Evil - there is no other word for it.

Wednesday, 14 February 2007, 20:03 GMT
Vulture fund threat to third world
Meirion Jones
BBC Newsnight
Zambia's plans to improve infrastructure could be threatened
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."
Martin Kalunga-Banda says $40m is equivalent to Zambia's annual debt relief
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 (right) tracked down DAI's 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
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.
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.
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 which 
is broadcast on Newsnight tonight on BBC 2 at 22.30GMT


Melissa Raven, Adjunct Lecturer
Department of Public Health, Flinders University
GPO Box 2100 ADELAIDE  SA  5001
AUSTRALIA 

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