Saturday, February 24, 2007
For a number of years the Group of 8 nations (G-7 plus Russia) have been attempting ---haltingly --- to reduce the enormous debts owned by poor undeveloped nations. Much of this debt has come about by the actions of International Monetary Fund and the World Bank that back projects for these countries making millions for large corporations, lining the pockets of the very top elite in the recipient nations, and resulting in very little immediate help to the starving and desperate majority of the citizens. In fact, the situations end up frequently being worse than they were before. (I suggest you read the inside story --- of interference in poor nations for profit, political control, and to steal natural resources --- in the book by John Perkins, Confessions of an Economic Hit Man, c.2005, available at amazon.com)
(The members of the Group of Seven (G-7) are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, which together account for about two-thirds of the world's economic output. http://usinfo.state.gov/ei/economic_issues/group_of_8.html)
As the debts of these poorer nations are reduced or even largely forgiven---a new breed of predatory entrepreneurs --- widely known as "the vultures" or "vulture funds" have entered the scene. These financial funds buy up the remaining debt from poor nations for a pittance, e.g. that of Zambia's debt (originally $20 million) reduced to $5 million, and then bought by a vulture fund for $4 million---which in turn demands a sum of $55 million on the basis of interest owed due to a long standing debt.
Now, U.S. taxpayers, often have granted the original loans through the their government. But -- U.S. taxpayers will not be getting the money loaned returned to them---because of the generosity of their government on behalf of us. However, the plight of Zambia and other poor nations is worse off than its was before: Zambia's debt is reduced. American taxpayers lose money loaned. Vulture funds swoop in; seize a small portion left; inflate it to a sum even higher than the original debt. End result: Zambia is worse off than before. Americans (or other nationalities) investment is negated. Vultures fly away into the clear blue sky carrying their load of carrion.
The British politician who in all probability will succeed Tony Blair this summer as Prime Minister considers these vultures "perverse and immoral". Speaking to the United Nations, five years ago he said: "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 owned, a morally outrageous outcome."
Two prominent and successful heads of their respective Vulture Funds are Michael Sheehan and John Singer. Greg Palast (http://www.gregpalast.com/) investigative reporter for the BBC
states: In the case of the number one vulture here in New York City, Paul Singer, he's paid about $10 million and expects to collect $400 million from the Congo.
Paul Singer is the number one donor to George Bush at the moment, has given over a million-and-a-half dollars in the last campaign. He’s Rudy Giuliani's chief fundraiser, raising $15 million now for his presidential campaign. He's a billionaire. He controls a $7 billion fund, and he's obviously very close with the Bush administration, which is crucial, absolutely crucial to his making these profits.
George Bush can put an end to it all with a stroke of a pen. Under the U.S. Constitution, the President has the power to stop the vultures from collecting a penny in a U.S. courtroom, but he hasn't done it, even though just last month George Bush publicly committed his government to debt relief.
ZAMBIA: 'Vulture' feeds on Zambia
by Ashley Seager, Guardian Unlimited
February 14th, 2007
A so-called "vulture" fund has been given permission by a British court to enforce a claim for tens of millions of dollars theoretically owed by Zambia.
The decision was immediately slammed by campaign groups who demanded that governments of rich countries moved to stop such funds reclaiming debt from poor countries who had supposedly already had their debts written off.
The high court ruled that a claim against Zambia by the US company Donegal International, owned by US citizen Michael Sheehan, for debts incurred by the impoverished southern African nation more than a decade ago, was lawful.
Zambia was represented by the prime minister's brother, William Blair QC.
Donegal is claiming about $55m (£28.2m) from Zambia but it is thought this will be reduced to around $20m when the parties meet in court again next month and the judge, Justice Andrew Smith, decides how much interest Zambia has to pay.
He ordered that Zambian assets in the UK be frozen in the meantime.
Oxfam and the Jubilee Debt Campaign said that Donegal - a vulture fund registered in the British Virgin Islands - should not accept any of the money because Zambia, one of the poorest countries in the world, has qualified for debt relief and desperately needs the money.
"It is clear that while the actions of Donegal International were not strictly illegal, they were immoral," said Adrian Lovett, director of campaigns and communications at Oxfam. "Donegal should not take the money."
Trisha Rogers, director of Jubilee Debt Campaign, said: "There is a clear need for a fair, comprehensive and binding framework for dealing with poor country debt which will ensure that commercial creditors will never again have the chance to profit in this way. "
Donegal bought the Zambian debt, with a face value of around $30m, from Romania in 1999, for less than $4m. Zambia had run up the debt, mainly for agricultural machinery, during the Cold War.
Zambia approved the Donegal purchase at the time and later agreed to pay Donegal $15m for it.
The judge had little choice but to say the contract was binding, although he is thought unlikely to allow Donegal's claim that interest and costs have inflated the amount to $55m.
The amount claimed by Donegal is more than the total debt relief Zambia is due to receive as agreed at the G8 meeting in Gleneagles in 2005.
Gordon Brown has condemned vulture funds and a Treasury spokesman said: "By depleting the resources of developing countries' governments, these companies reduce the funds available for schooling and hospital treatment. This behaviour is socially irresponsible."
Oxfam and Jubilee urged the chancellor to use his influence as chair of the International Monetary Fund's key decision-making committee to make sure that new regulations are devised that prevent private companies from bypassing international debt rules and pursuing debts from very poor countries.
The judge did not let Donegal off lightly. "I have been driven to conclude that they were at times being deliberately evasive and even dishonest," he said.
Mr Sheehan was "not merely careless but cavalier in presenting his evidence".
He pointed out that delays had been caused to the trial because "put at its kindest, some of Donegal's witnesses were less than candid".
BBC's Newsnight broadcast a report on Wednesday night purporting to show an email from Mr Sheehan offering $2m to the then president Frederick Chiluba's favourite charity when Donegal bought the debt.
Mr Blair called it a "bribe" but Mr Sheehan told Newsnight it was a "charitable initiative".
The US Justice Department later asked the BBC to hand over the documents to assess whether Mr Sheehan, a resident of Washington DC, had committed a crime under the US Foreign Corrupt Practices Act.