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Time to Clip the Wings of Vulture Funds
Published on Tuesday, February 20, 2007 by the Chicago Sun-Times
Time to Clip the Wings of Vulture Funds
by Jesse Jackson
 

They prey upon the poorest nations, taking resources from the most desperate peoples -- billionaire scavengers pocketing the funds that might go to feed children whose families live on less than $1 a day. They are called the vulture funds. They protect their scavengings with fat checks to politicians and lobbyists. One of the leading vulture firms is led by major donors to President Bush. Now it is time to put an end to this disgrace.

Consider impoverished Zambia, a small, poor country where the vast majority of people survive on little more than $1 a day. In 1979, the Romanian government lent Zambia money to buy Romanian tractors. The tractors didn't work well, and U.S. and European agricultural subsidies basically hijack Zambia's potential export markets. Zambia was unable to earn the foreign exchange needed to pay for this and other debts.

In 1999, Romania and Zambia negotiated to liquidate the debt for $3 million. The Paris Club of rich donors -- under great pressure from the global human rights movement -- has finally been moving to write off significant portions of unpayable debts, if the debt relief is used for investment in health, education and other vital needs in the debtor country.

Even as the deal was being signed, the vultures arrived. One of Debt Advisory International's vulture funds bought the debt from Romania for less than $4 million. They then renegotiated with Zambian officials and -- amid charges of bribery and abuse -- cut a new deal on the debt. They are now suing the Zambian government for the original debt plus interest, which they calculate at over $40 million, and they expect to win.

For the United States, with our $2 trillion budget, $40 million is peanuts. In Zambia, it represents vital medicine and textbooks. Martin Kalunga-Banda, Zambian presidential adviser and a consultant to Oxfam, told the BBC's Newsnight, "That $40 million is equal to the value of all the debt relief we received last year."

Investigative reporting by Greg Palast, broadcast on the BBC and Democracy Now, has exposed the vulture funds, defined by the International Monetary Fund as companies that buy up the debt of poor nations on the cheap when it is about to be written off and then sue for the full debt plus interest, often pocketing 10 times what they paid for it.

"Profiteering doesn't get any more cynical than this," reported Caroline Pearce of the global Jubilee debt forgiveness campaign.

Paul Singer, a reclusive billionaire, is said to have essentially invented vulture funds. In 1996, his company paid $11 million for some discounted Peruvian debt and then threatened to bankrupt the country unless it was repaid $58 million. They got their pound of flesh. Now, according to the BBC, they're suing Congo Brazzaville for $400 million for a debt they bought for $10 million.

U.S. courts serve to enforce the vulture funds' contracts. The president or Congress could bring an end to the practice. So naturally, the vulture funds lavish attention and contributions on key politicians. Debt Advisory International, for example, was paying $240,000 a year to the lobby firm Greenberg Traurig -- before lead lobbyist Jack Abramoff was jailed.

Singer has more direct political connections. He is among the biggest donors to Bush and the Republican cause in New York -- giving a reported $1.7 million since Bush started his first presidential campaign.

Last week, Rep. John Conyers, the chair of the House Judiciary Committee, raised the matter directly with Bush himself, asking him if he knew what his leading backers like Singer and Michael Sheehan were doing, and whether he would crack down on the practice. Conyers reports that the president said, "I don't know anything about this," and vowed to put an aide on it right away. Conyers has promised to pursue the matter.

This is the new global order: the wealthy -- armed with lawyers, lobbyists, courts and retainers -- making fortunes by preying on the vulnerable. Our government says that we want to be a source of hope to the poorest peoples of the world. The vulture firms make us a source of despair -- and an object of hate.

© Copyright 2007 Sun-Times News Group

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