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Dispute over securities accounts has foreign policy repercussions

cubaAs a Burns & Levinson business litigator, Boston’s Michael C. Gilleran never anticipated he would end up in a dispute implicating the foreign policy powers of the United States president.

But that’s exactly where he found himself earlier this summer as U.S. District Court Judge Timothy S. Hillman weighed plaintiffs’ request for the turnover of 383 securities accounts owned by Cuban nationals and held by Gilleran’s client, Canton-based Computershare.

The sons and estate of Gustavo Villoldo Argilagos sought the turnover in the execution of a default judgment obtained in Florida against Fidel Castro Ruz, Raul Castro Ruz, the Ministry of the Interior, the Army of the Republic of Cuba and the Republic of Cuba for the wrongful death and personal injuries of Villoldo, who was abducted, imprisoned and tortured by the Castro regime following the Cuban Revolution.

The Terrorism Risk Insurance Act allows victims of terrorism to attach the assets of state sponsors of terrorism if the assets can be found in the United States.

“Under arrangements set up for victims of torture, they can seize assets of the Cuban government in this country,” Gilleran says. “You may ask yourself why the Cuban government does not yet have an embassy in this country. Now you know why.”

The plaintiffs argued the Computershare accounts belong to the Cuban government, and not to the listed Cuban national accountholders, because Cuba nationalized its citizens’ foreign investment accounts in the 1960s.

Gilleran argued that that would result in an absurd outcome.

“The court said it would be a vast shame to see these assets taken from nationals who were victims of the Cuban government and then paid to other victims of the Cuban government,” he says. “Their claim is against the Cuban government’s assets, not assets of other Cuban nationals in the U.S.”

After initially ruling in favor of the plaintiffs, Hillman reversed course over summer.

“[T]he Computershare accounts are only owned by Cuba if the Court gives effect to Cuban [law]. The Court refuses to adopt such a circular justification, because it would allow Cuba to escape TRIA’s sanctions at the expense of the Cuban nationals who originally owned the accounts,” the judge wrote. “Because enforcement of the Cuban laws would not further the policy of TRIA and would violate the Fifth Amendment policy against takings without compensation, the expropriation of the Computershare accounts is not consistent with United States policy and law.”

It wasn’t only Gilleran’s arguments that won the day. He received a major assist from the U.S. government in filings that Gilleran believes “had to have had an impact on the decision-making.”

“[T]he United States has a strong interest in preserving the President’s ability to use blocked assets as a tool of foreign policy,” Washington-based Department of Justice lawyer Benjamin L. Berwick wrote in a statement of interest filed in the case. “Allowing some plaintiffs to attach blocked assets that are not owned by the sanctions target (in this case, Cuba) would selectively drain the pool of blocked assets, thereby reducing the leverage that these assets provide.”

While it wasn’t directly part of the case, Gilleran thinks the United States was worried that a victory for the plaintiffs would reduce its leverage in negotiations that have been ongoing since President Obama and Cuban President Raul Castro announced on Dec. 17 that the U.S. and Cuba will take steps to fully restore diplomatic relations.

The countries have competing outstanding claims against each other.

“The decision reduced the leverage of the Cuban government by denying it access to these assets of Cuban nationals in the U.S.,” Gilleran says. “The Cuban government would have said, ‘We now claim all these assets. We therefore use those to offset all these claims against us.’ … I’m sure the court didn’t want to interfere with the president’s foreign-policy-making power.”

Gilleran says the case has been a nice change of pace from other disputes over assets held by trustees, which usually “are traditional disputes over contract, tort and other basic issues.”

“Most cases that I and others deal with don’t concern the foreign policy powers of the U.S. president,” he says. “This one did.”

The case is now pending before the 1st U.S. Circuit Court of Appeals.

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