May 28, 2013 / 10:41 PM / in 5 years

Exclusive: British fund executives to go on trial in Cuba

HAVANA (Reuters) - The two top executives of a British investment fund in Cuba are scheduled to go on trial in Havana on Thursday, according to sources close to the accused men, as part of an unprecedented government crackdown on corruption involving foreign businessmen.

Havana offices of British investment firm Coral Capital Group are closed and cordoned off with Cuban police crime scene tape October 14, 2011. REUTERS/Enrique De La Osa

In the second trial of foreign executives on the Communist-run island in a week, Amado Fakhre, a Lebanese-born British citizen and chief executive officer of Coral Capital Group Ltd, faces various bribery charges related mainly to the fund’s import business.

Chief Operating Officer Stephen Purvis, who headed up various investment projects, reportedly faces lesser charges, such as operating outside the bounds of the fund’s license.

Fakhre has been jailed since the company’s offices were raided and closed in October 2011. Purvis was arrested and imprisoned in March 2012.

“We are providing consular assistance to them and their families and a consular official will attend the trial,” a British diplomat said.

The trial has not been announced to the public or media.

Coral Capital was one of only a handful of small foreign investment funds in Cuba. It was caught up in a dragnet of Cuba’s international trading sector, which was part of a broader crackdown on corruption by President Raul Castro, who replaced ailing brother Fidel in 2008.

In September 2011 authorities shut down one of the most important Western trading companies in Cuba, Canada-based Tokmakjian Group, after doing the same in July to another Canadian trading firm, Tri-Star Caribbean.

The closed trial of Sarkis Yacoubian, originally from Armenia and the owner of Tri-Star Caribbean, was held last week. An associate of Yacoubian, Lebanese citizen Krikor Bayassalian, was a co-defendant.

They were charged with bribery, tax evasion and damaging the economy. If the court affirms their guilt, sentencing is expected within a week or so.

“The arrests are aimed at shaking the tree to get to corrupt Cuban officials and purchasers,” a local expert on state-run companies said, asking that his name not be used.

Dozens of Cuban officials and businessmen have reportedly been arrested, tried and sentenced in the anti-corruption sweep.

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

Cuba’s state-run media has not yet reported the trials, nor mentioned the arrests and crackdown on foreign trade.

A SYSTEMIC PROBLEM

“If the Cuban government intends that such penalties serve as effective deterrents to corruption, and not as deterrents to legitimate foreign investment, it should clarify the precise nature of the alleged infractions and make the entire legal process more transparent,” said Richard Feinberg, a non-resident senior fellow of the Washington-based Brookings Institution and author of a number of studies on Cuba’s economy.

The arrests were unprecedented for Cuba, where foreign businessmen suspected of corruption are usually deported, and are viewed as a measure of President Castro’s determination to clean up a vice he views as a threat to Cuba’s socialist system.

But repression alone will do little, many observers believe.

“Real change would mean not only pursuing enforcement actions but also coming up with meaningful internal controls for Cuban officials with discretion in procurement and the licensing of business activity,” said Jose Gabilondo, associate professor of law at Florida International University in Miami.

“These officials are paid little and face enormous temptation to cut corners for the sake of themselves and their families,” he said.

Coral Capital, registered in the British Virgin Islands in 1999, was best known in Cuba as the joint venture partner in Havana’s upscale Saratoga Hotel and another hotel complex on the resort key of Cayo Coco. It had plans to build golf courses and related real estate developments near Havana, for which it had begun raising equity capital.

The fund diversified into trade financing and importing heavy equipment and other merchandise and this, rather than its real estate ventures, may have led to its problems, foreign business sources said.

The company represented various international brands in Cuba, among them Liebherr Earth Moving, Yamaha Motor Corporation and Peugeot Motorcycles, according to its now defunct Internet site.

The site said Coral Capital had invested some $75 million in Cuba, with more than $1 billion of projects in the works.

Reporting by Marc Frank; Editing by Jeff Franks and Bill Trott

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