Vulture Funds

[TheDave]

People are seriously messed up sometimes....


February 14, 2007 — On Thursday 15 February a high court judge in London will rule whether a 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, Zambian presidential adviser and a 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.”

Debt Advisory International (DAI) 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.

Tractors

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 DAI’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 DAI refuse to do interviews but reporter Greg Palast caught up with the company founder Michael Sheehan outside his home in Virginia.

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

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.

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.

Rudy 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.

Jubilee Debt Campaign told Newsnight that they are calling on Gordon Brown to turn his moral outrage about vulture funds into action
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.

[bendog]

bastards.

[yavoon]

buying debt is common. when a collection agency shows up at ur door cause u haven't paid ur hospital bills or whatever, they have bought ur debt(for a discount) in the hope they can squeeze it out of u.

[TheDave]

I have a feeling that some of the money we send over there for food and for AIDs medication ends up paying these fund holders....

[yavoon]

Originally Posted by TheDave

I have a feeling that some of the money we send over there for food and for AIDs medication ends up paying these fund holders....

most of the money just goes to the warlords and the cleptocrats that makeup pretty much the entirity of africa.

[TheDave]

Originally Posted by yavoon

buying debt is common. when a collection agency shows up at ur door cause u haven't paid ur hospital bills or whatever, they have bought ur debt(for a discount) in the hope they can squeeze it out of u.

There's a little more to this...

[yavoon]

Originally Posted by TheDave

There's a little more to this...

besides the shady bribing and involving governments instead of ppl? not particularly. buying debt is an efficient capitalist mechanism. if u think buying debt is so wrong shouldn't u be mad at romania and not at the company trying to collect?

[TheDave]

Originally Posted by yavoon

besides the shady bribing and involving governments instead of ppl? not particularly. buying debt is an efficient capitalist mechanism. if u think buying debt is so wrong shouldn't u be mad at romania and not at the company trying to collect?

Buying the debt of a poverty ridden country where a significant percentage of the population are dying of famine and disease only to bribe the local government and use shaddy legal tactics in order to extort huge sums of money is not the work of your local collection agency.

Sorry Yavoon but i just can't see the similarity between a few harrasing phone calls and strip mining the last few resources from a poverty stricken populace.

and yes I'm in on the joke that there are plenty of "guilty parties" to go along with these stories...

[Rigs11]

Actually what happens is that the ones who default on the loan have a chance to bid on the loan but are bribed by these same vultures to bid low. The vultures then end up paying ridicolously low dollars to buy these loans then take them to courts and demand payment plus interest. the people of the countries who defaulted on the loans are the ones that end up suffering the worst.Especially in poor countries were they make a dollar a day. By the way alot of this money goes to the republican party.

[yavoon]

Originally Posted by TheDave

Buying the debt of a poverty ridden country where a significant percentage of the population are dying of famine and disease only to bribe the local government and use shaddy legal tactics in order to extort huge sums of money is not the work of your local collection agency.

Sorry Yavoon but i just can't see the similarity between a few harrasing phone calls and strip mining the last few resources from a poverty stricken populace.

and yes I'm in on the joke that there are plenty of "guilty parties" to go along with these stories...

its less savory, collection agencies aren't too savory either. they will take the car of a single mother w/ two jobs. I think u should be morally upset at romania mostly, they sold it. the bribery is obviously bad and should beillegal, but who isn't bribing ppl in africa? african elections ppl literally get fed them marched to the voting booth and told who to vote for. its all very nasty.

[epicSocialism4tw]

Originally Posted by yavoon

most of the money just goes to the warlords and the cleptocrats that makeup pretty much the entirity of africa.

This is correct.

Food drops, hospital plants, housing, wells, you name it. It is all corralled and controlled by warlords.

Africa is a mighty mess with no simple solution.

The only solution is for western nations to overthrow warlords, colonize, and build infrastructure, but that will never happen.

[Rigs11]

Conyers confronted bush about this back in Feb. Bush said he didn't know this was going on

[yavoon]

Originally Posted by Rigs11

Conyers confronted bush about this back in Feb. Bush said he didn't know this was going on

haha

[alkemical]

Originally Posted by angryllama

This is correct.

Food drops, hospital plants, housing, wells, you name it. It is all corralled and controlled by warlords.

Africa is a mighty mess with no simple solution.

The only solution is for western nations to overthrow warlords, colonize, and build infrastructure, but that will never happen.

Why not? Because it's cheaper, and maximizes profits.

[bendog]

bushii is a ****ing bastard

http://www.christiantoday.com/articl...egal/11036.htm

[loborugger]

Originally Posted by yavoon

most of the money just goes to the warlords and the cleptocrats that makeup pretty much the entirity of africa.

BINGO!

[bendog]

But that misses the point. The guys paying off the vultures owning the vulture funds AREN'T THE WARLORDS AND CLEPTOCRATS

If you want to argue the IMF and world bank should target corruption, fine. I agree. But that's a totally seperate point than what vulture funds are about.

[yavoon]

Originally Posted by bendog

But that misses the point. The guys paying off the vultures owning the vulture funds AREN'T THE WARLORDS AND CLEPTOCRATS

If you want to argue the IMF and world bank should target corruption, fine. I agree. But that's a totally seperate point than what vulture funds are about.

I dont like the bribing and corruption, but what do u want? do u want romania to be disallowed from selling african debt? do u want ppl to be disallowed from buying african debt? or do u just want countries to be disallowed from loaning africa money? I wonder where in the line u think the great travesty has taken place, besides the obvious disheartening outcome(welcome to africa).

[Spider]

I got Harassment charges against me from a collection company ........ They kept calling my phone asking for a Billy , I said wrong # , well this went on , I asked to speak to the supervisor , nothing changed , Finaly I blew up .... I called them every 5 minutes ( seriously) asking for Sam Hill , they said he wasnt there , I said well this is the # I have for him , why would he give me a fake Phone #? I kid you not, after 2 months of this ( calling at least 4 times aday) , they said they are pressing Harassment Charges , after they hung up , I called right back asking for Sam Hill , Went ot court , told the Judge how they harassed me asking for a Billy ( actually , they typoed the last 2 #'s ) so I was paying them back , judge smirked said I proved my point and not ot call them again