Bush Could Block Debt Collection by 'Vulture' Funds

by Ashley Seager, Economics Correspondent
Thursday February 22, 2007
Guardian (London)
President Bush could come to the aid of Zambia against a so-called “vulture” fund demanding millions of dollars in debt payments. He is reported to be concerned that investors from the Washington DC area won a court case in Britain last week which enabling them to claim $20m to $40m (£20m) from the poor African nation – as much as it has received in debt relief from rich countries in recent years.
The fund is Donegal International, owned by US resident Michael Sheehan. In 1999 Donegal bought up some Zambian sovereign debt at a fraction of its original value and has pursued the country through the courts to enforce full repayment.
Donegal is likely to pursue Zambian assets in the US. However, Washington’s powerful congressional judiciary committee has seen a BBC Newsnight report on the case and is expected to investigate Donegal. The committee’s chairman, Congressman John Conyers, said he had drawn the tape, by reporter Greg Palast, to the attention of the president. Mr Conyers told US television that Mr Bush had said he knew nothing of the case but had asked his staff to look into it.
“It’s our position that the Foreign Corrupt Practices Act and the comity doctrine brought from our constitution allows the president to require the courts defer in individual suits against foreign nations. And so, we’re conducting a couple of things,” Mr Conyers said.
“First of all, we want to know where these practices are going on at the present time, and, two, how we can get this information to President Bush so that he can, as he indicated to us, stop it immediately.”
Mr Bush has the power to block collection of debts by vulture funds, either individual ones or all of them, if he considers it to be at odds with US foreign policy, in this case debt relief for poor countries.
Donegal bought the debt, with a face value of $30m, from Romania in 1999 for less than $4m. Zambia agreed to pay Donegal $15m in return for a payment to the then president’s favourite charity. This payment, exposed by Mr Palast but which Mr Sheehan denies was a bribe, could mean Donegal falls foul of the US Foreign Corrupt Practices Act.
The high court in London last week said Donegal’s actions were legal but the judge, Justice Andrew Smith, made clear his distaste for what Mr Sheehan’s company was doing. He ordered Zambian assets in Britain frozen until a fresh hearing next month.
Adrian Lovett at Oxfam welcomed Mr Bush’s possible intervention. He said 5,000 campaigners had emailed Donegal urging it not to take money from Zambia.
Greg Palast is the author of the New York Times
bestseller, ARMED MADHOUSE: From Baghdad to New
Orleans, Sordid Secrets and Strange Tales of a White
House Gone Wild. Sign up to receive Palast’s reports
for BBC, Harper’s and others at www.GregPalast.com.