VZCZCXYZ0006
PP RUEHWEB

DE RUEHMU #1120/01 2481715
ZNR UUUUU ZZH
P 041715Z SEP 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 3118
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHMD/AMEMBASSY MADRID 0495
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 001120 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, EB/IFD/OIA, AND L/CID 
STATE ALSO FOR WHA/EPSC 
 
E.O. 12958: N/A 
TAGS: EINV ECON NU
SUBJECT: NICARAGUA: BILATERAL REVIEW OF SECTION 527 
 
REFS: A) SECSTATE 81714, B) MANAGUA 883, (C) MANAGUA 998, (D) 07 
MANAGUA 426, (E) 01 MANAGUA 2313, (F) MANAGUA 287 
 
SUMMARY 
------- 

¶1. (SBU) In a July 29 letter to Foreign Minister Samuel Santos 
announcing her decision to grant Nicaragua a Section 527 waiver for 
2008, the Secretary included a benchmark that required Nicaragua to 
participate in a bilateral review to discuss a growing number of 
issues adversely impacting the resolution of U.S. claims, including 
the government's wholesale dismissal of claims during the 2007-08 
waiver period (Ref A).  Post recommends that a delegation of WHA, 
EEB, and L officials visit Nicaragua in mid October to conduct a 
bilateral review of how Nicaragua is processing claims subject to 
Section 527 of the Foreign Relations Authorization Act of 
FY1994/1995. 
 
BILATERAL REVIEW 
---------------- 

¶2. (SBU) In a letter to Foreign Minister Santos on July 29, the 
Secretary granted an annual waiver to Nicaragua based upon progress 
made during the previous twelve months.  With specific reference to 
the Attorney General's administrative dismissal of 146 claims 
previously accepted as legitimate claims, the Secretary requested 
that the U.S. and Nicaraguan governments conduct a general bilateral 
review of claims under Section 527 of the U.S. Foreign Relations 
Authorization Act of FY1994/1995. 
 
¶3. (SBU) We recommend that this bilateral review address the 
following concerns: 
 
-- the administrative processes and criteria used by the 
   Attorney General to dismiss U.S. claims for lack of 
   documentation proving ownership or that a property had 
   ever been confiscated; 
 
-- the criteria by which the Attorney General has 
   dismissed U.S. claims under Decrees 3/1979 and 38/1979 
   (which legalized the confiscation of property 
   belonging to the Somoza family and their "close 
   allies"); 
 
-- progress on resolving U.S. claims for property 
   controlled by the Government (including the military); 
 
-- administrative fairness and transparency in 
   determining compensation; 
 
-- U.S. claims languishing in Nicaraguan courts; and 
 
-- communication and cooperation between our two 
   governments for the purpose of resolving outstanding 
   claims. 
 
Administrative Dismissals 
------------------------- 

¶4. (SBU) In November 2007, Attorney General Estrada initiated an 
administrative process whereby he could unilaterally dismiss claims. 
 During the latter half of the 2007/2008 waiver year, he dismissed 
146 U.S. claims: 98 claims under Decrees 3 (1979) and 38 (1979), and 
48 where the claimant lacked documentation.  We need to know more 
about the criteria being used to dismiss claims for lack of 
documentation. 
 
¶5. (SBU) Past administrations have accepted supporting documentation 
as conclusive for claims that Attorney General Estrada is now saying 
is inconclusive.  Unfortunately, time and a turbulent history are on 
Estrada's side.  During the Sandinista revolution and the ensuing 
civil war, many original titles and deeds were lost, stolen, or 
destroyed.  For this reason, Nicaraguan law allows claimants to 
present property tax receipts, utility bills, personal mail, as well 
as statements from witnesses to show ownership. 
 
¶6. (SBU) To date, we have refused to accept the dismissal of these 
146 cases because the criteria have not been clear, and because we 
did not believe that claimants had been given adequate time to 
appeal.  We strongly suspect that Attorney General Estrada thinks 
that he has stumbled on a convenient way to dispose of claims.  We 
also suspect that, to dismiss claims under Decrees 3 (1979) and 38 
(1979), he is referring to some sort form of political blacklist 
created by the Sandinista National Liberation Front (FSLN) which is 
organic in nature. 
 
CLAIMS UNDER GON CONTROL 
------------------------ 

¶7. (SBU) Two performance benchmarks listed in the Secretary's letter 
of July 29 relate to progress on claims for properties under the 
control of the government and the military.  Of 54 U.S. claims in 
this category, 17 involve the government and 37 involve the 
military.  Progress has been painfully slow.  During the 2007-2008 
waiver period, only one claim for a property under government 
control and no claim for a property under military control was 
resolved (Ref B).  In the previous waiver year, only one claim for a 
property under military control and no claim for a property under 
government control was resolved (Ref C).  We need to make more 
progress in this area. 
 
LACK OF TRANSPARENCY WHEN IT COMES TO COMPENSATION 
--------------------------------------------- ----- 

¶8. (SBU) Fair compensation is becoming an important issue.  Attorney 
General Estrada is seeking to reduce the amount claimants receive in 
a number of ways, including low balling property appraisals, 
refusing payments for improvements made, and making "take it or 
leave it" offers.  Estrada's stated desire to limit the amount that 
individual claimants receive in compensation fits neatly with the 
government's overall effort to reduce the amount paid out in any 
given year. 
 
¶9. (SBU) Nicaraguan law requires the government to determine the 
value of a property based on appraisals made by the Nicaraguan 
Institute for Territorial Surveying (INETER).  In May, a claimant 
provided us with a document from Attorney General Estrada 
instructing INETER to use one appraisal table to calculate property 
taxes and another (with lower values) to calculate compensation. 
Meanwhile, claimants complain to us that the offers are based on 
historical rather than market values.  However, we know of nothing 
in Nicaragua law that says that compensation must be based on "fair 
market value." 
 
¶10. (SBU) The Office of Assessment and Indemnification (OCI), 
responsible for determining compensation for confiscated property, 
recently redrafted regulations to prevent the government from paying 
for improvements to land unless the improvements were duly 
registered with the Land Registry, or claimants can produce receipts 
showing payments for improvements made.  Often the improvements, 
such as a fence built by the owner, still stand.  Without proof of 
payment, however, the government will not offer compensation. 
 
¶11. (SBU) Attorney General Estrada has also asserted that the law 
does not require him to negotiate compensation, i.e., he can place a 
"take it or leave it" offer on the table and call a claim resolved. 
In April, Estrada provided us with a list of 42 claimants with 
offers on the table.  Only 18 accepted.  For the rest, Estrada 
deposited bonds in an escrow account and walked away, calling the 
claim resolved.  We are not sure for how long these bonds will stay 
on deposit.  A number of claimants have told us that they will 
refuse compensation until they get what they think is a fair value. 
Without negotiations, this is unlikely to happen. 
 
CLAIMS AWAITING A COURT DECISION 
-------------------------------- 

¶12. (SBU) Law 278/1997 instructs the government to pursue the return 
of property confiscated under statutes 85/1990 and 86/1990, also 
known as the "pinata" laws.  The former Sandinista government passed 
the pinata laws on the eve of its departure from power in 1990, to 
provide the legal basis for new titles and deeds to confiscated 
property that it had transferred to political supporters, or 
"pinateros."  We are aware of 93 claims belonging to 60 U.S. 
citizens awaiting court decisions that would result in the return of 
property retitled under the discredited "piata" laws.  Some court 
cases have languished for more than ten years.  At our working group 
meeting in July, government officials informed us that Attorney 
General Estrada had decided that he would no longer assert the 
rights of these claimants in court, leaving it to the claimants to 
individually pursue their cases (Refs D and E).  Contrary to the 
intent of Law 278/1997, Estrada has told us that he intends to 
protect the rights of current occupants, mostly original 
"pinateros," who are the "legitimate beneficiaries" of the pinata 
laws. (Ref F). 
 
¶13. (SBU) The majority of U.S. claimants are unaware that the 
government has abandoned their court case, much less that the 
Attorney General will now side with the current occupants.  Recourse 
for claimants in Nicaraguan courts is greatly complicated by 
systemic irregularities.  Many judges are beholden to the 
politicians who appointed them.  Moreover, the Nicaraguan judicial 
system is widely believed to be corrupt.  Frequently, judicial 
decisions seem to be based on questionable interpretations of the 
law.  In June 2008, one judge concluded that a U.S. claimant lost 
the right to her property because she never challenged the 
legitimacy of the title held by the occupying party.  Without 
government support, we find it difficult to believe that claimants 
who pursue their cases in the courts will receive a fair hearing. 

BILATERAL COOPERATION 
--------------------- 

¶14. (SBU) We continue to press for unfettered communication with 
working level officials for the purpose of resolving U.S. claims. 
To date, written correspondence is restricted to the Ambassador and 
Attorney General Estrada.  Except for monthly meetings, we are not 
permitted to meet, call, or draft correspondence to Nicaraguan 
working level officials.  During the monthly meeting in July, GON 
officials told us that that they would consider meeting with us 
outside of the monthly meetings to work on longstanding, complex 
claims.  We hope this is the case as it would begin to reestablish 
normal working relations with our counterparts. 
 
RECOMMENDATION 
-------------- 

¶15. (SBU) We recommend that officials from WHA, EEB, and L compose a 
delegation to visit Nicaragua in October to conduct a bilateral 
review of claims under Section 527 that includes topics that we 
mention here.  We believe it appropriate that a WHA Deputy Assistant 
Secretary lead the delegation and be the counterpart to Attorney 
General Estrada.  We believe that a bilateral review will clarify 
Nicaraguan policy and administrative processes, as well as stress 
the importance to the Nicaraguan government of providing fair and 
equitable compensation to U.S. claimants. 
CALLAHAN