Nation: The Cuban Coffee Caper

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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.