(Adds details from Tokmakjian Group official on allegations)
By Allison Martell and Daniel Trotta
TORONTO/HAVANA, Sept 29 (Reuters) - Cuba offered to free jailed Canadian executive Cy Tokmakjian in return for $55 million and company assets, his company said on Monday, but the deal fell through because the firm didn't have the money and the businessman wanted to clear his name.
Tokmakjian, 74, founder and chief executive of transportation firm Tokmakjian Group, was sentenced to 15 years in prison on Friday after being convicted of bribery and other economic charges in a case that lawyers and diplomats called a chilling development for potential foreign investors.
After Tokmakjian was detained in 2011, company lawyers met with Cuban officials about the case, said Lee Hacker, the Tokmakjian Group's vice-president for finance.
"They were ... told 'We're taking all your assets and in addition you're going to have to send another $55 million down before Cy will be released,'" Hacker said.
It was the first time the company had revealed the Cuban demand, which could not be immediately confirmed with authorities in Havana. Tokmakjian's case has been shrouded in secrecy - he was held for two and a half years before being charged.
Hacker said he was told by the company's lawyers that there was no basis for the $55 million figure. "It was just a number that was thrown out," he told Reuters.
Other attempts at negotiation failed partly because Tokmakjian does not want to admit to crimes he has not committed, his son Raffi said.
Cuba seized about $100 million worth of the firm's assets on the island and also sent two Tokmakjian aides to prison.
Hacker said Cuba could choose to expel Tokmakjian, or Cuba and Canada could agree that he serve his sentence in Canada under a treaty that governs the international transfer of prisoners.
Conservative Member of Parliament Peter Kent, whose constituency includes the Tokmakjian Group's headquarters, confirmed the businessman could be transferred under the treaty.
But, he said Canada's Minister of Foreign Affairs, John Baird, had suggested to his Cuban counterpart following the verdict that "the humane thing to do would be to simply deport him."
Hacker said the case stemmed partly from salary top-up payments to Tokmakjian employees in joint venture businesses and a decision to hire the wife of Cuba's former deputy of minister of sugar, Nelson Labrada, in Tokmakjian's hotel division.
"They're alleging that it was improper," Hacker said. "But she worked independently, had nothing to do with any sugar products or anything that was in Nelson's domain and ... we had the proper approvals on that."
Labrada was among 14 Cuban defendants in the case, all of whom were convicted. He has been sentenced to 20 years in prison.
Hacker defended Tokmakjian Group's practice of making incentive payments to employees of joint ventures that were majority-owned by Cuban state entities. Cy Tokmakjian was convicted of bribery partly on the basis of those payments.
"We would pay incentives to our staff in Cuba like every company does in Cuba," Hacker said.
Cuba legalized the payment of incentives, salary top ups, in 2007 but the change did not extend to joint ventures, leaving companies exposed. Hacker said the company did not believe at the time that there was anything illegal about the payments.
The charge of economic crimes against the state involved the late delivery of unspecified equipment. Tokmakjian distributed Hyundai vehicles and construction equipment in Cuba, as well as other mining gear.
The Tokmakjian Group, which did an estimated $80 million in business annually with Cuba until it was shuttered in September 2011, filed claims against Cuba worth more than $200 million through the International Chamber of Commerce in Paris and an Ontario court.
The case has strained Cuba's relationship with Canada, one of its biggest trading partners. Western diplomats have said it would dissuade foreign investors at a time Cuba is actively seeking partners from abroad to do business.
Cuba has yet to comment on the verdict or the sentencing. A call on Monday to the Cuban embassy in Ottawa for comment was not returned. (Additional reporting by Euan Rocha; Writing by Amran Abocar, Editing by Ross Colvin)