VZCZCXYZ0001
RR RUEHWEB

DE RUEHMU #1052/01 2991752
ZNR UUUUU ZZH
R 261751Z OCT 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0023
INFO WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 001052 
 
SENSITIVE 
SIPDIS 
STATE FOR WHA/CEN, EB/IFD/OIA, AND L/CID 
STATE ALSO FOR WHA/EPSC 
 
E.O. 12958: N/A 
TAGS: ECON EINV NU
SUBJECT: 2009 Bilateral Review of Nicaragua's Section 527 Process 
 
REF: SECSTATE 79312; 08 MANAGUA 1546; MANAGUA 465; MANAGUA 921 
MANAGUA 877; MANAGUA 953; 08 MANAGUA 564; MANAGUA 975; MANAGUA 235 
 
SUMMARY 
------- 
 
¶1. (SBU) In the Secretary's letter to Foreign Minister Samuel 
Santos announcing a Section 527 waiver for 2008-2009, she proposed 
holding another bilateral review of the Government of Nicaragua's 
(GON) claims processes and procedures.  The bilateral review is an 
opportunity to articulate USG views on issues that adversely affect 
the resolution of U.S. citizen claims, and also to press for better 
cooperation between the Embassy Property Office and the GON.  Post 
proposes that the delegation composed of WHA, EEB, and L that 
conducted the 2008 bilateral review lead this year's consultations 
in Nicaragua in December 2009 or December 2010. 
 
2009 BILATERAL REVIEW 
--------------------- 
 
¶2. (SBU) The Secretary's July 29 letter to Foreign Minister Santos 
granted a Section 527 waiver to Nicaragua for the 2008-09 waiver 
period, but also proposed another bilateral review of property 
issues (Ref A).  Her letter specifically mentioned over 130 U.S. 
citizen property claims dismissed under Decrees 3/1979 and 38/1979 
and for administrative reasons.  We also see the bilateral review 
as an opportunity to articulate USG views on claims for property 
that are under GON control, claims that languish in the courts, new 
confiscations of U.S. citizen property, issues related to the 
transparency of compensating U.S. claims, and the importance of 
addressing all U.S. citizen claims, even those not covered by the 
waiver. 
 
¶3. (SBU) Post proposes that the WHA, EEB, and L officials who 
conducted the 2008 bilateral review lead this year's consultations 
in Nicaragua (Ref B).  This team is familiar with the obstacles to 
resolving U.S. claims in Nicaragua and knows Attorney General 
Hernan Estrada and other GON officials.  Post recommends that the 
bilateral review occur in December 2009 or January 2010 to allow us 
to 1) emphasize the importance that we place on meeting the 
Secretary's benchmarks, 2) address new issues that have arisen 
during this waiver year, and 3) establish the framework for 
cooperation with the GON during the rest of the waiver year. 
 
BILATERAL REVIEW ISSUES 
----------------------- 
 
¶4. (SBU) We recommend that this bilateral review include the 
following agenda items: 
 
--Provide a clear explanation of how Section 527 applies to U.S. 
citizen claims against the GON; 
 
--Receive updates on 70 claims dismissed under Decrees 3 (1979) and 
38 (1979); 
 
--Review the 52 claims dismissed by the Attorney General for lack 
of documentation; 
 
--Discuss new confiscations of U.S. citizen property; 
 
--Evaluate progress on resolving U.S. claims for property 
controlled by the government, including the Nicaraguan Army; 
 
--Urge fairness and transparency in determining compensation; 
 
--Seek the repeal of new regulations affecting due process; 
 
--Advocate for U.S. claims that languish in Nicaraguan courts; and 
 
--Press for the resolution of all U.S. citizen claims regardless of 
whether they fall under Section 527. 
 
MISINTERPRETATION OF SECTION 527 
-------------------------------- 
 
¶5. (SBU) In July, Attorney General Estrada met with members of the 
U.S. Congress to complain that the USG was not properly applying 
paragraph (h) of Section 527 of the Foreign Relations Authorization 
Act of Fiscal Years 1994 and 1995.  Paragraph (h) defines a United 
States person as a U.S. citizen, corporation, partnership, or 
association at least 50 percent beneficially owned by United States 
citizens.  In August, GON officials stated that they were reviewing 
26 U.S. citizen claims to determine whether they met the definition 
provided in paragraph (h).  The Embassy has told GON officials 
repeatedly that at this time, the only operable paragraph of 
Section 527 is (g), which authorizes the USG to grant a waiver to 
Nicaragua based on national interest.  In addition, the criteria 
applicable in evaluating Nicaragua's progress in resolving U.S. 
citizen claims during this waiver year are the benchmarks laid out 
in the Secretary's letter to Foreign Minister Samuel Santos. 
 
DECREE 38 AND 38 DISMISSALS 
--------------------------- 
 
¶6. (SBU) Since 2007, the GON has dismissed a total of 98 claims 
through the application of Decrees 3 (1979) and 38 (1979), which 
authorized the GON to confiscate property belonging to the Somoza 
family, former members of the National Guard, and their "allies." 
On March 12, Estrada told the Ambassador that he would review 70 of 
the claims dismissed under the decrees.  Estrada kept his word, and 
during the 2008-2009 waiver year, the GON resolved 16 claims 
previously dismissed under Decrees 3 and 38 and six more during 
this waiver period.  Despite this progress, there remain a total of 
76 claims dismissed under Decrees 3 and 38.  In addition, on 
October 19, we received information that the National Confiscations 
Review Commission (CNRC) dismissed one non-waiver claim belonging 
to a U.S. citizen under Decree 38. 
 
ADMINISTRATIVE DISMISSALS 
------------------------- 
 
¶7. (SBU) Since 2007, Attorney General Estrada has notified us on 
several different occasions that the GON had dismissed waiver 
claims for administrative reasons -- for example, because claimants 
could not demonstrate proof of ownership or confiscation and/or 
because they never filed a claim with the CNRC.  Estrada sent the 
latest list in May to notify us that the GON would dismiss 52 
claims.  After the Embassy Property Office contacted claimants to 
ask them to provide the necessary paperwork to the Attorney 
General's Office to defend their claims, Estrada revised this list 
in August and alleged that 24 claimants never filed claims with the 
CNRC.  So far, one claimant representing one claim has acknowledged 
that he did not file with the CNRC.  He has subsequently withdrawn 
his claim from the Property Office's registry.  We are working with 
the Attorney General's Office to provide the remainder of our 
claimants with sufficient time to provide the necessary paperwork 
to defend their claims. 
 
NEW PROPERTY CONFISCATIONS 
--------------------------- 
 
¶8. (SBU) In 2009, the GON confiscated three properties belonging to 
three separate U.S. citizens and their families.  The Embassy has 
warned GON officials that any confiscation of U.S. citizen property 
weakens Nicaragua's chances of receiving a Section 527 waiver.  One 
of the properties belonged to U.S. citizen claimant Leonidas 
Guadamuz.  He filed a claim with the Property Office in April 2003 
because the GON had taken possession of his property in July 1979, 
but the government never went through the process of transferring 
ownership of the land to the beneficiary.  The legal representative 
of Mr. Guadamuz informed us that the GON formally confiscated the 
property under Decree 3 in April 2009 (Ref C).  In March 2009, U.S. 
citizen Lydia Mayorga received information that the GON had 
confiscated her property and offered indemnification bonds (BPIs) 
as compensation (Ref D).  Mrs. Mayorga has refused the government's 
offer but she is willing to negotiate a settlement, including the 
return of her property.  In July 2009, the Attorney General's 
Office published a resolution in the Official Gazette expropriating 
the land on which an open-air landfill known as "La Chureca" is 
located in Managua (Ref E).  The GON transferred title to the City 
of Managua.  Three U.S. citizens of the same family claim to own 
41.66 percent of the property.  The government offered BPIs with a 
face value of about $2 million, worth half that on the secondary 
market and far below the $5 million in cash compensation agreed 
upon in 2008. 
 
CLAIMS UNDER GON CONTROL 
------------------------ 
 
¶9. (SBU) During the 2008-2009 waiver period, the GON resolved two 
U.S. citizen claims under the control of the Nicaraguan National 
Police.  One claimant received bonds as compensation while the 
other agreed to lease his property in Jalapa to the police.  With 
regard to U.S. citizen claims under the control of the Nicaraguan 
Army, the municipal court in Masaya evicted a former Army officer 
from property owned by a U.S. citizen.  During the 2009-2010 waiver 
period, the GON has not resolved any claims under the control of 
the government or the Army.  On September 24, GON officials said 
that the case of U.S. citizen Juan Barreto, whose 28 properties are 
under control of the Nicaraguan Army, was close to resolution 
pending the submission of his family's corporate charter (Ref F). 
There are 51 claims under GON control, 36 of them are under control 
of the Army. 
 
LACK OF TRANSPARENCY FOR SETTLEMENT OFFERS 
------------------------------------------ 
 
¶10. (SBU) The Office of Assessment and Indemnification (OCI) 
settles claims through a process that lacks transparency.  The 
Attorney General's Office has published the procedures for 
determining compensation, but OCI refuses to provide claimants a 
clear explanation of how it calculates settlement offers. 
Specifically, OCI provides no information on how it determines 
property values or, in some instances, why it reduces settlement 
offers made by previous governments.  Attorney General Estrada has 
asserted that the law does not require him to negotiate 
compensation.  Instead, he makes a "take it or leave it" offer.  In 
addition, claimants are not allowed to review their files or 
retrieve information on property values from the National Cadastral 
Registry Office or its regional offices to assess government 
offers. 
 
RESOLUTION OF CLAIMS THROUGH OFFICIAL PUBLICATION 
--------------------------------------------- ---- 
 
¶11. (SBU) For those claimants who do not accept the government's 
offer, OCI deposits the bonds in an escrow account and publishes 
notice of the compensation in the Official Gazette.  The government 
has used this approach since June 2008, arguing that claimants had 
exhausted recourse through the administrative process and should 
file their cases with local courts if they disagree with the 
compensation offered.  Thirty U.S. citizen claimants, including one 
claimant whose case was being decided in court, have been affected 
by this measure (Ref G).  The Ambassador has told Attorney General 
Estrada that the USG does not consider these cases resolved. 
 
CLAIMS IN COURT AWAITING A DECISION 
----------------------------------- 
 
¶12. (SBU) There are 82 U.S. citizen claims in Nicaraguan courts 
awaiting a decision.  All of the claimants seek the return of their 
property.  Under Nicaraguan law (Law 278/1997), the Attorney 
General is required to support claimants who seek the return of 
property that was not confiscated under statutes 85/1990 and 
88/1990, also known as the "pinata" laws.  In August 2008, Attorney 
General Estrada announced that his office would no longer provide 
that support (Ref H).  On three occasions, the Attorney General's 
Office withdrew a petition filed with a local court in support of a 
U.S. claimant and instead filed a petition on behalf of the illegal 
occupants. 
 
NEW REGULATIONS FOR ADMINISTRATIVE PROCESS 
------------------------------------------ 
 
¶13. (SBU) On September 9, 2009, the GON issued a regulation that 
gives property claimants 45 days, or until October 26, to provide 
their mailing addresses to the Attorney General's Office.  The GON 
claims that this regulation was necessary because the Attorney 
General's Office has been unable to notify claimants regarding the 
status of their claims.  If a claimant does not provide the 
Attorney General's Office with the correct address within that 
period, any future administrative resolution will be posted at the 
Attorney General's Office.  Absent an appeal during the allotted 
timeframe, the GON will consider the claim settled.  Claimants 
still have the right to go to court to contest administrative 
decisions, but the GON will argue that claimants were already 
afforded due process according to Nicaraguan law.  We are concerned 
that the Attorney General's Office will abuse this regulation to 
finalize claims (Ref I).  As of October 1, 2009, 272 U.S. citizens 
await the resolution of 563 Embassy-registered claims.  We have 
been able to contact 93 percent of our claimants, which represents 
524 U.S. citizen claims. 
 
DEFENDING ALL U.S. CITIZEN PROPERTY CLAIMS 
------------------------------------------ 
 
¶14. (SBU) The GON wants to focus only on waiver claims, but we have 
reminded government officials that the Embassy advocates on behalf 
of all U.S. citizen property claims regardless of whether their 
cases fall under Section 527.  The Embassy maintains a separate 
database listing 22 property claims that 16 U.S. citizens 
registered after August 1, 2005 [Note: According to Nicaraguan law 
and as announced by the GON in 1998, claimants of any nationality 
had to have filed new claims before December 23, 2000, to be 
considered for compensation.  End Note]. 
 
¶15. (SBU) Since the beginning of 2009, more than 16 U.S. citizens 
have sought Embassy assistance to deal with legal and extra-legal 
disputes.  In addition, several U.S. landowners report that GON 
officials and local politicians are systemically infringing on and 
rescinding the property rights of foreign and local investors. 
Weak enforcement of property rights property rights and protracted 
court cases increasingly worry U.S. property owners and frighten 
potential investors (Ref J). 
CALLAHAN