Wednesday, 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. 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."
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.
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.
This is where it gets nauseating. Debt Advisory International (DAI) tried to allegedly bribe the President of Zambia with $2,000,000 to his favorite charity in exchange for him to figure out some way for Zambia to come up to pay this repo company $40,000,000 for a 1979 tractor financing loan. Michael Sheehan is the founder of DAI. Greg Palast caught up to him, and tried to get the first interview of these media shy capitalists, about the outrageousness of the company's actions. These vultures literally starve third world countries into deeper debt by legal loansharking.
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.
BBC and Greg Palast teamed up a story tonight that can be viewed online through the Real Player format. The piece starts at 1:53 into the broadcast, and I encourage all to watch it who can.
(Some highlights for those who can't view it). Michael Sheehan, who calls himself "Goldfinger", in an online Cadiallac enthusiastic group, didn't want to speak with Palast. DAI has a subsidiary in the US Virgin Islands, which is actually suing Zambia in UK courts.
Gordon Brown, the heir apparent to Tony Blair, told the UN five years ago:
"We particularly condemn the perversity where Venture Funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount out. A morally outrageous outcome".
Nothing has been done in the UK to stop this practice, speeches by Gordon Brown aside. DAI is expected to prevail in court tomorrow and Zambia will be forced to pay them the full $42,000,000. Zambia's entire saving from debt relief will literally be wiped out be the judgement in favor of these evil men.
Sheehan and others are also using the US courts to do the same thing with incredibly poor countries for hundreds of millions of dollars. George Bush, as President, has the power of an executive order to stop these evil companies. Even though he has given lip service to debt relief, he has failed to do so.
Greenberg Traurig, Jack Abramoff's former firm, was paid $250,000 a year by DAI to make sure these practices were not stopped. Even though the President spoke again of debt relief in the SOTU address, nothing has yet been done. A NYC billionaire, Paul Singer, actually invented Vulture Capitalism. He also happens to be the biggest NY donor to George W. Bush. In 1996, he bought Peru's debt for $11,000,000 and threatened to bankrupt them unless they handed him $58,000,000, which they did.
Singer bought some debt belonging to Congo $10,000,000 and is demanding $127,000,000. The Government of Congo was very hopeful that President Bush would use his legal authority to stop the court action, but he hasn't. The fact that Singer gave the GOP $300,000 in 2000, and $1,200,000 to GOP related causes in 2004 including Swift Boat Veterans for Truth. The people of Congo are in other words screwed.
It was actually a bastardization of Bono and others' good intentions that helped to create this situation. Lenders and countries holding debt have decided to forgive most of the debt like in the case of Romania and Zambia. They lower the price to $3,000,000 on Zambia's debt, (which actually was about fifteen million dollars and companies like DAI swoop in offering $4,000,000 to own the debt, and start heading to the courts demanding interest and back payments greatly inflating the costs.
I encourage everybody to pass this information along to friends, and to your members of congress and demand that they pressure the President by any means necessary to think about true debt relief rather than party donors and Abramoff lobbying firm clients.
Update: Zambia lost.
A High Court judge has ruled that Zambia must pay a substantial sum to a so-called "vulture fund".
British Virgin Islands-based Donegal International paid less than $4m for a debt the African nation owed, but sued Zambia for a $42m repayment.
According to BBC economics reporter Andrew Walker, people familiar with the case believe that the judge will order Zambia to pay Donegal between $10m and $20m, less than half what Donegal sought.