HOUSE ARREST FOR AMCITS IN INVESTMENT DISPUTE ENDS, CASE

UNCLAS KOLONIA 000097 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: CASC ECON EAID CPAS FM SUBJECT: HOUSE ARREST FOR AMCITS IN INVESTMENT DISPUTE ENDS, CASE AGAINST DEPARTMENT OF STATE SUBMITTED REF: A. A) KOLONIA 41 ¶B. B) KOLONIA 40 ¶C. C) E-MAIL WEMHOENER-CUITE/KORFF 6-19-09 AND PREVIOUS ¶1. (SBU) SUMMARY: Robert and Patricia Arthur's (Reftels) house arrest ended on June 30. The case by the FSM Development Bank, which resulted in the house arrest, is still active. Despite concerns that the FSM courts may impose additional penalties, the Arthurs continue to appeal the initial decision and have begun a letter writing campaign. The Arthurs also named the Secretaries of State and Interior in a lawsuit brought in a U.S. District Court in an attempt to bring attention to their case within the FSM. END SUMMARY. House Arrest Over, Case Ongoing -------------- ¶2. (U) The March 27, 2009 FSM Supreme Court decision to place Robert and Patricia Arthur under house arrest expired on June ¶30. Both Arthurs told Econ/Conoff they were pleased they could leave their hotel again, but expressed concern about what may happen next. Robert Arthur stated that when the FSM government informed them early on June 30 that the house arrest enforcement order had expired, they were given no information on what steps the State may take next. The Arthurs expressed concern that the next enforcement step the State may take could include jail time. The FSM Supreme Court maintains custody of the Arthurs passports. ¶3. (SBU) Robert Arthur commented that during their house arrest he and Patricia contacted a number of friends to start a letter writing campaign on their behalf. Post has received a number of letters urging Post to lobby on behalf of the Arthurs. Post's response assures the writers that the Embassy is actively engaged with the Arthurs on their concerns and will maintain that engagement (Ref C). Post understands similar letters were addressed to the Department, the U.S. Congress, and segments of the Pohnpei State and FSM National Government. Two people have also written letters to the editor that were printed in the June 24 issue of the Kaselelhlie Press, FSM's only newspaper, which is released every two weeks. Case Background -------------- ¶4. (U) Approximately a decade ago the Arthurs lost their "Pohnpei Pepper" and a Trocus Shell button businesses. To fund the startup of the two companies the Arthurs and a FSM national associate took a loan from the FSM Development Bank (FSMDB). Early indications were that both businesses were successful. Pohnpei State then entered into the pepper business and subsidized farmers selling to the state. The legislature also capped Trocus Shell harvesting. These two actions chased the Arthurs out of business. In the first of two court ruling regarding the investments, the court ruled that the state's actions caused the businesses to close and thus the state owed the Arthurs compensations. A portion of the settlement was paid. In the second case, the court determined that the Arthurs are still liable for the loan they took out. The Arthurs have not repaid the loan. Arthurs Sue USG -------------- ¶5. (SBU) On June 10 the Arthurs filed a case in the Commonwealth of the Northern Mariana Islands naming the U.S. Secretary of State, U.S. Secretary of Interior, Pohnpei State, and the FSMDB as defendants. The Arthurs have repeatedly told Econ/Conoff that their intention with the suit is to show the seriousness of the Pohnpei State's (note: likely referring to the state legislature) actions. Robert Arthur stated that the FSMDB used funding from the USG that was intended to promote investment and economic development. By forcing the closure of their businesses, the State is not adhering to the principals by which it is entitled to continued funding from the USG for economic development. Robert Arthur admitted that he does not think his case in the U.S. Court in the CNMI has much traction, but it shows Pohnpei State the seriousness of their claims. Comment -------------- ¶14. (SBU) As highlighted in earlier reftels, the Arthurs remain adamant that the FSMDB and Pohnpei State are wrong in their pursuit for loan repayment. The Arthurs continue to reject a proposal by the Pohnpei State's Attorney General to offset the two court cases, permitting the Arthurs to keep the partial payment they already received, and drop all further proceedings. The dispute is likely to continue for the foreseeable future, including possible additional enforcement measures such as renewed house arrest taken against the Arthurs. End Comment. DOUGLASS