Categories
politics

Canada Cuba US Business Hazards

With President Trump’s recent rollback of Obama era changes to Cuban relations have come new challenges to Canadian firms.

In this CBC articleU.S. punishes American firm after its Canadian subsidiary leases cars to Cuban embassy in Ottawa” a number of pitfalls are pointed at.

The gist of the article is that a Canadian subsidiary of American Honda Finance Company leased 13 vehicles to the Cuban embassy in Ottawa. The US government has regulations that forbid US firms from dealing with Cuba and they have fined the American parent company $89K in response.

Even though it’s a Canadian company doing business in Canada it is a subsidiary of an American company being held to American law which the US government feels it has a right to do. Some think this is “interference with a Canadian business transaction.”

How about Canadian companies doing business in or with Cuban companies?

It’s complicated.

From the text of the article:

“in 1992 Canada enacted the Foreign Extraterritorial Measures (United States) Order, which was passed in response to the passage of the Cuba Democracy Act in Washington the same year.

The order requires any Canadian company that is contacted by U.S. authorities responsible for enforcing sanctions to notify the Canadian federal government. The order also bars Canadian companies from complying with any U.S. law that seeks to limit their business dealings with Cuba.

A Canadian businessman who pays a fine such as the one levied on Honda could face five years in a Canadian prison as a result.”

So what’s a Canadian business to do: comply with Canadian law or American law?

Let’s say you are a Canadian business person who wants to comply with Canadian law but also desires to do business in Cuba. If you have business interests in the US then you have exposure – the US government could retaliate by punishing those businesses directly. If you don’t then you have to only worry about what might happen if you find yourself visiting the USA because if they find your violation serious enough in their eyes then you could be arrested and detained until they decide what to do with you.

Situations like this are part of the power of the US embargo. It keeps businesses afraid of doing business with Cuba.

It gets worse though . . .

“One new prohibition in the measures announced by Trump in Florida Friday could have particular consequences for Canadian companies that have U.S. affiliates or U.S. ownership.

They specifically prohibit all business dealings with businesses owned by the Cuban Armed Forces.

… many of the island’s hotels are majority-owned by the Cuban military …

Consequently, almost any foreign company involved in Cuban tourism is likely to have dealings with the Cuban military’s enterprise group, GAESA, or one of its holding companies, such as the Gaviota Group.

… Gaviota works with numerous Canadian entities, including Sunwing Vacations, Air Canada Vacations and Transat Holidays.”

Those last three companies are subsidiaries of Canadian airline companies.

What’s the worst that could happen?

Let’s say the US government tells those companies to stop what they are doing – cease arranging vacations for Canadians (and anyone else) in those Cuban hotels. And let’s say that they try to comply with the Canadian law that counters that.

The US could theoretically impound every Sunwing, Air Canada and Transat airliner that finds itself on a tarmac within the USA. Passengers would be left to find their own way home because employees of said companies could also be detained and prevented from doing their jobs. That would be disaster for those companies and disaster for US/Canada relations.

Potentially flights from Canada to Mexico and points south would have to circumvent US airspace because if they found themselves within the territory of the USA they could be forced to land at a US airstrip and face legal measures.

Think I’m being alarmist?

This New York Times article ) from 1996 tells the tale of a Canadian mining company doing business in Cuba and the legal issues it faced. The US government warned that non-compliance meant that executives, and their families, would be barred from entry into the US if the firm did not comply. This same threat was posed to executives from telephone companies in Mexico and Italy.

This was the Helms-Burton law and it was enacted under Bill Clinton. For more info here is the Wikipedia article on the Helms-Burton Act.

The first point is “International Sanctions against the Cuban Government. Economic embargo, any non-U.S. company that deals economically with Cuba can be subjected to legal action and that company’s leadership can be barred from entry into the United States. Sanctions may be applied to non-U.S. companies trading with Cuba. This means that internationally operating companies have to choose between Cuba and the U.S., which is a much larger market.”

Now I still to do more research on the history of application of the Helms-Burton act over the past two decades to find more useful information. But my inner Cassandra is having a field day with this because Trump has added this twist about doing business with the Cuban Military and, like the Egyptian and other militaries around the dictatorial world, they have their fingers in many of their country’s economic pies.

 

 

Categories
social commentary

Wells Fargo Banksters At It Again

Wells Fargo has had its hands slapped in the recent past for doing things to its customers without their knowledge or consent. In that case they were signing customers up for credit cards and then taking them away – ostensibly to meet sales quotas. Apparently a Virtual sale is as good as a real one when it comes to meeting short term quota goals. They were fined $185 million for that. The CEO lost his position.

Now they have been accused of making changes to the mortgage terms of some customers without asking their permission. It’s laid out in this New York Times article.

The customers in question all have on thing in common: they are facing bankruptcy.

The rejigging always works the same way: The term of the mortgage is extended to something like 40 years which brings the monthly payment down. It also increases the total interest owed over the term of the mortgage by tens of thousands of dollars.

The bank is contending it did nothing wrong, that it notified the customers of the change. Customers are saying no notice was given.

Some might thing that having the monthly payment drop from just over $1000 to the mid $600s sounds like a good deal. Especially when you’re facing bankruptcy.

There are problems with that though. When you go into the process you have to disclose all your financial incomes and outgoings to the court. If you begin making these new, lower, payments without the court’s permission you could come out of the bankruptcy owing the difference between the payments. The added interest of extending your mortgage term from 10 years to 40 years amounts to tens of thousands of dollars. That would put you into an arrears situation and the bank could immediately begin foreclosure proceedings against your house.

When I initially read this last night (different article on different news site) that last part wasn’t mentioned. I theorized another possible reason for this behaviour.

When you do finally go bankrupt the court looks at who you owe money to in order to determine who gets what. These entities are divided into two categories: the secured and the unsecured creditors.

The secured creditors get paid out first and then, if anything is left over, the unsecured get paid.

So when it comes to the secured creditors how would the court / trustee decide who gets what portion of your financial carcass? Well they would likely add up the financial commitments owed and take the ratio of that amount represented by an individual vulture, er – creditor, and assign them that amount.

Imagine someone had a house, car or two, RV, boat, cabin in the woods that they owed on. If you’re Wells Fargo and the house is your stake in this then by boosting the total amount owed on that property you would also boost the ratio of the total debt and give you a bigger piece of the carcass.

Now I’m not a banker and have never worked for a bank. Nor a credit institution or a court. Haven’t gone through bankruptcy myself. So I cannot honestly say that this would be the case. I just have a Cassandra somewhere in my head that comes up with these worst case scenarios without prompting.

This recently exposed activity happened in the 2015/2016 period. It might have gone on a bit before but the class action suit lists only 25 customers so far. So it could be argued that this all happened under the tenure of the previous administrative regime.

I’ve heard that Wells Fargo is a $270 Billion entity. Their last fine was less than 1/10th of one percent of that amount. I would imagine that it does cause some painful consternation to some degree . . . but was that enough pain to cause the bank to change its practices?

Only time will tell.

The image used comes not from WF but from http://www.occupy.com/

They don’t think too highly of Wells Fargo at occupy.com and with good reason. Just type Wells Fargo into their search box to find articles like this one.