Washington may cut off aid because of the slow pace of settling confiscation
 claims by U.S. citizens.

 BY GLENN GARVIN
 

 MANAGUA -- When the Nicaraguan government offered her $38,000 for the
 electric company it seized from her parents, Carrie Gagnon knew it was a bad
 deal. But she did not realize just how bad it was until she read in a newspaper
 that Nicaragua was planning to sell the plant for as much as $9 million.

 ``It's unbelievable,'' said Gagnon, a Tampa housewife. ``It's . . . well, it's just not
 right. What kind of a government is that, anyway?''

 A decade after the fall of the Marxist regime that governed Nicaragua in the
 1980s, the problem of compensation for the tens of thousands of pieces of
 property it seized continues to stifle this country's economy, poison its foreign
 relations, and roil its politics.

 And now it threatens to cut off Nicaragua's access to billions of dollars in foreign
 aid earmarked for rebuilding a country that has been continuously hammered by
 earthquakes, wars and hurricanes during the last 30 years.

 Washington, angered by what some officials consider the slow pace of settling
 confiscation claims by U.S. citizens and the meager compensation offered them,
 is considering invoking a law that would require President Clinton not only to cut
 off all U.S. aid to Nicaragua, but lobby against loans from international financial
 institutions such as the World Bank.

 ``It's a very delicate situation,'' said Francisco Aguirre, Nicaragua's ambassador to
 Washington, who has been frantically lobbying against the cutoff. ``Winning a
 waiver from the law has never been automatic, but this year it's been more
 delicate and more difficult than ever before.''

 PROPERTY PROBLEM

 The property problem is by no means restricted to U.S. citizens. The vast
 majority of people who lost land, homes or businesses to the orgy of
 confiscations during the 1980s were Nicaraguans.

 And the repercussions ripple throughout the economy here: Buying and selling
 land is difficult because of the tangled underbrush of conflicting property claims,
 which in turn makes it difficult for foreign investors to locate in Nicaragua.

 But it is the 800 or so pending claims by U.S. citizens -- rather than the 9,700 by
 Nicaraguans -- that get the most public attention because of a 1994 U.S. law that
 prohibits aid to countries that expropriate property from U.S. citizens without
 compensation.

 The law permits Clinton to issue a waiver if the State Department certifies that a
 sincere effort is being made to resolve the claims. For six years in a row,
 Nicaragua has received the waiver.

 But, with certification coming up again this month, it is clear that tempers are
 fraying in Washington. Not only has U.S. Ambassador Oliver Garza issued
 repeated public warnings that he might recommend against a waiver, but a bill
 introduced in Congress would actually prohibit it.

 ``Our government has been very patient, but, regrettably, our patience seems to
 have been misinterpreted by the government of Nicaragua as a lack of interest,''
 said U.S. Rep. Benjamin Gilman, R-N.Y., the bill's sponsor.

 Many of the 800 or so U.S. citizens with property claims pending here are openly
 rooting for the law to be invoked. Carrie Gagnon and her husband, George, a
 stockbroker, are among them. They are furious that loans from the
 U.S.-supported Inter American Development Bank will be used to help Nicaragua
 sell their family power company for millions of dollars, while the government offers
 them a comparative pittance.

 TAX DOLLARS

 ``My in-laws are paying their own hard-earned tax dollars to give aid and comfort
 to the very Nicaraguan government that is robbing them,'' George Gagnon said.
 ``American dollars are working against us as American citizens because of the
 Nicaraguan government's bad faith. It's scandalous, and it's got to be stopped.''

 The Gagnons' story is not only of the origins of the property problem, but what
 critics call the abusive tactics the Nicaraguan government has sometimes
 employed as it tries to untangle the mess.

 The electric company was founded by Carrie Gagnon's grandfather in 1951 in the
 northern Nicaragua city of Matagalpa. The company had a silent -- and, the
 Gagnons say, unwelcome -- partner: Anastasio Somoza García, the patriarch of
 the family dynasty that ruled Nicaragua.

 ``You couldn't get bank loans or import machinery and spare parts in those days
 without Somoza's permission, so he got 50 percent of the company for $1,'' said
 George Gagnon. ``His only role at the company was to collect half the profits.''

 By 1979, the electric company had 6,000 customers. But when the Somoza
 regime was toppled that year by Marxist Sandinista guerrillas, the power
 company was one of what by some estimates were 170,000 pieces of property
 seized by the new government. The Gagnons received nothing for their half.

 FREE ELECTIONS

 Eleven years later, when the Sandinistas finally held free elections and lost, the
 Gagnons filed a claim for the power company. But President Violeta Chamorro's
 government refused to give it back and offered the family only $38,000 in
 compensation -- and that in 15-year bonds that could only be redeemed in person
 in Nicaragua.

 The Gagnons indignantly rejected the offer. But indignation turned to rage when
 they learned that the government is privatizing its power grid -- which includes
 their old company -- and expects to receive between $400 and $1,500 per
 customer from the winning bidder in August. That means Nicaragua will get
 between $2.4 million and $9 million for the Gagnons' property.

 ``It's so unfair, so incredibly unfair, that it's almost impossible to believe,'' said
 George Gagnon, who has been faxing warnings to the multinational corporations
 expected to bid on the Nicaraguan electrical system, warning them that they will
 find themselves mired in lawsuits if his family is not paid.

 Even some Nicaraguan officials have blanched when confronted with the Gagnon
 case. ``That's a big discrepancy, between $38,000 and $2.4 million, and we're
 going to reanalyze that case,'' said Luis Tellería, director general of the
 government office that sets financial offers for property claims. ``It's possible
 there's been a mistake, and we'll see.''

 But many confiscados, as they're called here, say that low-ball offers and
 excessive demands for paperwork are not mistakes, but business as usual in the
 way Nicaragua handles property claims. The government deliberately tries to wear
 them down so they will settle cheaply or even give up, they say.

 RULES OF GAME

 ``They keep changing the rules of the game,'' said Dwight Kleine, an Orlando
 time-share salesman who is pursuing half a dozen claims for auto dealerships
 and parts companies that were confiscated from his parents. ``First they want this
 piece of paper, then they want another, then they want a tax record or something
 that one of their own government offices lost -- and you're responsible for coming
 up with it.''

 Kleine's case grew so notorious -- the government demanded completely new
 paperwork from him four times in two years -- that it prompted Ambassador Garza
 to write a letter to the Nicaraguan government warning that ``we are seriously
 worried about due process for property claimants.''

 Nicaraguan officials say they are getting a bad rap. Many confiscados inflate their
 losses to ridiculous levels, officials contended, and even those with legitimate
 claims often expect the government to simply take their word for it.

 ``A lot of people come in here and say, you took my farm, it was about 20 acres,
 pay me,'' Tellería said. ``Well, `about 20 acres' is not a measurement -- we need
 deeds and surveys to tell us exactly how much it is so we can value it correctly.

 ``Or even if the man has his deed, he might say, `Oh, there were 10 John Deere
 tractors on the farm, those were confiscated too. Pay me.' But when we say,
 `Show us bills of sale, show us records that you paid customs duties to import
 them, but don't expect us to just pay you without proof,' he gets angry.''

 Tellería and other officials say that the United States is complaining the most
 loudly at precisely the time that President Arnoldo Alemán's government is
 starting to make real progress on resolving the claims.

 THE CLAIMS

 Of 17,000 property claims filed with the Nicaraguan government, more than 7,200
 have been resolved -- nearly 3,000 of them in the last three years, officials say.
 Nicaragua has paid out $735 million to settle the claims.

 On the claims filed by U.S. citizens, the officials say, the box score is even
 better. About 3,200 of 3,800 have been resolved, more than 40 percent of them
 during the past three years.

 Their argument will probably carry the day, some U.S. officials say, but just
 barely. ``They'll probably get the waiver,'' said a U.S. Senate staffer who follows
 Nicaraguan issues closely. ``But they've got to wake up -- this has been going on
 for 10 years, and that's more than long enough. Two years ago, they got it
 because the Alemán government was new and we were still on a honeymoon.
 Last year they got it because of Hurricane Mitch. From now on, they're going to
 have to earn it.''