haiti, and will need an influx of foreign cash to stay afloat. There is urgency to the project. Time is running out for Venezuelan President Hugo Chávez, Cuba’s benefactor, who funds the country to the tune of $10 billion a year, says José Azel, a University of Miami research associate. At home, Chávez, who is sick with cancer, is also fighting off a tough challenge from Henrique Capriles in presidential elections slated for October. His successor will almost certainly cut Cuba’s generous aid package to deal with Venezuela’s own needs.

So a strange incongruity exists in Cuba today: Havana is bending over backwards to attract foreign currency at the same time it is imprisoning some of its biggest Western investors. For all Cuba’s reforms, this Castro appears to be as intent on maintaining an iron grip on the country as the last one.

Few are more keenly aware of the pitfalls of doing business in the new Cuba as a pair of Canadians sitting in jail in Havana. It has been more than a year since Sarkis Yacoubian, the president of Tri-Star Caribbean, a trading firm with headquarters in Nova Scotia, was detained in the Cuban capital. And September will be the one-year anniversary of the arrest of Cy Tokmakjian, the president of a trading company based in Concord, Ont. He and Yacoubian have both been imprisoned without charges. Their assets now belong to Cuba. No trial date has been announced.

Both Yacoubian and Tokmakjian ran well-established businesses in Cuba, had years of experience in the country, and multi-million-dollar contracts with several government ministries. Yacoubian imported the presidential fleet of BMWs. Tokmakjian, who’d been in Cuba for more than 20 years and did $80 million in annual business there, had the rights to Hyundai and Suzuki, which are used by the country’s police.

So far, Raúl has scared off more joint ventures than he has attracted, jeopardizing the investment Cuba needs to succeed. Spanish oil giant Repsol quit the country in May. Canada’s Pizza Nova, which had six Cuban locations, packed its bags, as did Telecom Italia. The country’s biggest citrus exporter, BM Group, backed by Israeli investors, is gone. A Chilean who set up one of Cuba’s first joint enterprises, a fruit juice company, fled after being charged with corruption last year. He was convicted in absentia. Shipping investors are pulling out, even as Cuba prepares to open a new terminal on the island’s north coast.

Experts say Raúl’s crackdown is an attempt to reassert control. By targeting the biggest names in the business community, he’s sending a message, says Azel. “Raúl doesn’t want to be Gorbachev,” the Soviet statesman who brought down Communism in the former Soviet Union. “He wants to be the guy who makes socialism work.”

Yet as detentions pile up it remains unclear what exactly the jailed Canadians and Britons have done, or what the regime means by clamping down on corruption. “Cuba’s version of what is legal and proper is different from the rest of the world,” says Ted Henken, president of the Washington-based Association for the Study of the Cuban Economy. Even sales commissions are viewed as corrupt, says Yoani Sánchez, a Havana-based journalist. Foreign companies can’t pay their Cuban employees any more than the standard wage, about $20 a month, says Sánchez—barely enough for two weeks’ living in poor conditions with a poor diet. Many foreign bosses routinely top up pay with bonuses and commissions, which Havana considers bribery. For years, says Henken, corruption was the grease that made wheels turns. “You got what you needed to live from what was thrown off the back of the truck.”

It is not clear whether the detained Canadians are facing charges for salary top-ups, for example, or for legitimate corruption allegations. Canada’s Foreign Affairs department would only confirm that “consular services are being provided to two Canadian citizens detained in Cuba.” Executives at Tri-Star Caribbean and members of the Tokmakjian family declined comment, citing the “extremely sensitive” nature of the situation.

Azel’s advice to potential Canadian investors? Stay away. “You’re defenceless. There’s no independent judiciary to adjudicate any kind of claim,” he says. “Doing business with Cuba is a very risky proposition.”

So then why all the new resorts and planned golf courses? Why do so many Brits and Canadians take the personal and business risk? Because it’s widely believed that the days are numbered for the U.S. travel ban on Cuba, which has barred Americans from visiting the island for almost three decades. Predictions for tourism growth are off the charts—up to six million annual visitors, from two million today, says Gregory Biniowsky, a Canadian consultant who’s lived in Cuba for two decades. Cuba’s boosters believe the country, with its vast, undeveloped white sand beaches, just 45 minutes by plane from Florida, could come to rival Jamaica or the Dominican Republic as a tourist draw. “It’s just a matter of time before things boom here,” says Biniowsky. Five billion barrels of oil lie under Cuba’s waters, according to the U.S. Geological Survey. To some, getting in on the ground floor is worth the risk. But foreign investors who lose sight of the dangers could find themselves in serious trouble.

The old Royal Bank of Canada Building in Havana. The interior of the building is below.

Photos by Arch Ritter, April 2012

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Updating re Economics Essays from TEMAS

Below are a series of hyperlinks to articles on economic reform in Cuba. Unfortunately the essays are available only in Spanish.

Economía y política

Richard Levins y Aurora Levins Morales, Respondiendo a Ricardo Torres

Omar Álvarez Dueñas, A propósito de la controversia sobre la «inviabilidad del socialismo»

Carmelo Mesa-Lago, Sobre la «inviabilidad del socialismo», pero ¿qué tipo de socialismo? (Observaciones a los comentarios de José Luis Rodríguez en Temas)

José Luis Rodríguez, A propósito del socialismo, ¿de qué inviabilidad se habla?

Luis Marcelo Vera ¿Cuál es el problema estratégico principal de la economía cubana?

LArmando Nova González, La propiedad en la economía cubana

Ricardo Torres Pérez, La actualización del modelo económico cubano: continuidad y ruptura

Julio Díaz Vázquez, Es aplicable el modelo chino o vietnamita en Cuba?

Rafael Betancourt, Observaciones en torno al Proyecto de Lineamientos

Fernando Barral, Aproximación sociológica al problema de la corrupción en Cuba

Armando Nova González, El papel estratégico de la agricultura: problemas y medidas

Omar Everleny Perez, Cuba: ¿por dónde va la economía?

Pavel Vidal Alejandro, La estabilidad monetaria en Cuba: una síntesis

Ramón de la Cruz Ochoa, Acotaciones al texto del Dr. Fernando Barral sobre la corrupción en Cuba

 

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Miriam Celaya on Corruption: “About Controls, Comptrollers and the Uncontrollable”

An interesting and cutting critique on corruption from the Blog Sin Evasión by Miriam Celaya. October 3 2011

Miriam Celaya

One of the first rulings of General R. when he assumed the enthronement to power (please allow me to flatter the younger Castro’s vanity) was to create a system to detect and to put a stop to the rampant corruption that has been entrenched in the country through all spheres and at all levels. It is suspected that corruption is generalized, but the controls and audits reach only to a point … past this point, it might cause dangerous vertigo.

The first (detecting corruption) should be extremely easy. It is obvious and jumps up at you without much effort. The second (putting an end to it), is another matter. Because the General, of course, initiated from the start a process on the surface – not exactly from above — and downward, just where the pockets of the regime resent it the most, and many illustrious heads have rolled since then, including some gray-haired celebrity ones or some that don’t even have enough hair for a comb-over and only until recently were part of the trusted court of their olive green Majesties.

The first of the renowned Band of Seven to have been sacked were Otto Rivero, Felipe Pérez Roque, Francisco Soberón, José Luis Rodríguez, Carlos Lage, Carlos Valenciaga Estenoz and Fernando Rodríguez, who apparently were some sort of threat to the higher epaulets in the palace. “Revolutionaries” of the old guard, who until recently were known for their proven commitment to the regime have joined them.

Apparently, the effects of the Finance Ministry are proving more outrageous than what is prudent, so the official press has been given explicit orders to keep silent. That is, even more silent. So the media, mainly the written press, is engaged, with zeal worthy of better causes, to bring to the light of day the misuse of resources by the manager of some bakery or some agrarian co-op, but sweeps under the rug the dirt of ministries and of other senior bureaucrats with titles that are longer than their own names.

It seems that no one escapes the scrutiny of the severe comptroller of impulses of the purifying will of the General. Personally, I think it’s like a cash count, in which the incoming treasurer makes an effort to purify the accounts so that their own gains are not resented. Because in the state we find ourselves, it could be said that comptrollers have defecated against the ceiling fans, and more courtiers have been hit with feces than their majesties had thought. From ministers, managers of firms (foreign and Cuban), aviation directors, corporate officers of various magnitudes, including the brand-new and militant ETECSA, and countless numbers of minor number of minor entourages that have indeed been publicly beheaded.

But what more curious individuals won’t stop wondering, those who won’t stop misbehaving, who wonder about everything and are always full of ill-intentions, is who will be the leaders charged with renovating a model that seems to generate epidemics of corrupt leaders? What guarantees will there be that of those who will assume the responsibilities of the deposed won’t end up corrupted? What are the chances that a government that has not been able to create morally able replacements to carry out the “high mission of the revolution” will ever succeed in putting together, in the short run, a group of responsible and honest leaders? Will they create leadership schools? Will the General be able to trust anyone under the age of 75? Can we trust (and this is the clincher) the selection capability of the General?

But, in the midst of this sea of corruption of those who used to manage just a small slice of the power and the money, maybe the hardest questions to answer are precisely those that seem more urgent and logical: Are our president and his closest cronies the only “pure” ones we have left to take the helm in the midst of so many storms? Is the General “auditable”? Who is the comptroller who scrutinizes the financial dealings of the administration of the country?

Let’s sit and wait for the answer from the brand-new Comptroller General of the Republic.

 

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Cuba’s Anti-Corruption Drive: Second Canadian Trading Company Shut Down

By Marc Frank | Reuters –
HAVANA (Reuters) – Cuba has shut down one of the most important western trading companies in the country as an investigation into alleged corrupt import-export practices broadened to a second Canadian firm, foreign business sources said on Friday.

State security agents on Friday watched who entered the building in Havana’s Miramar Trade Center where Ontario-based Tokmakjian Group, one of the top Canadian companies doing business on the communist-run island has its offices. The company offices of the fourth floor were sealed with a notice that it had been closed by Cuban State Security. “We received notice on Monday from the foreign ministry and the Council of State, which is the procedure in such cases, to stop all dealings with the Tokmakjian Group,” said an employee of a Cuban company that does business with the firm. Like other people who spoke to Reuters about the clampdown on the company, she asked that her name not be used.

Miramar Trade Center

Tokmakjian Group is estimated to do around $80 million in business annually with the Caribbean island, mainly selling transportation, mining and onstruction equipment. The company is the exclusive Cuba distributor of Hyundai, among other brands, and a partner in two joint ventures replacing the motors of Soviet-era transportation equipment. Company officials were not immediately available for comment.

Cuban authorities shut down Canadian firm Tri-Star Caribbean on July 15 and arrested company president Sarkis Yacoubian. The company, considered a competitor of Tokmakjian Group, did around $30 million in business with Cuba. “Apparently Tri-Star Caribbean was just the beginning. They brought in more than 50 state purchasers for questioning, arrested some of them and broadened the investigation from there,” a western businessman said. “As far as I know up to now just Canadian firms are involved, but you can bet every state importer and foreign trading company in the country is on edge,” he said.

Cuban President Raul Castro has made fighting corruption a top priority since taking over for his ailing brother Fidel in 2008, and in the past year a number of Cuban officials and foreign businessmen have been charged in graft cases.

Tri-Star Caribbean did business with around half of the 35 Cuban state companies authorized to import, from tourism, transportation and construction to the nickel and oil industries, communications and public health. The whereabouts of the man who founded the family business, Cy Tokmakjian, of Armenian heritage, born in Syria and educated in Canada, was not clear on Friday.He was last seen by Reuters a week ago, the day after his offices were sealed, but another western businessman said he had been detained by Cuban authorities. “They picked up Cy on Saturday and I heard his wife and at least one of his kids flew ion to see what they could do,” he said.

Cuba’s state-run media rarely reports on corruption related investigations until they are concluded and those charged are sentenced.
Tokmakjian, a former mechanic, is a self-made millionaire with interests in Canada and other countries besides Cuba, where he is a well known figure. He made his first deal with the Caribbean island in 1988.

President Castro, a general who headed Cuba’s Defense Ministry for 49 years, has cracked down on corruption as part of his efforts to revive the country’s sagging economy, but to date has done little to change the conditions that foster it, such as low salaries and lack of transparency. There is no open bidding in Cuba’s import-export sector and state purchasers who handle multimillion-dollar contracts earn anywhere from $50 to $100 per month.

Castro has moved military officers into key political positions, ministries and export-import businesses and in 2009 stablished the Comptroller General’s Office with a seat on the Council of State. A source close to the Tri-Star Caribbean case said the Comptroller General’s Office had been brought into the investigation, indicating it most likely was targeting high level officials.

Castro’s crackdown has resulted in the breaking up of high-level organized graft in the civil aviation, cigar and nickel industries, at least two ministries and one provincial government. An investigation into the communications sector and another into shipping are also under way.

Cy Tokmakjian

Cy Tokmakjian

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