Vulture Fund Threat to Third World
Greg Palast / Amy Goodman
February 2007
Greg Palast reports on Vultures
for BBC Newsnight
Report by Meirion Jones, BBC Newsnight
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.
Meirion Jones produced Greg Palast's investigation
into Vulture Funds
*****
Debt Relief Groups Attack Vultures
After our BBC Exposé
Democracy Now!, February 20th,
2007
In response to Greg Palast's report last
week on BBC and Democracy Now, the debt-relief and economic justice
group Jubilee USA is launching a new effort today calling on Debt
Advisory International to drop its efforts to collect money from
the Zambian government. [includes rush transcript]
We turn now to our continuing coverage
of "vulture funds." Vulture funds are Western companies
profiting off buying up countries" debts and then forcing
those countries to pay off the debt at a far higher price.Last
week BBC investigative journalist Greg Palast exposed on Democracy
Now! how one company is trying to collect $40 million dollars
from the government of Zambia after buying one of its debts for
$4 million dollars. Zambia claims the company, Debt Advisory International,
even tried to bribe government officials by offering to make a
donation to: "the president's favorite charity." Palast
questioned the company's owner, Michael Francis Sheehan, about
the allegation.
0. Excerpt of Greg Palast's BBC report
on "Vulture Funds"_
0.
An excerpt of a report from investigative journalist Greg Palast.
Well just hours after we aired that story a British court ruled
on the case. Zambia was ordered to pay Sheehan's company $20 million
dollars on its original $4 million dollar debt. The Zambian government
says the money will have to come directly from its budget for
health and education.Well, an international campaign is emerging
to prevent Debt Advisory International from collecting. One day
after the ruling, House Judiciary Chair John Conyers appeared
on Democracy Now! The Michigan Congressmember said he raised the
issue with Present Bush after hearing Palast's report on our broadcast.
0. Rep. John Conyers_
Democratic Congressmember John Conyers. In addition to Congress,
pressure is also coming from the grassroots. The debt-relief and
economic justice group Jubilee USA Network is launching a new
effort today calling on Debt Advisory International to drop its
efforts to collect money from the Zambian government.
0. Kristin Sundell, outreach coordinator
for the Jubilee USA Network.
AMY GOODMAN: We turn now to our continuing
coverage of vulture funds. Vulture funds are Western companies
profiting off buying up countries' debts and then forcing those
countries to pay off the debt at a far higher price.
Last week on BBC, investigative journalist
Greg Palast exposed on the attempts of one company trying to collect
$40 million dollars from the government of Zambia after buying
one of its debts for $4 million dollars. Zambia claims the company,
Debt Advisory International, even tried to bribe government officials
by offering to make a donation to "the president's favorite
charity." Palast questioned the company's owner, Michael
Francis Sheehan, about the allegation. We ran it on Democracy
Now!
0. GREG PALAST: Mr. Sheehan says it wasn't
a bribe. They were only trying to help the Zambian people.MICHAEL
SHEEHAN: We offered to donate debt to a low-income housing initiative,
which was a charitable initiative, which did end up building over
several thousand houses for the poor. You're contorting the facts.
You're on my property, and I would ask you to step off.GREG PALAST:
We showed this to the current president's advisor. He was not
impressed.
0. MARTIN KALUNGA-BANDA: When you are talking about any amount,
$40 million or thereabout, to be paid to service some unfair debt,
you are talking about in excess of 300,000 children being prevented
from going to school.
0.
AMY GOODMAN: An excerpt of the BBC Newsnight report from investigative
journalist Greg Palast that we ran on Democracy Now! last Thursday.
Hours after we aired the story, a British court ruled on the case.
Zambia was ordered to pay Sheehan's company $20 million dollars
on its original $4 million dollar debt. The Zambian government
says the money will have to come directly from its budget for
health and education.
Well, an international campaign is emerging
to prevent Debt Advisory International from collecting. One day
after the ruling, House Judiciary Chair John Conyers appeared
on Democracy Now! The Michigan Congress member said he raised
the issue with Present Bush on Thursday after hearing Palast's
report on our broadcast.
0. REP. JOHN CONYERS: But it was my job,
I felt, to raise the whole question of this bond speculation that
goes on at the expense of poor debtor countries, in which their
debt is bought up and then they're sued for the full amount. It's
bought up at pennies on the dollar, and then they're sued. And
I wanted to thank you for revealing this to us, because it allowed
me to ask President Bush two questions: one, about Paul Singer
and Michael Sheehan; and two, whether he would be willing to stop
this incredible misuse of our government's charity toward funding
aid to our poorer nations.
0.
AMY GOODMAN: Democratic Congressmember John Conyers. Paul Singer,
by the way, is one of the chief Republican fundraisers in this
country for both, well, presidential hopeful Rudy Giuliani, as
well as President Bush. In addition to Congress, pressure is also
coming from the grassroots. The debt-relief and economic justice
group, Jubilee USA, is launching a new effort today, calling on
Debt Advisory International to drop its efforts to collect money
from the Zambian government.
For more, we go back to Washington, D.C.,
where we're joined by Jubilee USA director Kristin Sundell. Welcome
to Democracy Now!
KRISTIN SUNDELL: Thank you, Amy. It's
good to be with you.
AMY GOODMAN: Can you talk about what you're
doing with this information?
KRISTIN SUNDELL: Yes. Well, today we are
calling on people in the United States to call Debt Advisory International,
to call their Washington, D.C. office at (202) 463-2188, and to
tell Michael Sheehan, who is the owner of Debt Advisory International
and Donegal International, not to take $20 million of the money
that was freed up by debt cancellation for the people of Zambia.
AMY GOODMAN: Kristin, what effect does
this have on Zambia? Why are you so concerned about this?
KRISTIN SUNDELL: Well, the money that
was freed up through debt cancellation for the people of Zambia
was the result of ten years of campaigning by people in the global
south, in the global north, working together for debt cancellation.
And I recently returned from Zambia, where I was a member of a
delegation from Jubilee USA to see some of the impacts of debt
cancellation there. And we visited hospitals, where user fees
have just recently been abolished with the proceeds from debt
cancellation. We were told about plans to hire thousands of additional
teachers with money freed by debt cancellation. And if Michael
Sheehan collects $20 million, that will take fully half of the
money that was freed up this year by debt cancellation and would
certainly prevent the Zambian government from implementing these
plans.
AMY GOODMAN: How exactly does it happen?
How does a Western US company get their hands on this debt, and
a British court rules on their behalf?
KRISTIN SUNDELL: Well, this dates back
to 1999, when Donegal International, a vulture fund, bought up
a portion of Zambia's debt at the bargain-basement price of $3.3
million and then has been holding onto this. And now that Zambia
is eligible for debt cancellation, under a deal that was reached
at the G8 in 2005, it's now trying to collect this money, and
it originally was trying to collect up to $55 million. The judge
ruled that it could collect a maximum of $20 million, and we'll
find out on March 9th exactly how much that they are able to collect
from the government of Zambia.
AMY GOODMAN: How typical is this?
KRISTIN SUNDELL: Well, this is something
that is just coming to the attention of Jubilee USA and debt campaigners
here in the United States. I know that this is also something
that's happened in Peru. It's something that's happened in the
Congo, as well. And so, we are very concerned, and people around
the world who have been working on this issue for the last ten
years are very concerned, because the money freed up from debt
cancellation is meant to address extreme poverty in the countries,
not to go line the pockets of people who are taking advantage,
like the vulture funds, and buying up debt and then trying to
collect on it later.
AMY GOODMAN: Are you coordinating with
the House Judiciary Chair John Conyers, who says he's calling
for an investigation?
KRISTIN SUNDELL: We are also communicating
with the office of Representative Conyers, and we're going to
be investigating also, exploring with him what further can be
done preemptively, in addition to the efforts that are going on
today to put pressure on Michael Sheehan. And I should also say,
if people want to fax or email his office today, they can also
do that via the Jubilee USA website, which is jubileeusa.org,
beginning at 9:00 a.m. Eastern this morning.
AMY GOODMAN: Kristin Sundell, I want to
thank you for being with us, outreach coordinator for Jubilee
USA Network.
KRISTIN SUNDELL: Thanks, Amy.
AMY GOODMAN: Thank you for joining us
from Washington, D.C.
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