Big Business Sues Ecuador for $1 Billion

     MANHATTAN (CN) – Five Virgin Islands corporations sued Ecuador for $1 billion, claiming its government illegally expropriated more than 200 businesses in a campaign of intimidation against political opponents and media.
     Plaintiffs Arch Trading Corp., Arvin Properties, Hezer Holdings, Madec Limited, and Osis International Corp. sued Ecuador and two of its agencies, in Federal Court.
     The plaintiffs, all British Virgin Islands corporations, claim they owned several hundred companies that were seized by Ecuador.
     “Ecuador has been under the political leadership of its current president, Rafael Correa Delgado (‘Mr. Correa’), since 2007,” the complaint states. “Mr. Correa is the leader of the Alianza País Party of Ecuador, which at all times relevant to this controversy has advanced a series of policies commonly referred to by Mr. Correa as a ‘citizens’ revolution’ and ’21st century socialism.’
     “These policies have been characterized by pervasive coercion of private commercial interests, intimidation of political opponents and subversion of the rule of law in Ecuador.
     “During Mr. Correa’s administration, the Ecuadorian government has:
     “(i) effectuated a coerced re-writing of the nation’s Constitution;
     “(ii) undertaken large-scale expropriations of private assets in violation of Ecuadorian and international law;
     “(iii) misused regulatory powers of state agencies and instrumentalities;
     “(iv) punished political opponents through judicial and extrajudicial means;
     “(v) infringed upon the right of free expression;
     “(vi) attacked independent and opposition media outlets through contrived judicial proceedings; and
     “(vii) subverted the rule of law by politicizing the Ecuadorian judiciary and stripping it of its capacity to act independently of the political objectives of the Ecuadorian government.”
     Correa’s government created a trust, defendant Fideocomiso AGD-CFN No Mas Impunidad, [No More Impunity] to hold and manage seized assets for the government. UGEDEP, an administrative agency of the Ecuadorian government created in 2010, is the sole beneficiary of the trust, according to the complaint.
     The final defendant is the trustee Corporacion Financiera Nacional (CFN), a government agency whose president is appointed by Correa.
     “Pedro Delgado, a cousin of President Correa, served as UGEDEP’s president until December 2012,” the complaint states. “Mr. Delgado also served as president of the Banco Central del Ecuador during the same time. Mr. Delgado was forced to resign from both positions after he admitted that he had falsified an undergraduate degree in order to gain acceptance to the INCAE Business School in Costa Rica. Mr. Delgado, who currently resides in Miami, is being prosecuted by the Ecuadorian government for falsification of public records.”
     The plaintiffs claim Ecuador seized their assets without compensation in 2008, and handed them over to the trust, which still holds and manages them.
     They claim the move was part of Correa’s agenda to weaken opponents and sabotage the independent media.
     “Since his entry into office in early 2007, Mr. Correa has consistently and aggressively advanced an agenda of debilitating competing interests and of concentrating power in himself and his allies,” the complaint states.
     “To this end, Ecuador’s Constitution has been forcibly restructured and the country’s legal system has been undermined and systematically politicized. Private business interests have been assailed and independent media interests – including some owned by the plaintiffs which form part of the seized assets – have been subjected to persistent aggressive attacks and confiscation.
     “On July 8, 2008, Ecuador, acting through its Agencia de Garantía de Depósitos (‘AGD’), an agency or instrumentality of Ecuador, abruptly seized more than 200 companies owned by the plaintiffs. Hundreds of additional seizures of the plaintiffs’ assets by the AGD ensued over the following months (collectively, the ‘seizures’).
     “The seizures were precipitated by the personal intervention of Mr. Correa, who pushed through the unlawful actions by the AGD despite the opposition of Ecuador’s then-Minister of Finance and the Chairman of the Board of AGD, Fausto Ortiz, who refused to participate in the fraudulent authorization of the seizures and lost his position as a consequence. Under Ecuadorian law, the absence of this individual’s consent rendered the seizures illegal.
     “The Ecuadorian government then made a horrendous circumstance very much worse through an edict known as Constituent Assembly Mandate 13, which prohibited the courts of Ecuador from even considering any legal challenges to the seizures on penalty of the removal from office and criminal prosecution of any judge who agreed to accept such legal claims, thereby categorically depriving the plaintiffs of access to Ecuador’s legal system.
     “The seizures constitute unlawful expropriations in violation of international, Ecuadorian and other law, for which Ecuador has provided no compensation whatsoever.”
     Correa was elected president in late 2006, after running a populist campaign during a period of political and economic fragmentation in Ecuador. He took control of the country’s political and economic resources, the media and the legal system, after rewriting the Constitution and weakening the National Congress, according to the complaint.
     “Attacks upon business leaders were key to securing Mr. Correa’s ‘citizens’ revolution,'” the complaint states.
     “The attacks were also critical to Mr. Correa’s broader agenda in light of the threat he perceived from an independent media. Mr. Correa has throughout his administration publicly assailed and inhibited the media through demagoguery, lawsuits, baseless fines and expropriations.
     “In July 2007, Mr. Correa stated that he would shut down any television channel that attempted to destabilize the Ecuadorian government or took ‘actions against democracy.’ In October 2007, the Inter-American Press Society reported that Mr. Correa maintained a ‘hostile attitude’ towards the press, frequently referring to the media as ‘incompetent,’ ‘slanderous,’ ‘lying press,’ ‘corrupt,’ mediocre,’ ‘mafia,’ ‘pornographic journalists,’ ‘human misery,’ ‘wild beasts,’ ‘idiots that publish trash,’ and to journalists as ‘racists,’ ‘discriminators,’ and ‘excluders.’
     “The threat perceived by Mr. Correa from independent media interests was particularly acute in 2008 in light of the referendum on the new Constitution scheduled for November of that year, which was essential to fortifying the power that Mr. Correa had aggregated.
     “The new Constitution that was ultimately adopted in November 2008 contains provisions regarding ‘social communication,’ giving the Ecuadorian government control over television and radio frequencies, as well as media ownership.
     “Following the seizures here at issue on July 8, 2008, Mr. Correa’s regime owned 15 media outlets – i.e., five television channels, four radio stations, two newspapers and four magazines. Of those, the majority had belonged to the plaintiffs.”
     The plaintiffs claim they have lost more than $1 billion.
     They seek damages for wrongful taking of property.
     They are represented by Joseph Finnerty III and Pedro Martinez-Fraga with DLA Piper.
     Edward Snowden, the former NSA contractor who is accused of leaking classified government documents, is seeking political asylum in Ecuador, claiming his chances of a fair trial in the United States are slim. Ecuador said his request is under review.
     Ecuador’s extradition treaties with the United States exclude crimes that are committed with “political motives.”
     WikiLeaks founder Julian Assange also has taken advantage of Ecuador’s reluctance to extradite. Assange has spent the past year in the Ecuadorian Embassy in London to avoid extradition to Sweden on sex charges.
     The charges in the five corporations’ complaint in Manhattan Federal Court are reminiscent of the corporate rumblings that preceded the United States’ failed invasion of and long estrangement from Cuba. Fidel Castro’s expropriation of U.S. businesses, particularly oil refineries, casinos and agricultural companies, angered U.S. business and the government. The CIA then organized the failed Bay of Pigs invasion.
     U.S. relations with Ecuador under Correa have been anything but warm, but there is no indication that the strained relationship will lead to open intervention.

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