SATURDAY, AUGUST 29, 2009
STOP THE VULTURE CULTURE CAMPAIGN!
[photopress:vultures.jpg,thumb,pp_image][The Nicaragua Network joins with Jubilee USA Network, Africa Action and Transafrica in the campaign to stop vulture funds. We urge you to ask your Representative to co-sponsor this bill.]
On June 18th, Representative Maxine Waters introduced the Stop VULTURE Funds Act (H.R. 2932), a bill in the House of Representatives that would prevent vulture funds from making this excessive profit at the expense of poor countries. (Click here to see the current list of cosponsors.)
‘Vulture fund' is a name given to a company that seeks to make profit by buying up debt in default on the secondary market for pennies on the dollar, then trying to recover up to ten times the purchase price, often by suing impoverished countries in U.S. or European courts.
Some vulture funds target failing companies, but Africa Action, Jubilee USA Network and TransAfrica Forum are focused on those that target the sovereign debts of impoverished countries.
Heavily Indebted Poor Countries (HIPC) are particularly vulnerable to vulture funds who purchase the defaulted debts of HIPC countries at much reduced prices and litigate against the debtor for inflated sums, making huge profits on the backs of the world's poorest citizens.
These vulture fund companies tend to be quite secretive, and many of them are based in tax havens such as the British Virgin Islands. Some are owned by large, often U.S.-based, financial institutions such as hedge funds. In other cases, there is limited or no information on who owns them. Often subsidiary companies are set up by these larger hedge funds simply to pursue one debt, then shut down after winning those assets.
As of late 2007, 11 of 24 Heavily Indebted Poor Countries (HIPCs) surveyed by the International Monetary Fund were facing litigation from 46 different commercial creditors. Of these, 25 creditors had received court judgments against HIPCs amounting to about $1 billion on original claims of $427 million.
Nicaragua and Vulture Funds:
On April 4, 2007, four Serbian companies filed suit in the Federal District Court of the District of Columbia against Nicaragua for US$9 million. Nicaragua had borrowed this money in 1983 and 1985 from the then-government bank Udruzena Beogradska Banka in what was then Yugoslavia but the debt was later bought up by commercial banks. Nicaraguan economist Nestor Avendaño explained that this debt was part of the US$1.5 billion that Nicaragua had not been able to restructure with countries that were not members of the Organization for Economic Cooperation and Development (OECD) or of the Paris Club of lender countries. The Serbian claim was just one of several hanging over Nicaragua in which "vulture" creditors were demanding as much as US$900 million. According to the magazine Latin Finance, one vulture fund attorney said that the fund would continue to pursue the case with Nicaragua: "We will follow them around the world; we'll be implacable until, sooner or later, they pay."
However, in December 2007, the government of Nicaragua and its creditors agreed to a cash buy-back of more than US$1.3 billion of the country's commercial external debt at 4.5 cents on the dollar. It was funded by US$61 million from the World Bank's Debt Reduction Facility (DRF). The government said that all four of the commercial financial institutions holding court judgments against the country accepted the terms of the buyout. The final closing was expected to take place during the first quarter of 2008. Nicaragua is now free of old law suits. If the Stop VULTURE Funds Act passes, Nicaragua will not have to fear any new ones!
What does the Stop VULTURE Funds Act do?
The Stop VULTURE Funds Act would prevent Vulture Funds from using US courts to collect more than 6% interest above the amount they paid to purchase the debt. It also would require vulture funds to operate in a more transparent and fair manner. For more information, click here.
MAKE THE CALL
Dial 202-224-3121 & ask to be connected with your Representative's office. Don't know who your Representative is? Visit www.house.gov and enter your zip code in the box in the upper left corner of the page.
SAMPLE SCRIPT:
You: Hello, what is the name of the staff person who handles international financial issues? Could I speak to him/her please? [you will be connected to the staff person, or more likely, with his/her voicemail]You: My name is xxxx and I'm from (name your city & state). I'm calling to ask Representative xx to co- sponsor the Stop VULTURE Funds Act (HR 2932). This bill would prevent vulture funds from using US courts to profiteer on poor country debt and would require them to operate in a more transparent manner. To co-sponsor the bill and for more information, please contact Kathleen Sengstock in Representative Maxine Waters office.Please email the results of your call to julia@jubileeusa.org. If possible, leave your phone number for the staffer and keep following up until they let you know whether or not the Representative will co- sponsor the bill.
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