Report

Is Washington Letting This American Rot in a Cuban Jail?

Havana keeps saying that it's willing to let this U.S. contractor go. But the White House and Congress keep rejecting the offers.


Four years ago, Cuban security agents arrested an American subcontractor named Alan Gross, accused him of spying for the U.S., and sentenced him to 15 years in a Havana prison. Gross has been languishing there ever since, a victim of Obama administration inaction, Congressional meddling, and the difficulties of negotiating with a regime as mercurial and opaque as the government of Cuban strongman Raúl Castro.

The story of Gross's continuing imprisonment -- his sentence is set to run for 11 more years -- offers a case study of Cuba's potency as a political issue on Capitol Hill, where powerful lawmakers have helped block at least one deal that could have brought the contractor home. The White House, for its part, has shown little interest in substantive negotiations with the Cubans, in part because Havana's demands have shifted considerably over the years. Gross, who traveled to Cuba to deliver satellite phones and other communications equipment to the island's small Jewish community, has lost nearly 100 pounds and watched, from less than 100 miles away, as his daughter developed breast cancer and his 90-year-old mother's health deteriorated sharply because of her own battle with lung cancer. Barring something unforeseen, he'll never see her again.

The Gross case isn't simply about the fate of a single American. U.S.-Cuban relations have been frozen for years, but President Obama took office in 2009 with what seemed like a clear political mandate to change that. He had won Florida after taking more of the Cuban-American vote than any Democrat in decades, and the White House quickly began exploring concrete ways of relaxing the sanctions, making it easier for Cuban-Americans to travel home, and improving diplomatic ties between the two countries. Those efforts were largely put on ice after Gross was arrested and sentenced, and it's not clear when, or if, they'll resume.

The latest twist in the saga is just spinning up now, with a loose-knit coalition of roughly 50 senators from both parties working to finalize a letter to the White House that uses some of the most forceful language to date to press President Obama to cut a deal with Havana. The letter, obtained by Foreign Policy, calls on Obama to "take whatever steps are in the national interest" to get Gross, 64, out of Cuba.

An earlier draft, portions of which were also obtained by FP, was far more explicit in calling for a negotiated settlement, with lawmakers pressing Obama to take "any measures necessary" to free Gross. People familiar with the matter say that the language was softened because of strong opposition from two of the most powerful and prominent members of the Senate, both of Cuban-American descent: Robert Menendez of New Jersey, the Democratic chairman of the Senate Foreign Relations Committee, and Republican Marco Rubio of Florida, who is widely seen as a likely contender for the GOP presidential nomination in 2016.

People involved in the Senate deliberations say that Menendez and Rubio have also been privately lobbying some of the 50 senators who have expressed a willingness to sign on to the letter to reconsider their support and remove their names. Legislative aides who have been working the issue expect at least a handful of the original signatories to drop off before the letter gets to the White House.

"Menendez and Rubio have been explaining to members that the original letter seemed innocuous, but it was really calling for the Obama administration to make more concessions to Castro," said Mauricio Claver-Carone, the director of the U.S.-Cuba Democracy PAC and a close ally of the two senators. "They're making the case that we've been negotiating with the Cubans for four years, that it hasn't worked, and that its time to impose consequential actions on Cuba until it frees Alan Gross."

The two lawmakers are pressing their case in a White House letter of their own. The letter, obtained by FP, calls for Obama to work towards Gross's "immediate and unconditional release," as opposed to holding any negotiations -- or making any concessions -- to bring it about. The seven other signatories include New York Democrat Chuck Schumer and an array of Cuba hawks like Arizona Republican John McCain and South Carolina Republican Lindsey Graham. A Menendez aide said the letter will be delivered Friday.

The Gross case is so sensitive that none of the lawmakers and Capitol Hill staffers involved in the internal government deliberations over his release or the talks with the Cubans would speak for the record. The White House declined to comment and referred questions to the State Department, where a spokesperson said "securing Alan Gross's immediate release is a top priority of the U.S."

"We use and will continue to use every appropriate diplomatic channel to press for Mr. Gross's release, both publicly and privately," the spokesperson said. 

Gross's lawyer, Scott Gilbert, said the administration could be doing far more. Gilbert said the White House had erred by arguing that the Cuban government should release Gross unconditionally before Washington would address the broader U.S.-Cuba relationship while simultaneously calling for an improvement in U.S.-Cuban relations in order to then bring about his freedom.

"You have a self-created 'Catch-22,'" he said.

The chain of events that would ultimately end with Gross's arrest began fifteen years ago with the passage of the Helms-Burton Act, a hard-hitting bill that formalized the decades-old, and largely ineffective, U.S. embargo against Cuba. Congress approved the bill in March 1996, just weeks after Cuban MiG warplanes shot down a pair of small planes operated by a U.S.-based dissident group called Brothers to the Rescue, killing the four people aboard. 

"In their memory, I will continue to do everything I can to help the tide of democracy that has swept our entire hemisphere finally, finally reach the shores of Cuba," President Clinton said at the time.

The legislation directed the U.S. Agency for International Development to devote more resources to democracy promotion work in Cuba, and the George W. Bush administration created a program designed to help ordinary Cubans evade the Castro regime's strict controls on their phone and Internet usage. The money devoted to that initiative jumped from $3.5 million in 2000 to $20 million in 2009.  A Bethesda-based firm called Development Alternatives, Inc., or DAI, received much of that funding. DAI, in turn, hired Gross to bring satellite phones and other communications equipment to Cuba.  He began traveling to the island in early 2009.

Gross's ordeal began on the night of December, 2009, just minutes after he finished a phone call with his wife Judy. He was slated to fly home the next day, but Gross never left Cuba. Instead, according to a detailed account in Foreign Affairs, four Cuban security agents knocked on the door of Gross's room in Havana's Hotel Presidente and arrested him as soon as he opened it up. They took him to a waiting car and drove him to a nearby military base. He has been in jail ever since.

Gross has acknowledged bringing satellite phones and other sensitive communications equipment into Cuba, but said he was simply trying to make it easier for the island's small Jewish community to connect with the outside world over the Internet. In court testimony and media appearances, Gross said that he wasn't aware that he was doing anything illegal.

The Cuban government, however, said that Gross was a spy who had been sent to Cuba to help ordinary citizens break the laws of their country. Cubans need formal permission from the government to use satellite phones or to connect to the Internet. The Cuban government moved Gross to a military prison and prepared to put him on trial.      

Backchannel negotiations for Gross's release had begun shortly after his arrest. People familiar with the matter say that the Cuban government initially indicated that it would consider releasing Gross if the American pro-democracy programs on the island were eliminated or sharply cut back. These people say that USAID quietly agreed to spend only $15 million of the $20 million that had been budgeted for the programming in 2010. The agency also said it would spend just $10 million of the money the following year, these sources said. Gross's supporters would later point out that $10 million seemed like an astonishingly small amount of money to pay to get an American citizen out of a third-world jail.

A person with direct knowledge of the talks said that word of the changes leaked to Menendez and Republican Representative Ileana Ros-Lehtinen of Florida, a Cuban-American who was then the ranking member of the House Foreign Affairs Committee. Both lawmakers opposed making any concessions whatsoever to the Cuban government. "Menendez communicated to the White House, very bluntly, that there would be serious repercussions if the money wasn't spent," this person said. USAID duly spent the full $20 million set aside for 2010. It would ultimately spend $20 million in 2011 as well.

Talks between the U.S. and Cuba continued, hampered by the levels of mistrust and hostility that had built up over the past few decades. In the fall of 2010, according to Foreign Affairs, then-Assistant Secretary of State Arturo Valenzuela met with Cuban Foreign Minister Bruno Rodriguez in New York to discuss the case. Valenzuela, according to Foreign Affairs, said Cuba had to release Gross before Washington would be willing to discuss other aspects of the U.S.-Cuba relationship. Rodriguez, the magazine reported, was angry that Valenzuela was laying down preconditions without making any promises of his own. The meeting ended without a deal. Valenzuela, now a professor at Georgetown, didn't respond to repeated requests for comment.

Gross's trial began in Havana in March 2011.  He apologized to the Cuban government and insisted that he hadn't been trying to subvert Cuban law or weaken the powers of the Castro government.

"I do deeply regret that my actions have been misinterpreted as harmful and a threat against the security and independence of Cuba," Gross said in a transcript of his hearing later released by one of his attorneys. "I am deeply sorry for being a trusting fool. I was duped. I was used. And my family and I have paid dearly for this."

The court decided Gross hadn't paid enough and sentenced him to 15 years in a Cuban prison, a surprisingly harsh punishment for an American citizen then in his early 60s. In November 2012, Gross and his wife Judy filed a $60 million lawsuit against his former employer, DAI, accusing the firm of failing to adequately prepare him for the challenges and dangers of working in Cuba. The family settled the lawsuit this past May, without publicizing the terms and with neither party admitting fault. 

"We have been clear from day one that Alan's safe return to his family is our first priority," DAI President and Chief Executive Officer Jim Boomgard said in a statement at the time.  "Settling this litigation allows us to work together on that overriding goal, which should be the focus for everyone involved in this case."

Judy Gross, in the same statement, said she was "pleased" the company had committed itself to doing everything in her power to win her husband's release.

"We want Alan back home, safe and sound," she said.

There's no sign that will happen anytime soon, however. The on-again, off-again talks have foundered over the future of the so-called "Cuban Five," a quintet of Cuban intelligence officers who were convicted of espionage and a variety of other crimes in 2001. One of them, Gerardo Hernández, was linked to the February 1996 downing of the two civilian planes operated by Brothers to the Rescue, the U.S.-based dissent group. He and three others remain in prison. The fifth, a U.S. citizen named René González, was paroled in 2011 and was allowed to return to Cuba in April 2013 for his father's funeral. A federal judge ruled that González could stay in Cuba permanently if he gave up his American citizenship.

Several Americans who have worked on the Gross case for years said the Cubans have repeatedly offered to hold talks over his fate without preconditions, but didn't get a response from the Obama administration. Other Cuban officials indicated to U.S. representatives that any resolution of the Gross case would have to involve the freeing of one or more of the four Cubans. An American who was involved in earlier phases of the talks said that he thinks the Cubans might also have been open to a deal if the U.S. had agreed to give the men new trials or improve their living conditions. "We're talking conjugal visits, things like that," the person said. 

There appears to be little chance of that sort of swap happening. Secretary of State John Kerry, who held a secret meeting with Rodriguez, the Cuban foreign minister, during his time in the Senate, bluntly told the House Foreign Affairs Committee in April that the Obama administration wouldn't be willing to release the Cuban prisoners in exchange for Gross. The contractor, he said, should instead be released on "humanitarian" grounds.

"They were and have been attempting to trade Alan Gross for the five spies that are in prison here in the U.S., and we've refused to do that because there's no equivalency," he said. "Alan Gross is wrongly imprisoned, and we're not going to trade as if it's spy for spy."

Raul Castro, Cuba watchers say, doesn't appear willing to accept anything less than the freeing of some or all of the four Cuban spies.

"Raul raised the cost of letting Alan go," said a Hill staffer with knowledge of the case. "The ask is now the Cuban Four; if gets less than that, he loses face. He's boxed himself in and needs to be able to show something he's not likely to get."

Last spring, Rodriguez sat down with Gilbert and Judy Gross in Havana and floated the idea of sending Gross back to the U.S. for a two-week parole so the contractor could see his dying mother. Gilbert said the talks never matured because U.S. representatives "weren't given clear directives" from senior Obama administration officials about whether to pursue a deal. 

While the tussling continues, Gross is languishing in a Cuban jail, where he spends 23 hours per day in a small cell that he shares with two other prisoners. Prison appears to be taking an enormous physical and mental toll. A lump on Gross's shoulder led to a temporary cancer scare. He missed one of his daughter's weddings and wasn't there for her when she was diagnosed with breast cancer. His mother, 90, appears to be in the final stages of herlung cancer battle. Gross isn't slated to be freed until 2024, when he will be 75 years old. Gilbert, his lawyer, said hope of an early release is the only thing keeping Gross alive. If the U.S. government doesn't figure out a way of bringing the contractor home, Gilbert said that he expects his client to die in prison. "Keeping him there for 11 years would be a death sentence," Gilbert said. 

Courtesy of the Gross family

Report

Mr. Bitcoin Goes to Washington

Can the skyrocketing crypto-currency survive when all of D.C. is looking to tame it?

Bitcoin is going to have to grow up fast. The digital currency's skyrocketing value and habit of winding up in criminals' hands are attracting the attention of Congress and D.C. regulators. And that's forcing supporters of the four-year-old Bitcoin to suddenly start acting like an old-school financial firm in Washington. They're ramping up lobbying efforts to shape regulations that are likely to come, prepping for Senate testimony, and even forming their own trade association. Perhaps it's just a coincidence that the Federal Election Commission has quickly decided to allow campaign donations to be made by Bitcoin.

The distributed, cryptographically-signed currency has already had a long journey since it was created almost five years ago to allow people to buy and sell things online without the cost and hassle of a bank. The virtual currency has attracted investors from all over the world, which has pushed the value of an individual Bitcoin to around $380, over five times what it was in April after the last bubble burst.

It's impossible to know whether widespread investment or political contributions were part of creator "Satoshi Nakamoto's" original vision when he created the first Bitcoins in 2009; his real identity is still unknown. Many enthusiasts see it as a potentially utopian currency because it is independent from the predations of the banking system, which could theoretically mean much lower transactions costs. Other fans with a more libertarian bent like the fact that it's not backed by a government, so it's not subject to the whims of politicians or a meddling central bank.

Now, the Bitcoin economy is at a crossroads. Either it learns to work with the U.S. government, disavowing much of what makes it unique, or it sticks to less-regulated parts of the world, like some Internet gambling sites. That would likely mean trading Bitcoin would continue to be unreliable, relegating it to more of a curiosity than a usable currency. Even if Bitcoin exchanges agree to be tamed, it's unclear they can afford it. Are the disparate ranks of overnight Bitcoin millionaires and newly-interested investors going to foot the bill? Creating trade groups that can take questions from senators and meet with government agencies is expensive, and so is making the changes regulators want, like recording and verifying customer information so authorities can track down money that changes hands illegally.

While Bitcoin has been championed by privacy-rights activists, it has also become a favorite for lawbreakers from arms dealers to tax evaders because it operates outside the traditional banking system, allowing people to move money and illegal goods anonymously. In October, the Justice Department shut down an online black market called the Silk Road and arrested its owner, Ross William Ulbricht, a.k.a. "Dread Pirate Roberts." Authorities also confiscated 26,000 Bitcoins, the largest ever seizure of the digital currency. Last week, Silk Road re-emerged presumably under new leadership, mocking the government notice that shut the site down.

Then there's the run-of-the-mill theft and fraud, like the Ponzi scheme the Securites and Exchange Commission alleges Trendon Shavers ran for two years. Shavers, who went by "pirateat40" online, allegedly bilked 66 investors out of about $4.5 million in Bitcoin by promising 7 percent weekly returns for investments in his First Pirate Savings & Trust, according to the complaint filed in July.

Of course, it's not all pirates and robbery on the virtual seas. Bitcoin is also attracting investment from high-profile entrepreneurs and companies that want to popularize digital currency investments for individuals. Cameron and Tyler Winklevoss, famous for suing Mark Zuckerberg over their role in creating Facebook, have asked regulators for permission to create a fund that would allow Bitcoins to be traded like stocks. And SecondMarket would like to make Bitcoin investments available for your retirement account.

New research by University of California, San Diego, graduate student Sarah Meiklejohn suggests that Bitcoin may not always be such an effective tool for avoiding law enforcement. At the moment, Bitcoin can be used to buy drugs or shift money to a country with a lower tax rate with apparent anonymity, because moving Bitcoins doesn't create the same paper trail that moving money through a bank does. But Bitcoin transactions are still tracked as part of the system for creating and using them. You can either buy Bitcoins or use specialized computers to find and unlock them by mining through lots of data. Either way, the transactions are recorded in a central database to make sure no one tries to spend the same Bitcoin twice. Meiklejohn, who's studying for a Ph.D. in computer science, showed that this database can be used to track transactions to an exchange and from there to a bank account, challenging the notion that the Bitcoin system is anonymous.

"If a user is suspected of engaging in criminal activity, an agency with subpoena power could go to the exchange and say, 'I really need to know who that person is,'" said Meiklejohn. So, if the authorities could get the exchanges and companies that hold Bitcoin to collect the sort of information that banks do about their customers, they could potentially regulate digital currency much the way they do the rest of the financial system.

And that seems to be the tack they're taking. In March, the Treasury Department said companies that transfer and exchange Bitcoins should register as money transmitters, like PayPal and Western Union, and follow rules to prevent money laundering and fraud. But a final, unified approach isn't yet clear. In August, New York's financial regulator opened a wide-ranging investigation into Bitcoin companies and the possible need for more regulation.

All of this interest makes Bitcoin hard for lawmakers to ignore. Two Senate panels are looking into Internet black markets and Bitcoin. The Senate Committee on Homeland Security and Governmental Affairs announced a hearing on Nov. 18 to look into the "potential risks, threats, and promises" of virtual currencies. A Senate banking subcommittee is also planning a hearing.

The new attention from Washington has spurred entrepreneurs and enthusiasts to create the Bitcoin Foundation to speak for the anonymously-created currency. Despite its counter-culture roots, the Foundation's mission statement is to standardize and protect the currency so it can be more widely used. Marco Santori, the Foundation's head of regulatory affairs, said Bitcoin companies should have the same regulation banks have, except specifically tailored for digital currency. Some supporters are critical of the lobbying effort and government involvement, but Santori said the majority of the Foundation's members are leaning toward cooperating with the government's efforts to regulate.

Some backers of virtual currencies have also created an organization to self-police the use and trading of digital currencies called the Digital Asset Transfer Authority (DATA). DATA is soliciting memberships for several thousand dollars and sponsors for tens of thousands. It's unclear whether these new organizations will attract enough support to be successful. While the value of each Bitcoin has soared, the systems required to trade and use Bitcoin are not very developed. Companies that run the exchanges and the banks that hold Bitcoin deposits, are struggling to meet U.S. regulators' new requirements and the security requirements needed to fend off hackers.

Stan Stalnaker, a founding member of DATA, said digital currency companies aren't making enough money to afford the sort of regulatory structure that the U.S. government might want. That could make other countries happier homes for these electronic money exchanges.

"If they push this stuff out it's all going to happen in other jurisdictions and believe me there is a race on," said Stalnaker, who is also the director of Hub Culture and another digital currency called Ven. Two of the biggest exchanges are in Russia and China. One Chinese firm just went dark, leaving millions of dollars in Bitcoin in limbo -- and once again highlighting the problems with unregulated exchanges.

If the exchanges aren't interested in regulation, or can't afford it, Bitcoin is going to have a hard time maturing into a widely used currency. Nicholas Colas, chief markets strategist with ConvergEx Group, estimates that the majority of Bitcoin buyers -- as high as 90 percent -- are investors, rather than people who intend to use it as currency to buy and sell things. If a currency isn't used, it has no value. It's not like a stock or a bond that is connected to the value of a company.

One possibility is that these Bitcoin investors step in to support the creation of infrastructure that passes regulatory muster, in order to encourage the use of Bitcoin and, in turn, support the value of their investment. Colas says Bitcoin investors have enough wealth to fund the infrastructure to make the market work properly.

"There are many people who have made millions and millions of dollars that aren't public," said Colas. Whether they'll want to reinvest that in shoring up the Bitcoin marketplace is unclear.

Some skeptics doubt that Bitcoin can ever grow up. Nicholas Weaver, a researcher at the International Computer Science Institute in Berkeley, thinks exchanges face bigger problems than the government's new interest in them.

"The problem that every exchange faces is that Bitcoins are fundamentally incompatible with modern finance," Weaver said. Because the transactions are designed to be irreversible, like cash transactions, Weaver said Bitcoin banks and exchanges can't interact with the banking system, which allows banks and individuals to claw back transfers if something goes wrong. Credit card transactions, for instance, can be undone, if it turns out that the merchant is defrauding the buyer.

Nonetheless, lawmakers don't look like they're gunning to shut it down, at least for now. Next week's hearing will focus on "the promises of virtual currency for the American and global economies," according to the committee announcement. It's unclear where all this new attention will lead, but Bitcoin's wild youthful days as an unregulated currency may already be over.

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