Down By Law: Vulture Funds Feeding on the Dispossessed
Written by Chris Floyd
Monday, 12 March 2007
I. The Lessons of Civilization
Every day, millions of people around the world are taught hard truths about how the instruments of "civilization" are used to help the powerful at the expense of the deprived. They see the brutal hypocrisy behind the soaring rhetoric of noblesse oblige that issues from the citadels of wealth and privilege. They see, and learn, that raw self-interest is the true coin of the global realm; they see it in the ruins of their own lives and in the blighted futures of their children. Is it any wonder, then, that many of them come to reject the putative offerings of civilization and embrace extremist or nihilistic or asymmetrical responses to their distress?
Every instance of systemic or institutional injustice contributes to the growing instability of the world community, to the violence and corruption and despair that howl outside the shrinking "Green Zones" of prosperity and security in the developed nations. This holds true at every level, from the vast and glaring crime of aggressive war, as in Iraq, to obscure rulings on arcane points of international finance – as in a London courtroom last month, when the British High Court upheld the right of a well-connected financial predator to feast on one of the world's poorest nations.
The case involved the little-known but highly lucrative world of "vulture funds" – or as its practitioners prefer to call it, the "secondary market in sovereign debt." It works like this: private investors buy up bits of the debt of impoverished nations from various creditors – at pennies on the dollar – then go to court to force the debtor to cough up the full amount, plus punitive interest payments. In the London case, a New York vulture named Michael Sheehan and his off-shore, UK-registered front company, Donegal International, were trying to turn a $.3.3 million debt purchase into a $55 million profit bonanza squeezed out of the Zambian people, some of the poorest on earth. Donegal won the case, even though Justice Andrew Smith ruled that Sheehan and one of his associates "were at times being deliberately evasive and even dishonest" in their testimony, as the Financial Times reports.
The amount Donegal is asking for would effectively wipe out the debt relief Zambia would have received this year from the deal signed at the famous "Live 8" summit in Scotland in 2005, when the G-8 nations agreed – amidst much harrumphing self-congratulation – to a large-scale debt relief and restructuring program for poorer countries. Zambia had earmarked the relief money for health programs and education, in a country where the life expectancy is 37, more than half a million children have been orphaned, and 1 in 5 adults have HIV, as Oxfam reports.
Justice Smith indicated that it is unlikely he will grant the company the full whack of $55 million when he makes his final ruling later this month; indeed, Smith made clear his distaste for the enterprise, but said current law compelled a ruling on behalf of the vultures. Even so, Sheehan and the boys will still walk away with a hefty profit – and many Zambians will die of disease or sink further into poverty and ignorance as a result. Meanwhile, some of Zambia's assets have been frozen until the final amount is set and the payoff to Donegal discharged, causing further financial distress to the poverty-wracked country, which is trying to emerge from the shadow of the corrupt and undemocratic regime that took on many of the onerous debts. >>>cont
Chris Floyd
Monday, 12 March 2007
I. The Lessons of Civilization
Every day, millions of people around the world are taught hard truths about how the instruments of "civilization" are used to help the powerful at the expense of the deprived. They see the brutal hypocrisy behind the soaring rhetoric of noblesse oblige that issues from the citadels of wealth and privilege. They see, and learn, that raw self-interest is the true coin of the global realm; they see it in the ruins of their own lives and in the blighted futures of their children. Is it any wonder, then, that many of them come to reject the putative offerings of civilization and embrace extremist or nihilistic or asymmetrical responses to their distress?
Every instance of systemic or institutional injustice contributes to the growing instability of the world community, to the violence and corruption and despair that howl outside the shrinking "Green Zones" of prosperity and security in the developed nations. This holds true at every level, from the vast and glaring crime of aggressive war, as in Iraq, to obscure rulings on arcane points of international finance – as in a London courtroom last month, when the British High Court upheld the right of a well-connected financial predator to feast on one of the world's poorest nations.
The case involved the little-known but highly lucrative world of "vulture funds" – or as its practitioners prefer to call it, the "secondary market in sovereign debt." It works like this: private investors buy up bits of the debt of impoverished nations from various creditors – at pennies on the dollar – then go to court to force the debtor to cough up the full amount, plus punitive interest payments. In the London case, a New York vulture named Michael Sheehan and his off-shore, UK-registered front company, Donegal International, were trying to turn a $.3.3 million debt purchase into a $55 million profit bonanza squeezed out of the Zambian people, some of the poorest on earth. Donegal won the case, even though Justice Andrew Smith ruled that Sheehan and one of his associates "were at times being deliberately evasive and even dishonest" in their testimony, as the Financial Times reports.
The amount Donegal is asking for would effectively wipe out the debt relief Zambia would have received this year from the deal signed at the famous "Live 8" summit in Scotland in 2005, when the G-8 nations agreed – amidst much harrumphing self-congratulation – to a large-scale debt relief and restructuring program for poorer countries. Zambia had earmarked the relief money for health programs and education, in a country where the life expectancy is 37, more than half a million children have been orphaned, and 1 in 5 adults have HIV, as Oxfam reports.
Justice Smith indicated that it is unlikely he will grant the company the full whack of $55 million when he makes his final ruling later this month; indeed, Smith made clear his distaste for the enterprise, but said current law compelled a ruling on behalf of the vultures. Even so, Sheehan and the boys will still walk away with a hefty profit – and many Zambians will die of disease or sink further into poverty and ignorance as a result. Meanwhile, some of Zambia's assets have been frozen until the final amount is set and the payoff to Donegal discharged, causing further financial distress to the poverty-wracked country, which is trying to emerge from the shadow of the corrupt and undemocratic regime that took on many of the onerous debts. >>>cont
Chris Floyd
posted by Kangaroo Brisbane Australia at 5:36 AM
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