The Cuban Coffee Caper

How Castro paid $8.7 million and got not a single cupful

As Cuba's ruler for the past 20 years, Fidel Castro obviously wasn't born yesterday. He has triumphed over at tempted invasions, coups and assassinations. He has felt confident enough to send troops to Africa to stir up trouble. Yet he has now been taken, in a huge swindle brought off by a group of men accused of selling Cuba a cargo of nonexistent coffee. The ruse, involving transactions from Canada to the Caribbean, ultimately collapsed, but not before Cuba was relieved of about $8.7 million--perhaps the worst sting the Cuban dictator has ever suffered.

The Cuban government, the Royal Canadian Mounted Police, the FBI, and the U.S. Justice Department's Strike Force are all involved in the attempt to untangle the swindle. Authorities have arrested one man, a West German commodities broker named Karl Fessler, charged three more, and are seeking others.

In an attempt to support Castro's faltering economy, the Soviet Union has been buying much of the coffee Cuba grows at a price higher than on the world market. In fact, Cuba has even been accused in some anti-Castro quarters of mixing imported coffee with home grown and then selling the spurious blend to the Russians. Be that as it may, Cuba does import cheaper coffee for domestic consumption.

Knowing the Cubans' need for coffee, Karl Fessler, a jet-hopping high roller, is said to have made them an attractive offer in late 1977. According to the Cuban government, Fessler told its trade representatives that he would sell them 3,000 metric tons of "Barahona," a choice Arabic blend grown in the Dominican Republic, at a bargain price. Reportedly, Fessler and some cohorts produced all the documents attesting to the availability of the coffee, and the deal was clinched last October on the Caribbean island of St. Martin. The Cubans agreed to a price of $1.39 a lb., vs. $1.54 on the world market. In a later meeting, the Cubans asked if they could inspect the coffee. No need for that, Fessler assured them. Everything was fine.

Except that not a single coffee bean existed. Companies were set up in the Caribbean and an aging freighter of Panamanian registry was bought for $700,000. The culprits proceeded to pay off anybody who might hinder the swindle. The Justice Department estimates that hundreds of thousands of dollars were paid out.

The ship without the coffee was launched near Santo Domingo last November. The plan was to sink it en route to Havana. The gang expected to collect twice: once from the duped Cubans, a second time from the company that insured the ship. When the freighter was at sea, Fessler and a confederate are said to have marched into the Bank of Nova Scotia in Toronto. All sorts of papers were shown verifying that the coffee was on its way: a telex from the ship's captain, complete invoices, bills of lading, inspection receipts. Following the instructions of Cuba's brokers, the bank promptly disbursed the $8.7 million as Fessler directed.

Then came a hitch. Someone had apparently neglected to bribe a port official in Santo Domingo; he retaliated by refusing to let the crew that had been hired to scuttle the ship board the vessel. So the freighter had put to sea with its original crew, who were unaware of the plot. En route, they evidently realized that something was wrong. They sailed into Puerto Limon, Costa Rica, and left the ship. At first, when the coffee failed to arrive on time, Cuba's representatives were not alarmed. They received a telex explaining that the freighter had been delayed at sea because of mechanical problems. Finally, the brokers involved in the deal decided to check. They flew to Costa Rica and found the freighter empty.

By then the swindlers were long gone. Fessler showed up in Miami, where he went on a spending spree. He bought a $17,000 Cadillac and $70,000 in jewelry, made a down payment on a Key Largo condominium, invested $850,000 in securities, and moved into a Coral Gables hotel suite. Fessler lived so openly, it seems, because he thought he had not committed a crime liable to prosecution in the U.S. He also did not figure that Canadian authorities would press so vigorously for his extradition. FBI agents, who had been tipped off by the outraged Cuban brokers, arrested Fessler in December. On him they found $40,000 in cash, travelers checks and around-the-world air tickets. Fessler is the only one of the gang who has been arrested.

He was charged with fraud. The others remain at large. So does most of the money. Last week FBI agents and Canadian Mounties island-hopped around the Caribbean looking for the funds, which were laundered in a series of bank-account transfers. "They did everything to make it vanish," says Martin Raskin, an attorney for the Justice Department Strike Force.

Even if the money is found, Castro may not get it. In an extraordinary action, Cuba's Banco Nacional filed a suit in Dade County Circuit Court against Fessler for the return of the money. But by doing so Cuba has made itself vulnerable to lawsuits from property owners whose assets were seized when Castro took power. In addition, the U.S. Treasury has tied up the roughly $1 million recovered on the grounds that the Americans involved in the scheme violated the Trading with the Enemy Act.

If the Cubans do not get their money, they are determined to get Fessler. Currently jailed in Dade County without bail, he intends to fight extradition to Canada. His attorney, Samuel Bare, who calls his client "strictly a broker, a dupe in the whole thing," fears that if Fessler is extradited to Canada, he might somehow wind up in Cuba. In that case, says Bare, "he would be looking at a firing squad." Even so, the Justice Department dropped the fraud charges against Fessler in January, to clear the way for extradition hearings this month. Meanwhile, Castro's agents, who have no great respect for due process, are said to be on the prowl for him and the others. Says a source close to the investigation in Miami: "Everyone in this thing is in jeopardy of his life." That is a high price to pay, even for coffee.

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