Exclusive: Cuba targets military firm in corruption probe

HAVANA Tue Dec 13, 2011 5:43pm EST

Cuban flags fly beside the Interests Section Office of the United States (USINT), in Havana July 28, 2010, two days after the 57th anniversary of the start of the Cuban revolution.   REUTERS/Desmond Boylan

Cuban flags fly beside the Interests Section Office of the United States (USINT), in Havana July 28, 2010, two days after the 57th anniversary of the start of the Cuban revolution.

Credit: Reuters/Desmond Boylan

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HAVANA (Reuters) - Cuba has detained top executives of the powerful military-run Tecnotex company, broadening a corruption investigation that has already shuttered three foreign firms, foreign business sources told Reuters.

Tecnotex is one of the most important trading companies on the Communist-run island, purchasing equipment, technology, construction materials and other goods for a myriad of military-owned firms in the civilian sector of the economy.

Tecnotex's director Fernando Noy was among those arrested, according to a foreign businessman who deals with the company. "They went right into the Tecnotex office and took Noy out in handcuffs," he said. Other sources also said Noy was detained.

The reported arrest follows that of the chief executive officers of one British and two Canadian companies along with a number of their Cuban employees and purchasers for state-run firms - all of whom had dealings with Tecnotex, according to the sources. The chief executives remain in custody.

Noy is a military officer and is well-known within Cuba's business world. His reported arrest could not be confirmed with Cuban authorities.

However, the company told callers that Noy no longer worked for Tecnotex and had been replaced by Belkis Mir Verdura. The firm's commercial director has also been removed while a deputy sugar minister, arrested in October, remains behind bars in connection with the probe.

A crackdown began when President Raul Castro succeeded his older brother Fidel as president in 2008 and said widespread theft and corruption had to be eliminated because it contributed to Cuba's chronic economic woes.

It coincided with reforms to strengthen Cuba's socialist system. Dozens of Cubans have been jailed, including former government officials and top executives of state companies.

ANTI-GRAFT FIGHT

Cuba's armed forces have been active players in the economy for years through their holding company Grupo de Administracion Empresarial S.A. (GAESA), which is headed by President Raul Castro's son-in-law, Colonel Luis Alberto Rodriguez.

Western diplomats and businessmen believe GAESA's businesses, which included Tecnotex, control as much as 40 percent of Cuba's foreign exchange revenues.

The precise allegations against the former Tecnotex director and the foreign company CEOs, who have yet to be charged, are not known, diplomats said. Their arrests have not been reported in Cuba's state-run media.

"In the face of violations of established legality there is no alternative but to resort to the Attorney General's Office and the courts, as we have already begun to do, in order to ensure that offenders are held accountable, whoever they might be, because all Cubans, without exception, are equal before the law," Castro said in an August speech to the National Assembly.

Transparency International, considered the world's leading anti-graft watchdog, rates Cuba 61 out of 183 countries in terms of managing the vice, ahead of all but eight of 33 nations in Latin America and the Caribbean.

Castro established a Comptroller General's Office in 2009 and it has attacked high-level graft in government, food processing, civil aviation, telecommunications and the cigar and nickel industries.

Castro has been less successful, however, in tackling problems such as low salaries and lack of transparency, which contribute to the problem, according to foreign diplomats and businessmen.

There is no open bidding in Cuba and business managers and their employees who handle multimillion-dollar contracts earn the equivalent of just a few dollars per month.

Cuban officials blame U.S. sanctions, imposed in the 1960s, for the lack of open bidding, charging their arch-enemy with systematically scaring off any foreign company interested in doing business with the country.

(Editing by Jack Kimball and Kieran Murray)

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