Canadian businessman Sarkis Yacoubian only knew his Cuban interrogator – the Cubans call them "instructors" – as Major Carlito. When they first met in the dim basement of the Havana house where security agents had initially imprisoned Mr. Yacoubian in July, 2011, he says Major Carlito greeted him by grabbing his own crotch.

"If you are expecting that the Canadian embassy is going to come to your help, this is what they are going to get," Mr. Yacoubian, 54, says his captor warned him. Then, he says, Major Carlito accused him of being a spy, an accusation that would eventually be abandoned before the Canadian was convicted by a Cuban court of corruption charges and expelled last year.

His story, and that of Toronto-area businessman Cy Tokmakjian, who was released from incarceration in Cuba last month after a similar corruption trial, are cautionary tales for would-be investors in Cuba.

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However, some say the historic Dec. 17 announcement of Canada-brokered talks to normalize Cuba's relations with the United States – plus recent moves by leader Raul Castro to liberalize the economy – still has Canadian investors and entrepreneurs interested in the Communist-ruled island.

Despite Major Carlito's threat, the Canadian embassy did closely monitor's Mr. Yacoubian's status as he spent two years in jail before facing any formal charge. And the ambassador attended Mr. Yacoubian's 2013 trial, which saw him sentenced to nine years in prison and fined $7-million for corruption, tax evasion and doing "economic damage" to Cuba.

Mr. Tokmakjian, 74, spent more than three years in prison. Two of his Canadian employees who had been blocked from leaving Cuba were also recently freed. His Concord, Ont.-based Tokmakjian Group reportedly had a $90-million-a-year business on the island importing vehicles and construction equipment. His assets in Cuba were seized. Mr. Yacoubian, a former employee of Mr. Tokmakjian's who broke away from his boss to build what he said was a $20-million-a-year business in Cuba bringing in similar products, says all of his assets on the island were also seized.

Both were caught up in what has been described as an anti-corruption sweep. Some of their Cuban employees as well as Cuban state officials were jailed. Several Cuban officials associated with a joint venture with Toronto-based miner Sherritt International Corp., Canada's largest investor in Cuba, were also convicted of corruption offences in 2012. And a handful of other foreign businessmen in Cuba, including Briton Stephen Purvis – who told reporters his captors also initially accused him of espionage – and Frenchman Jean-Louis Autret were also imprisoned. Both have since been freed.

Mr. Yacoubian's account of his ordeal sounds plucked from a spy novel. But even though months before his arrest he did buy a 2011 Aston Martin – James Bond's car of choice – he says he was no spy.

He also says he was not corrupt and was only following common business practices in Cuba. He said he was forced to hand over 1 or 2 per cent on many transactions for what he called "protection money" for Cuban officials for routine things, such as permission to operate a mechanics' shop or to obtain payment for goods sold. But he insists he never paid kickbacks to obtain contracts as the Cubans alleged. He questions why he was targeted.

"If there's a traffic light that's red, everybody passes. Now that I am passing you say, hold on a second, you can't do that," he said.

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Before Mr. Yacoubian was arrested at gunpoint at his Havana offices in July, 2011, he had been running his own business in Cuba for 15 years after breaking away from Mr. Tokmakjian and founding his own company, Tri-Star Caribbean Inc., in the mid-1990s.

During his two and a half years in some of Cuba's most notorious prisons, Mr. Yacoubian says he sank into a depression, attempted a hunger strike and threatened suicide. He says he was arbitrarily moved from cell to cell, which he described as "psychological torture." But early on he says he was treated much better, held in a house in Havana, even playing dominoes with his captors. He was also allowed out to visit his elderly mother, who had flown into Havana, and from whom his imprisonment was kept secret.

He says he told his captors about the practices of other companies and of Cuban officials who received payments, and says he was made to testify against Cuban officials at what he said were closed sessions with military prosecutors.

Toronto-area Conservative MP Peter Kent, who represents the Thornhill, Ont., riding where Mr. Tokmakjian and his family live, visited both men while they were held at La Condesa, a prison an hour outside of Havana. He says their cases and those of the other foreign businessmen is chilling investment in Cuba.

"They have lost a lot of significant investment because, I believe, of the treatment of guys like Cy and [British national] Purvis and others," Mr. Kent said, adding that businessmen from close U.S. allies but not from Venezuela, China or Russia had been targeted. "There, but for the whim of somebody in the Interior Ministry, they would either find themselves in jail one day or their assets seized.… It doesn't matter how well you've behaved, you're vulnerable."

In Mr. Tokmakjian's case, the Cubans alleged that he paid for vacations in Varadero, a barbecue and a flat-screen TV for Cuban officials, as well as for casino chips for a Cuban delegation on a visit to Niagara Falls, Ont. But Mr. Kent called these "confected charges" and said the Cubans refused to allow various expert witnesses to testify in Mr. Tokmakjian's defence, before sentencing him to 15 years in jail in what his company called a "show trial." Mr. Tokmakjian has denied all of the allegations against him. Through a lawyer, he declined to be interviewed for this story.

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Cuba, by comparison with many of its Latin American neighbours, appears to have less large-scale bribery involving high-ranking officials, says Alexandra Wrage, who runs a non-profit called Trace International and advises multinationals on anti-corruption. But lower-level officials, she says, are often engaged in more widespread run-of-the-mill corruption demanding small payments or perks from foreigners.

"The consequences for corporations are kind of terrifying," Ms. Wrage said. "You have a whole population that has basically been trained into the idea that they need to circumvent the rules to survive."

Still, those risks – and the stories of Mr. Yacoubian and Mr. Tokmakjian – don't appear to be dramatically dampening enthusiasm for investment in Cuba from Canada. In one sign of the demand, national law firm Gowling Lafleur Henderson LLP will announce this week the launch of a new Cuba practice to help guide foreign investors there.

Gowlings is working with Gregory Biniowksy, a Canadian lawyer who has lived in Cuba for more than 20 years, who says he has seen a significant boost in interest from Canadian investors since December, with none overconcerned about being thrown in jail: "My experience with Canadian, European and even American investors that are looking at Cuba is that it doesn't seem to be playing much of a factor in their calculations."

Mark Entwistle, a former Canadian ambassador to Cuba who now works as a consultant for investors in the country with Toronto-based Acasta Capital, says it is quite possible to do business in Cuba without paying bribes. He said he could not comment on the specifics of the two cases but said he did not think they were scaring business away: "I don't think there has been any great impact of these specific cases and the media attention they have generated on people interested in exploring the Cuba opportunity."

When asked, even Mr. Yacoubian himself declines to outright warn Canadian businesspeople to avoid Cuba: "The businessmen are smart. There is a risk-reward factor. I am not going to comment. If they want to try it, they can try it. It worked for me for 20 years. And then I lost everything."