Libya, Families of Victims of Pan Am 103 Bombing Agree on $2.7B Compensation Fund

The Libyan government signed an agreement Wednesday setting up a $2.7 billion fund for families of the 270 victims of the 1988 Pan Am bombing (search) -- a key step to lifting U.N. sanctions against Libya, according to an e-mail from the families' lawyers.

The agreement setting up an escrow account at the Bank for International Settlements (search) in Switzerland was reached after an 11-hour session in London, said the e-mail signed by attorneys James P. Kreindler and Steven R. Pounian and read to The Associated Press.

The bank, which is headquartered in Basel, Switzerland, and known as the BIS, confirmed earlier Wednesday it was asked to manage an escrow account "from which claimants will be compensated." Libya (search) will pay up to $10 million for each victim, lawyers have said.

Under the deal, U.N. diplomats said the Libyan government would start transferring the $2.7 billion into the escrow account immediately and complete the transaction Thursday.

The Libyan government then would send a letter to the Security Council saying it met the conditions for lifting sanctions -- by taking responsibility for the bombing, renouncing terrorism and paying compensation to the families, the diplomats said.

The United States and Britain also would send letters to the council saying they believe Libya has met the requirements to have sanctions lifted and Britain would circulate a draft resolution doing so, the diplomats said.

Friday is the target date for sending the letters, circulating the draft resolution and holding a meeting at the State Department with victims' families, the diplomats said.

Susan Cohen, of Cape May Court House, N.J., whose 20-year-old daughter, Theodora, died in the bombing, said the State Department called her to say victims' families were invited to Washington on Friday.

The compensation deal calls for Libya to pay each victim's family $4 million when U.N. sanctions against Libya are lifted, another $4 million when the United States lifts its own sanctions against the country, and $2 million when Libya is removed from the State Department's list of countries sponsoring terrorism, said Mark Zaid, an attorney representing more than 50 relatives of victims.

After Libya deposits the money in Switzerland and sends its letter to the Security Council, "we expect the U.N. Security Council to enter a resolution lifting the U.N. sanctions against Libya which will trigger the payment of $4 million per case to our New York trust account," Kreindler and Pounian said in their e-mail to family members.

Kreindler did not immediately return a message left at his office after business hours.

Theodora Cohen's father, Daniel, said money was not the issue.

"This is supposed to be about justice, it's supposed to be about punishment. It is not supposed to be about blood money and a tawdry payoff and that's all I'm afraid we're going to get out of this," he said.

"Moammar Gadhafi is going to profit because although he may have to shell out as much as 2.7 billion dollars, with those sanctions gone he's going to make that back in a New York minute."

While the attorneys appeared confident that sanctions would be lifted quickly, U.N. diplomats were not as confident.

That's because Moammar Gadhafi's government agreed in 1999 to pay only $33 million to families of the 170 people killed in the 1989 bombing of a French passenger jet over Niger.

Six Libyans, including Gadhafi's brother-in-law, were convicted in absentia by a French court in March 1999 of bombing the UTA flight and sentenced to life in prison.

The $33 million Libyan payout for the UTA bombing would provide just $194,000 for each of the 170 victims -- a point stressed by French diplomats. While Paris is not expecting the same deal the Pan Am victims are getting, U.N. diplomats said France wants equity for the UTA victims.

Also, a U.S. official in Washington said the Bush administration, skeptical about lifting the U.N. sanctions, was weighing whether to abstain or support the British-drafted resolution. The official spoke on condition of anonymity.

A Security Council resolution passed in 1992 banned arms sales and air links to Libya to try to force Gadhafi's government to hand over two Libyans indicted for the Pan Am bombing over Lockerbie, Scotland. After the men were handed over for trial in April 1999, the council suspended sanctions indefinitely.

In 2001, a Scottish court convicted Libyan intelligence agent Abdel Basset Ali al-Megrahi of the bombing and sentenced him to life imprisonment. A second Libyan was acquitted.

Under the U.N. resolution, sanctions cannot be lifted permanently until Libya acknowledges responsibility for the bombing, pays fair compensation, renounces terrorism and discloses all it knows about the explosion.