CARL MOLLINS June 26 1995


CARL MOLLINS June 26 1995





For 25 years, renegade financier Robert Lee (Bobby) Vesco has bilked investors, bedevilled governments and eluded lawenforcement authorities on both sides of the Atlantic and from Canada to the Caribbean. For almost half of that time, since September, 1982, the Detroit autoworker’s son and high-school dropout has lived a life of luxury and reputed influence in Fidel Castro’s impoverished Cuba—until now. Last week, Vesco was incarcerated at the Cuban state security headquarters. American diplomat Joseph Sullivan, who represents U.S. interests in the Cuban capital, began negotiations for the fugitive’s extradition to face long-standing U.S. drugsmuggling and swindling charges. However that plays out, Vesco is once again creating an international disturbance.

Vesco’s arrest added grist to an escalating conflict in Washington over U.S. policy towards Cuba. President Bill Clinton’s Democratic administration is taking what he calls “calibrated steps” towards ending more than three decades of mutual hostility, and eventually establishing full diplomatic relations. That policy promises to reward Cuban political reforms by relaxing U.S. economic sanctions imposed three years after Marxist Castro gained power in 1959 and began nationalizing American-owned assets. But Republicans in Congress

want to move in the other direction, getting tougher with the Castro regime. They aim to expand the boycott with a bill that would bar foreign firms, including Canadian ones, and citizens dealing with Cuba from conducting business or even visiting the United States.

Last week, the U.S. Treasury further fuelled the dispute by serving notice that it will soon begin declaring foreign companies operating in Cuba to be outlaw “Cuban agents,” forbidden from conducting business in the United States. Officials privately pointed to the example of Cuban

subsidiaries of Toronto-based Sherritt Inc. that are engaged in joint nickel-mining ventures. That case played into the hands of Cuban-American critics of Clinton’s policy at a U.S. Senate committee hearing over the

tougher-sanctions bill. They assailed the Canadian company for dealing with what one witness called Castro’s “slave economy.” The bill, opposed by Canada and European governments, also won support from three Republican presidential candidates in the Senate—Bob Dole, Phil Gramm and Arlen Specter. And some Cuban-Americans see Vesco’s detention, approved by Washington officials, as evidence of a corrupt regime, ripe for collapse under harsher economic pressure.

Indeed, three Cuban-American members of the House of Representatives who attacked Sherritt at last week’s Senate hearing

had earlier joined with Dole in chastising Castro for harboring Vesco. Florida Republicans Lincoln Diaz-Balart and Ileana RosLehtinen, with New Jersey Democrat Robert Menendez and Dole, the Senate majority leader, wrote to FBI Director Louis Freeh expressing concern about “the international haven for criminal activity the Castro dictatorship has created 90 miles from our shores.” Specifically, they added, “credible reports indicate Robert Vesco has become a de facto ‘minister of corruption’ directly advising Castro on evading the U.S. embargo, narco-trafficking, money laundering and structuring deals for the sale of expropriated U.S. property, among other illicit activities.”

It is far from the first time that Vesco has been accused—and indicted in his absence—for illegal activities and corrupting

politicians. The accusations began soon after he gained control of Investors Overseas Services Ltd. in 1970. IOS, incorporated in Saint John, N.B., officially headquartered in Geneva and operating out of a French village across the Swiss border, had been an investor’s wonder in the 1960s. At its peak,

IOS managed mutual funds worth more than $2 billion for some 250,000 investors, mainly Americans and Canadians. Its own shares boomed on Toronto, Montreal and New York City stock exchanges.

In 1972, the New York Securities and Exchange Commission (SEC) accused Vesco of siphoning more than $220 million into personal holdings in other jurisdictions. That led to several civil suits and criminal charges. The following year, New Brunswick’s Supreme Court declared IOS bankrupt By then, Vesco had moved to the Bahamas, where he bought protection with bribes, according to later investigations. He had sought to head off the SEC with a secret 1972 contribution—

$200,000 in $100 U.S. bills—to then-President Richard Nixon’s re-election campaign. Two Nixon cabinet ministers, Attorney General John Mitchell and Commerce Secretary

Maurice Stans, were acquitted two years later on charges of exerting influence on Vesco’s behalf, after Vesco refused to testify at the trial.

Vesco, allegedly with the help of bribes, remained out of extradition reach in Costa Rica, where he lived for five years until 1978. That year,

Costa Rican voters elected a presidential candidate who had campaigned on a pledge to rid the Central American country of Vesco. Vesco returned to a luxurious retreat on a Bahamas islet—just as Colombian drug lord Carlos Lehder was setting up a cocaine trans-shipment operation on a neighboring key. Lehder, later seized in Colombia and whisked by U.S. agents to Florida, where he was sentenced in 1988 to life plus 135 years, testified that Vesco was an associate whose services included arranging Cuban government clearance for overflights of drug planes. In 1989, a Florida indictment named Vesco as a conspirator in drug

smuggling. The same year, Cuban Interior Minister Tony de la Guardia, reputed to be a convivial friend of the free-spending Vesco, was executed by firing squad for drug trafficking.

Despite his reported closeness to de la Guardia, Vesco had remained untouched by the law from the time he became a Cuban resident in September, 1982. (He was admitted initially for treatment of a kidney ailment after being expelled from the Bahamas and refused reentry to Costa Rica.) In a vaguely worded Cuban foreign ministry statement about Vesco’s arrest on June 9, there was no mention of the drug trade. It said that Vesco, permitted to live in Cuba for humanitarian reasons, was arrested “under suspicion of being a provocateur and agent

Tough talk in Washington may hurt Canadian companies

for the foreign special services and is under a process of investigation.” That cast uncertainty over initial reports that Cuba was ready to hand Vesco over to American authorities for trial. Testimony in U.S. drug cases and published speculation over the years has indicated that Cuban involvement with drug trafficking reaches as high as Gen. Raúl Castro and perhaps to his brother Fidel himself. But regardless of whether Vesco is allowed to talk in a U.S. court, his arrest colors the conflict between advocates of a diplomatic resolution of the long U.S.-Cuba standoff and those pressing to tighten sanctions in order to foster unrest on the island and topple Castro.

Either way, Canadians and other foreigners are caught in the crossfire. Although Sherritt faces only marginal problems from U.S. Treasury action against its joint ventures with Cuba, that company

and others are more seriously endangered by the proposed legislation in Congress. They include a clutch of small companies as well as Torontobased Delta Hotels and Resorts Ltd., which manages five hotels and four lodges for a Cuban group and has two hotels in Florida.

The U.S. Treasury’s scheme would ban U.S. dealings only with subsidiaries of foreign companies operating within Cuba. The broader bill before Congress, however, would hit the parent companies. The Treasury’s move, although said by officials to have been in the planning stage for 10 months, may help to disarm critics of Clinton’s diplomatic approach. It may also distract support for the sterner, more sweeping punishment espoused in the sanctions legislation, which is sponsored by two Republicans, Senator Jesse Helms of North Carolina and Representative Dan Burton of Indianapolis.

The proposed legislation has already been modified in the face of objections from Clinton, Canada and other countries. The revision drops an original provision to outlaw U.S. imports of such sugared products as candy, as well as all sugar itself, from any country that buys Cuban sugar, as Canada does. But, while Canada insists that no Cuban sugar is exported across the border, the bill would reduce imports of Canadian beet sugar by an amount equal to the volume of Cuban cane sugar that Canadian refineries now buy. Another of the bill’s measures would make companies liable to lawsuits in U.S. courts if they operate properties taken over by Cuba in the past from American owners—including assets once owned by Cubans who are now U.S. citizens.

Legal experts say the lawsuit provision would generate an international judicial mess. It would also pose an incalculable risk to investors in Cuba. So does the political pressure to get tougher on Cuba, even though that crusade is part of advance campaigning for the 1996 U.S. elections. The wellheeled Cuban-American community, with an eye on recovering property abandoned three decades ago, is a lucrative source of funding for candidates who agree that Castro must be pushed out.

But even if the Helms bill proves a passing fancy, the Treasury’s regulation, like the bill in Congress,

relies on a principle that raises the hackles of America’s trading partners—the application of U.S. law to companies beyond its jurisdiction. The Cuba sanctions are based on the 78-year-old U.S. Trading with the Enemy Act. Israel is the only other country that goes along with the U.S. designation of Cuba as an “enemy” to be boycotted.

In targeting enemies, Americans concerned about the drug invasion may well regard operatives in the cocaine war as more formidable foes than Cuba’s business community, native or foreign. By that measure, the arrest of Robert Vesco neutralizes an enemy who, by many accounts of his activities, posed a greater threat to American life than sanction-busters off Florida’s coast. □