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### Viewing cable 08MANAGUA1120, NICARAGUA: BILATERAL REVIEW OF SECTION 527

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08MANAGUA1120 | 2008-09-04 17:15 | 2011-06-23 08:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua

`

    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

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