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Cablegate: Nicaragua: U.S. Citizen Private Property Disputes On The

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #0698/01 1551451
ZNR UUUUU ZZH
R 031451Z JUN 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 2686
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 000698

STATE FOR WHA/CEN, EB/IFD/OIA AND L/CID
STATE FOR WHA/EPSC
STATE PLEASE PASS TO USTR
TREASURY FOR INL AND OWH

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: U.S. CITIZEN PRIVATE PROPERTY DISPUTES ON THE
RISE

REFS: A) 07 MANAGUA 1789, B) 07 MANAGUA 1663, C) 07 MANAGUA 2376,
D) 07 MANAGUA 889

SUMMARY
-------

1. (SBU) Private property disputes involving U.S. investors are on
the rise along the Pacific Coast and elsewhere in Nicaragua.
Several U.S. investors have sought the Embassy's assistance to
protect their property rights because they lack confidence in
Nicaraguan law enforcement institutions. The Government of
Nicaragua (GON) has responded to requests for assistance, but only
after considerable pressure from U.S. citizens or the Embassy. The
GON's slow and/or reluctant efforts to resolve these disputes only
heightens the perception that real estate investments in Nicaragua
are fraught with more risk than reward.

U.S. PRIVATE PROPERTY DISPUTES ON THE RISE
------------------------------------------


2. (SBU) Since 2007, U.S. citizens with beachfront property along
the Pacific Coast and valuable real estate elsewhere in Nicaragua
have sought U.S. Embassy assistance to deal with insidious legal and
extra-legal disputes.

WEAK ENFORCEMENT OF PROPERTY RIGHTS
-----------------------------------

3. (SBU) Weak enforcement of property rights in Nicaragua
increasingly concerns U.S. property owners. Several have expressed
frustration that they have taken appropriate legal measures to
establish their ownership, but GON officials and municipalities are
either reluctant or unwilling to enforce the law to protect their
rights. We sense that the growing number of intractable property
disputes may well be scaring away investors.

4. (SBU) Nicaraguan legal scholars and attorneys allege that judges,
mayors, and police in towns outside of Managua fail to protect U.S.
citizen property rights because they seek bribes or are actually
assisting land trafficking mafia groups looking to steal property.
One expert notes the police and judges in municipalities outside of
Managua simply lack the ability to effectively deal with these
issues. Following is a summary of disputes that we are monitoring
closely:

ARENAS BAY BEACHFRONT HOME DEVELOPMENT
--------------------------------------

5. (SBU) In November 2006, U.S. real estate company Grupo Del Sol
initially sought Embassy assistance to protect their $ 88 million
beachfront housing development in Tola, including the $ 8 million
Arenas Bay beachfront home development project, from squatters
backed by the senior Sandinista National Liberation Front official
Lenin Cerna (Refs A-B). This dispute received extensive media
coverage in May and June 2007 when U.S. citizen Armel Gonzalez, a
former investor in the Arenas Bay project, went public with a
recorded extortion attempt by former Sandinista National Liberation
Front (FSLN) congressman Gerardo Miranda, who offered to resolve the
dispute for $500,000. Miranda and other GON officials subsequently
and successfully sued Gonzalez for slander. The scandal forced
Gonzalez to withdraw his investment from the Arenas Bay project and
leave Nicaragua because of security concerns.

6. (SBU) Now that the media coverage of the scandal has dissipated,
Grupo del Sol has met frequently with GON officials to resolve this
dispute, and the Embassy has continually pressured the Ortega
administration to protect the company's property rights. On March
25, Gail Geerling, Business Development Director for Grupo del Sol,
told Econoff that the company agreed to transfer a parcel of
beachfront property to the GON to resolve the dispute. Geerling
added that she and Attorney General Hernan Estrada would hold a
joint press conference to announce the resolution of the dispute
once the deal is concluded to help shore up Nicaragua's image among
foreign investors.

MARINA PUESTA DEL SOL
---------------------

7. (SBU) In Janaury 2007, U.S. real estate developer Roberto
Membreno sought Embassy assistance to protect his $20 million Marina
Puesta del Sol beachfront resort in the department of Chinandega
(Ref D). On January 24, 2007, a group of armed squatters organized
by Jerez Lacayo took control of a strip of land belonging to Mr.
Membreno. Lacayo asserted that he owned the property because the
former owner of the land owed him money. The police initially
removed the squatters from the land but Jerez received a court order
in February 2007 which allowed him to retake possession of the
property. In March 2007, Membreno received a nullification order to
overturn the local court's previous decision but the squatters
remained on the land.

8. (SBU) In April 2007, the Chinandega municipal court requested the
cancellation of Mr. Membreno's titles and the Office of the Property
Superintendent indeed cancelled them. Mr. Membreno subsequently
contacted President Ortega and Attorney General Estrada in May for
assistance. Estrada said the court's actions were "inappropriate"
and ordered the Chinandega municipal court to retry the case. The
court reversed its decision and returned the titles to Mr. Membrano
in August 2007. In October 2007, Membrano filed another lawsuit to
remove the squatters. Lacayo subsequently filed a competing lawsuit
to challenge Membrano's case. The squatters remain on the property
until the Chinandega municipal court rules on the competing
lawsuits.

PELICAN EYES
------------

9. (SBU) On October 16, 2007, U.S. citizen Chris Berry, the owner of
Pelican Eyes Hotel in the popular coastal town of San Juan del Sur,
contacted Econoff to inform him of his ongoing land dispute with a
prominent local family, the Sandinos. Berry said this dispute began
in 2005 when the Sandino family laid claim to his entire property.
Berry explained that a municipal court in Rivas had ruled in his
favor in 2006, but an appeals court overturned that decision in 2007
and awarded the Sandino family title to his land and to that of 42
other property owners, including at least 20 U.S. citizens. The
Supreme Court upheld the appeals court's ruling in 2008, but Berry
has requested a constitutional review of the decision. An
attorney/businessman who has reviewed the case on behalf of the
Sandino family has asserted to us that Berry faces some significant
vulnerabilities, as the property was granted to him by municipal
authorities who lacked power to do so.

SPINNETT FAMILY: SAN JUAN DEL SUR
---------------------------------

10. (SBU) On November 26, 2007, U.S. citizen Steve Spinnett
contacted Econoff alleging that squatters, judges and GON officials
associated with former President Arnoldo Aleman were conspiring to
take possession of his family's beachfront property near San Juan
Del Sur. In January 2007, the Spinnett family donated a portion of
its land to a missionary group. In March 2007, a municipal judge
from Rivas accompanied squatters to facilitate their taking
possession of Mr. Spinnett's property and the land he donated. The
Spinnett family filed a lawsuit in the Rivas municipal court in
April 2007 to secure the return of both properties. On March 10,
2008, Mr. Spinnett informed Econoff that the presiding judge in his
case hinted that she would order the squatters removed if he were to
pay her a bribe. Spinnett declined and the judge has delayed
issuing a decision on his case. On April 15, Spinnett asked the
Embassy to urge the GON to remove the squatters from his property.

STEVE WALSH: SAN JUAN DEL SUR
-----------------------------

11. (SBU) On January 14, 2008, U.S. citizen Steve Walsh contacted
Econoff to seek assistance with an ongoing property dispute he has
with a French businessman, Clement Poncon. Walsh reported that he
has title to beachfront property in San Juan Del Sur but he is not
allowed access it to by Poncon because the French businessman also
claims ownership of the property [Note: It appears that both Walsh
and Poncon bought the disputed property from the same land
trafficker. End note]. Walsh has filed a lawsuit in civil court
against Poncon to protect his property, but he asked the Ambassador
to speak with the French Ambassador to Nicaragua, Thierry Fraysee,
to negotiate a settlement. On March 18, the Ambassador met with his
French counterpart who asserted that Poncon was willing to negotiate
a settlement. On April 4, the Ambassador met with Poncon who
offered to resolve the dispute if Walsh agreed to a land swap and \QTQ2ght Embassy assistance in her efforts to remove land invaders
from property located near the Augusto Sandino International Airport
in Managua. On February 16, she reported that the local Citizens
Power Councils (CPC) leaders in her neighborhood were organizing
squatters to invade and take over additional property. On February
17, EmbOffs contacted the National Police and Prosecutor General's
Office to solicit their support in protecting Mrs. Gonzalez'
property. On February 29, the Ambassador called Attorney General
Estrada to ask his office to take action to remove the squatters and
prevent further invasions on Gonzalez' property.

13. (SBU) On March 5, the Office of the Prosecutor General lodged a
criminal complaint against the squatters for violating Mrs.
Gonzalez' property rights. On March 10, Gonzalez informed us that a
judge ordered the police to arrest and incarcerate 12 of the
squatters who organized the illegal invasion of her property. On
April 11, Gonzalez said that her attorney received information that
Estrada and the presiding judge in her case struck a deal not to
take any further action and they agreed to free the 12 criminals
because President Ortega did not want this issue to negatively
impact upcoming municipal elections.

LAGUNA DE APOYO
---------------

14. (SBU) On March 26, U.S. citizen Jeffrey Finch, a developer and
co-owner of a hotel and ecotourism project called Los Congos located
in Laguna de Apoyo National Park in the Department of Granada,
contacted the Property Office to complain that his company's
application for an environmental permit has been pending for almost
2 years with the Ministry of Environment and Natural Resources. In
addition, he noted that the mayor of nearby Diria claims that the
property is municipal land and has trespassed on the property
several times, either removing natural resources (trees, rocks,
soil) or allowing tourists and squatters to temporarily reside there
without the permission of Los Congos. Finch and his partners are
working with the mayor and GON to resolve these issues, but he said
that he would request Embassy assistance if necessary.

BEACHFRONT PROPERTY IN CARAZO: REX BENNETT
------------------------------------------

15. (SBU) On March 28, 2008, U.S. citizen Rex Bennett requested
Embassy assistance to protect his beachfront property in the
Department of Carazo. Bennett reported that a land trafficker named
Diomedes Diaz, who is also allegedly a member of the FSLN Party,
invaded his property with squatters and physically threatened
Bennett if he did not leave the land [Note: Bennett reported that
Diaz put a handgun to his head and threatened to kill him if he did
not leave the property. End Note]. Bennett left the property and
filed a lawsuit against Diaz in the Carazo District Court to remove
him and the squatters from his property, but the court has yet to
consider the case.

FLOR DE MAYO
------------

16. (SBU) On April 14, U.S. citizen Philip Christopher, the co-owner
of a beach resort called Flor de Mayo near San Juan del Sur, asked
for the Embassy's assistance to help remove 200 squatters from his
property. Christopher said that he has been dealing with squatters
for two years and alleges that a land trafficking mafia is
attempting to take over his property. He has filed complaints with
the police and local courts to remove the squatters. Christopher
said the courts have ruled in his favor, but they have not
instructed the local police to remove the squatters. He added that
he met with Attorney General Hernan Estrada in August 2007 to seek
the GON's help to remove the squatters. Estrada asked Christopher
for patience and assured him that he would look into this issue. On
May 19, Estrada sent a letter to the Ambassador alleging that three
U.S. citizens were involved in attempting to take over Mr.
Christopher's property.

CHRISTOPHER EVANS CHARTIER
--------------------------

17. (SBU) On May 1, local newspaper "El Nuevo Diario" reported that
the attorney of U.S. citizen Christopher Evans Chartier, Hector Jose
Lacayo Paez, falsified Evans' signature to provide himself power of
attorney over Evans' legal affairs in Nicaragua and sell his
property to a third party. According to press reports, Mr. Evans
was out of the country when Paez sold his property. The Prosecutor
General's Office is prosecuting Paez and other lawyers involved in
the illegal sale of the property and the falsification of public
documents.

GON DEALS WITH DISPUTES ONLY UNDER PRESSURE

-------------------------------------------

18. (SBU) The GON has investigated several property disputes
involving U.S. landowners, but only under constant pressure from
U.S. citizens or the Embassy. Indeed, Gail Geerling believes the
GON will act under pressure to protect U.S. citizen property because
the Ortega administration is sensitive to negative publicity about
foreign investment. Geerling also suggests that U.S. investors
become more integrated into local communities -- to develop allies
in order to protect their property -- by providing jobs, funding
medical clinics or schools, or supporting the police with equipment
donations.

COMMENT
-------

19. (SBU) GON officials are aware of the growing number of property
disputes, and claim they are doing all that they can to protect
Nicaraguan and foreign investors (Ref C). The situation may,
however, already be spinning out of control. President Ortega and
fellow Sandinistas returned to government carrying heavy historical
baggage, having confiscated 28,000 properties before leaving
government in 1990. In addition, Ortega is on the political hook
with political groups throughout the country to deliver on promises
of land. In other instances, local criminals sense opportunity in
the confusion of the Sandinista government and a crumbling judicial
system. Also, many U.S. investors who rushed to make investments in
then-cheap beachfront property in the boomtown atmosphere of the mid
1990s may have in fact been incautious about assuring the validity
of their titles. In many cases the chain of ownership was disrupted
by Sandinista "agricultural reform" nationalizations, and less than
transparent subsequent transfers, aggravated by the destruction in
many cases of official records. That said, the GON's slow and/or
reluctant response to resolve disputes only heightens the perception
that real estate investment in Nicaragua is fraught with more risk
than reward. GON officials such as Attorney General Estrada are
hard pressed to side with U.S. investors against Nicaraguans linked
to the Sandinista party. As more and more would-be foreign
investors express serious problems protecting their properties, the
word is spreading among investors in Central America that Nicaraguan
tourism is rapidly losing its place in the sun. End Comment.

TRIVELLI

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