posted on June 6, 2007 11:46:59 PM new
'Vulture funds' threat to developing world
Meirion Jones
BBC Newsnight
Zambia's infrastructure plans could be threatened
Vulture funds report
UPDATE: Zambia loses case
Court Judgement in full (6MB)
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On Thursday 15 February a high court judge in London will rule whether so-called vulture fund can extract more than $40m from Zambia for a debt which it bought for less than $4m.
There are concerns that such funds are wiping out the benefits which international debt relief was supposed to bring to poor countries.
Martin Kalunga-Banda, a Zambian consultant to Oxfam told Newsnight, "That $40m is equal to the value of all the debt relief we received last year."
Vulture funds - as defined by the International Monetary Fund and Gordon Brown amongst others - are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest - which might be ten times what they paid for it.
Mockery
Caroline Pearce from the Jubilee Debt campaign told Newsnight it makes a mockery of all the work done by governments to write off the debts of the poorest.
"Profiteering doesn't get any more cynical than this. Zambia has been planning to spend the money released from debt cancellation on much-needed nurses, teachers and infrastructure: this is what debt cancellation is intended for not to line the pockets of businessmen based in rich countries."
Martin Kalunga-Banda says $40m is equivalent to Zambia's annual debt relief
Debt Advisory International manages a number of vulture funds which buy up the debts of highly indebted poor countries cheaply and then sue for the original value of the debt plus interest. Zambia - where the average wage is just over a dollar a day - is one of the highly indebted poor countries which the world's governments agreed needed debt relief.
Suing
In 1979 the Romanian government lent Zambia money to buy Romanian tractors. Zambia was unable to keep up the payments and in 1999 Romania and Zambia negotiated to liquidate the debt for $3m.
Before the deal could be finalised one of Debt Advisory International's vulture funds stepped in and bought the debt from Romania for less than $4m. They are now suing the Zambian government for the original debt plus interest which they calculate at over $40m and they expect to win.
Like the other vulture funds Debt Advisory International refuse to do interviews but reporter Greg Palast caught up with the company founder Michael Sheehan outside his home in Virginia.
Greg Palast (right) tracked down Michael Sheehan
Greg Palast: "I just want to ask you Mr Sheehan - why are you squeezing the poor nation of Zambia for $40 million - doesn't that make you a vulture?
Michael Sheehan: "No comment I'm in litigation. It's not my debt."
Greg Palast: Aren't you just profiteering from the work of good people who are trying to save lives by cutting the debt of these poor nations?
Michael Sheehan: Well there was a proposal for investment. That's all I can talk about right now.
Five years ago Gordon Brown told the United Nations that the vulture funds were perverse and immoral: "We particularly condemn the perversity where Vulture Funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed - a morally outrageous outcome". But the vulture funds are still operating.
'We don't do interviews'
The London case is just one of many which are running around the world.
Newsnight went to New York to try to interview Paul Singer - the reclusive billionaire who virtually invented vulture funds.
In 1996 his company they paid $11m for some discounted Peruvian debt and then threatened to bankrupt the country unless they paid $58m. They got their $58m.
Now they're suing Congo Brazzaville for $400m for a debt they bought for $10m.
We didn't get our interview. His spokesman told us, "We have nothing to hide; we just don't do interviews".
US courts
Jubilee Debt Campaign told Newsnight that they are calling on Gordon Brown to turn his moral outrage about vulture funds into action
Watch more of Greg Palast's Newsnight reports
The vulture funds raise most of their money through legal actions in US courts. Those actions against foreign governments can be stayed by the word of the US President and that is where lobbying and political influence becomes important.
Debt Advisory International are very generous to their lobbyists in Washington. They have been paying $240,000 a year to the lobby firm Greenberg Traurig - although recently they jumped ship to another firm after Greenberg Traurig's top lobbyist was put in jail.""
( I beleive that's bushit's close personal friend, JACK abramOFF)
""Paul Singer has more direct political connections. He was the biggest donor to
George Bush and the Republican cause in New York City -
giving $1.7m since Bush started his first presidential campaign.
Rudi Guiliani is the favourite to be the next Republican presidential candidate and a leaked memo from his campaign shows that Paul Singer has pledged to raise $15m for Guiliani's campaign.
Tactics
The vulture funds have teams of lawyers combing the world for assets which can be seized to settle their claims. There have also been claims of dubious tactics.
Back in Britain the Zambian case has seen much legal discussion about allegations of bribery. The Zambian legal team - led by William Blair QC - Tony Blair's brother, has argued that a $2m bribe was offered to the former Zambian President to make it easier for the vulture funds to claim their money.
They showed the court an email disclosed in the Zambia case saying that a payment to the "President's favourite charity" had allowed them to do a more favourable deal.
When we caught up with Michael Sheehan outside his house in Virginia he told us it was not a bribe but a charitable donation.
He told us, "We offered to donate debt to a low income housing initiative which was a charitable initiative which did end up building several thousand houses" before adding "you're contorting the facts, you're on my property and I would ask you to step off".
The Jubilee Debt Campaign told Newsnight that they are calling on Gordon Brown to turn his moral outrage about vulture funds into action if he becomes Prime Minister and change the law to make the Zambian case the last to appear in a British court.
posted on June 7, 2007 12:14:13 AM new
Battle over ‘vulture funds’
Published June 5th, 2007 in Articles
Palast reports from London on BBC Newsnight
Watch the report
Congressman John Conyers, still in the thick of his hearings on the firing of US Attorneys, is preparing a new target for investigation: Vultures.
We’re not talking about the feathered birds of prey, but predators with allies in the White House and Swiss bank vaults full of untraceable currency. These speculators buy up the debt of the poorest nations on the planet for pennies on the dollar — then use legal extortion or less-than-legal bribery to extract payments from these nations - payments equal to five, ten or twenty times what the vultures “invested.”
Conyers has personally informed George Bush that he expects the President to join the other G8 leaders to put the vultures out of business. “I’m counting on the President to do the right thing,” Conyers told BBC reporter Greg Palast. But if the President doesn’t, Bush can expect another set of investigations and hearings on the Administration’s inaction and ties to vultures.
Tonight Palast’s BBC investigative team follows up on previous quarry: Michael Francis Sheehan, a.k.a. “Goldfinger.” Goldfinger has already won $20 million from Zambia for a debt he “bought” for less than $4 million. How did he do that? We discovered that the deal was greased by payments to the former President of Zambia’s “favourite charity”. Could the Zambian President’s “favourite charity” be himself?
BBC travels to the Boutique Basile in Geneva, Switzerland, where Zambia’s charity-minded ex-president, Frederick Chiluba, bought one million dollars in finery, including 206 suits, 349 shirts, each monogrammed with his initials –- and each shirt costing as much as the average Zambian earns in a year. The diminutive despot also bought 72 pairs of shoes — all with extra-high heels.
Still, the vulture “Goldfinger” is closing in on Zambia, demanding another $35 million — while US law enforcement closes in on him — and Conyers closes in on President Bush.
Who WILL win this high-stakes derby?
Watch the report on BBC Newsnight’s website.
.
BBC Producer: Meirion Jones
Camera & Editing: Richard Rowley (BigNoise Films)
Producer & Researcher: Matt Pascarella
Research: Leni von Eckardt
Production Assistance: Zachary Roberts & Adam Chimienti
********
Greg Palast is the author of the New York Times bestseller, ARMED MADHOUSE: From Baghdad to New Orleans — Sordid Secrets and Strange Tales of a White House Gone Wild.
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