Investigative reporter Greg Palast looks at the battle to end "vulture funds", where companies buy up debts of poor nations cheaply and then sue for the full amount.
At the close of the G-8 Summit in Germany last Friday, leaders of the world’s richest countries reiterated their commitment, first made in 2005, to cancel all of the debt owed by the world’s poorest countries. However, so-called "vulture funds," or companies that buy up third world debt at rock-bottom prices and then sue the countries for the full value and more, are undermining any promises of debt relief.
In February, BBC investigative journalist Greg Palast exposed on Democracy Now! how one vulture fund, Donegal International owned by US resident Michael Sheehan, was trying to collect $40 million dollars from Zambia after buying one of its debts for $4 million dollars. Soon after, Congressman John Conyers and Congressman Donald Payne brought this up with President Bush, and urged him to ensure that the G-8 summit would close the legal loopholes that allow vulture funds to flourish. Greg Palast produced this report for BBC Newsnight last week.
- Greg Palast, Investigative reporter with the BBC and author of the books "Armed Madhouse", "The Best Democracy Money Can Buy" and "Democracy and Regulation."
This is a rush transcript. Copy may not be in its final form.
AMY GOODMAN: At the close of the G8 summit in Germany last Friday, leaders of the world’s richest countries reiterated their commitment first made in 2005 to cancel all the debt owed by the world’s poorest countries. But so-called "Vulture Funds", or companies that buy up third world debt at rock-bottom prices, then sue the countries for the value and more are undermining any promises of debt relief. In February, BBC investigative journalist Greg Palast exposed on Democracy Now! how one "Vulture Fund", Donegal International, owned by US resident, Michael Sheehan, was trying to collect forty million dollars from Zambia after buying one of its debts for four million dollars. Soon after, Congress member John Conyers and Congress member Donald Payne brought this up with President Bush. They brought it up a few hours after the broadcast on Democracy Now!, and urged them to ensure the G8 summit would close the legal loopholes that allow "Vulture Funds" to flourish. Well, Greg Palast produced this report for BBC News Night last week.
GREG PALAST:George Bush has flown into the meeting of G8 leaders tonight. Near the top of the list of problems–poverty in Africa. But activists worry that G8 nations aid for Africa is being seized by vultures. In February, News Night exposed the activity of "Vulture Funds." These vultures figured out how to get their hands on the money our governments give to help out Africa, and put it in their own pockets. They do it by buying up old loans made to the poorest countries just before the loans are effectively written off. Then the vultures sue for ten times what they pay for the loans. We tracked down one of them in Virginia–Michael Francis Sheehan–also known as Goldfinger .
[inaudible video] …aren’t you just profiting of the good work of people. We’re trying to save lives by cutting the debt of these nations.
MICHAEL SHEEHAN: Well, there was a proposal for investment. That is all I can talk about.
GREG PALAST: Goldfinger paid just three million dollars for some old Zambian debt, but eventually sued Zambia for 55 million. Worldwide, Goldfinger and fellow "Vultures" are suing desperately poor people for more than two billion dollars. Our expose sparked an international reaction. The next morning, the News Night report was rebroadcast in America .
GREG PALAST: After watching our News Night piece two very angry congressmen marched right into the White House and demanded the President do something.
CONGRESSMAN: I was outraged. Just simply outraged to hear this shocking broadcast. It infuriated me. It made me angry. It, uh, was just on my mind, I couldn’t even hardly focus on what the President was saying.
GREG PALAST: Congressman Donald Payne surprised the President by the issue. He was joined by one of the most powerful men in Congress–John Conyers.
JOHN CONYERS:I brought this matter up to President Bush in the White House. I asked him about "Vulture Funds" and did he know that some of the poorest nations were being taken advantage of in this highly immoral, ruthless scheme. And he said he was interested in knowing more about these "Vulture Funds" operations. And he said we would get to work on it right away.
GREG PALAST: That same day in Britain, a judge ruled that Sheehan and his associates were evasive and dishonest. Yet the judge had no choice but to order Zambia to pay Sheehan’s firm its 15 million, and that upset some members of Parliament. On March 1, 85 of them demanded a change in the law to put Sheehan and other "Vultures" out of business. Ministers faced repeated questions about why the government had clamped down on "Vulture Funds", and some MP’s weren’t happy with the answers.
WOMAN:It is British law and British courts that "Vulture Funds" are hiding behind. What Gordon Brown needs to do is tackle our law, tackle our contract law and make it impossible for "Vulture Funds" to behave in this way.
GREG PALAST: The Zambia case especially drove their anger, raising the issue of corruption.
GREG PALAST: Here’s something odd. Zambian officials agreed to pay Goldfinger near 15 million dollars days after just days after he bought the debt for only 3 million. Now why would they do that? Well, according to an e-mail disclosed in this courthouse, Goldfinger said the deal would be done because he was making a donation to the President’s favorite charity. Now could the President’s favorite charity actually be the President himself?
GREG PALAST: This was the President at the time — Frederick Chaluba. And here is his favorite shop. Boutique Bazille, in Geneva, where you can buy diamond cuff links and diamond studded ties…
[MUSIC] Diamonds are forever. They are all I need to please me…
GREG PALAST: …where he spent 1 million dollars on 206 suits, 349 shirts — each monogrammed with his initials — and each shirt costing as much as an average Zambian earns in a year. And 72 pairs of shoes for the diminutive despot–all with extra high heels. On May 4, a British court ruled that President Chaluba must payback 46 million dollars he looted from his nation’s Treasury. Lawyers began to wonder if Michael Sheehan might find himself on the other side of the legal process too. His lawyers had admitted that any payments to President Chalupa’s charity, might in the end have been used in a corrupt manner. But he denied it was bribery. The US government started to look for evidence which might indicate whether Sheehan had violated the Foreign Corrupt Practices Act. May 10th, Tony Blair announces he would resign. The same day, his successor Gordon Brown issued a statement: I deplore the activities of so-called "Vulture Funds" and promise to work with G8 partners to curb them. On May 19th, Brown again told fellow G8 Finance Ministers that "Vulture Funds" were nothing short of scandalous.
May 22, the heat is on, as the United States Congress holds its first ever hearings on the "Vultures". Here, Congressman Donald Payne is taking testimony from activists including actor Danny Glover. I drove out to New Jersey, and to Congressman Payne’s district to find out what moved him to take on the "Vulture Funds". He told me that thinking about the "Vultures" seizing money from the starving put an image in his head he couldn’t shake.
DONALD PAYNE You know, it reminded me of that picture, you know, that Pulitzer Prize picture of the vulture following a child–was just waiting for the child to die. The photographer that took the picture actually committed suicide. It just conjured up people just taking blood out of a country’s lifeline.
GREG PALAST: The "Vultures" have already sucked up about 1 billion dollars in aid meant for the poorest nations according, to the World Bank in Washington. The money for debt relief comes from those buildings over there. The World Bank and the IMF, and from the US and British taxpayer. But before it can get to the poor people in Zambia, it somehow ends up right in this building, the offices of Debt Advisory International and its principal, Mr. Sheehan.
GREG PALAST: You remember Mr. Sheehan.
GREG PALAST: He’d rather not talk about his business. He failed to show up when the US Congress wanted to ask him about the bribery allegation. So we thought we would bring the questions right to him.
GREG PALAST: Hi. Is Mr. Sheehan in? We just wanted to ask Mr. Sheehan…
MAN: I’m sorry, Mr. Sheehan is not here.
GREG PALAST: Is he in the country? Um, we want to ask Mr. Sheehan why he didn’t appear before Congress to answer allegations of bribery of Zambian officials. Did they call you?
[Inaudible voices, door slams]
GREG PALAST: I guess he doesn’t like visitors.
SECURITY: No, not unexpected, not when he comes down, seeing cameras and stuff. I don’t think so.
GREG PALAST: He doesn’t like Congressmen…
SECURITY: I guess not.
GREG PALAST: Mr. Sheehan faces more serious congressional hearings later this year in front of John Conyer’s Judiciary Committee.
JOHN CONYERS: Hey, Greg!
GREG PALAST: Do you get bigger suites now that you’re a Chairman.
JOHN CONYERS: Yes.
GREG PALAST: In the meantime, Congressman Conyers is pointedly counting on President Bush to back action against the vultures at the G8 summit.
JOHN CONYERS: I’m absolutely counting upon him to do the right thing.
GREG PALAST: Back in Britain, MP’s of all parties are counting on Gordon Brown to change the law.
MP: It’s a legal loophole, really, and I think if he can close that, that’s what he should be doing. He should get to grips with what is clearly an exploitation of the current system and goes against the spirit of the G8.
GREG PALAST: So will the President and the incoming Prime Minister do the right thing or do nothing to protect Africa’s poorest from the "Vultures"?
AMY GOODMAN: Greg Palast reporting. He joins us in studio now. Right now, where does it all stand, Greg. Who has the power and the damage that’s being done?
GREG PALAST: It’s all up to George Bush right now. This is what is driving the other members of the G8, that is, the incoming Prime Minister of Britain, Gordon Brown, has made this like number one priority. I mean, you have to understand, debt relief for Africa is real serious business for Europe. And about half — about half of the money for aid to Africa is being sucked up by these "Vultures" who are seizing the funds. It all comes down to George Bush. It’s also driving Congressman Conyers crazy. And he’s basically said, "Look. If Bush doesn’t do the right thing, this is the next investigation. He just made a big splash with investigating the prosecutor firings. That ain’t done yet. But as soon as that’s done, he moves right into "Vultures" if Bush doesn’t act. Now what is it — what’s the deal with Bush? You see — under US — what’s happening is these "Vultures" are seizing the money from US bank accounts, principally. And George Bush can–of these poor nations. In other words, they’re given money to buy AIDS drugs, they have resources to, you know, for–basically earmarked for education, AIDS. They’re sucking up the AIDS money. Bush can put a stop to it tomorrow morning. No one can sue a foreign government in the United States without the approval of the US government, in particular the President of the United States. Its under the Separations of Powers clause of our Constitution.
AMY GOODMAN: And what did Bush respond to, Conyers?
GREG PALAST: Well you know, it’s been the, he does that, you know: "I missed school that day. I don’t know what’s going on." You know, deer in the headlights. "I’ll check it out. I’ll do something about it." Now, as you know, we had this dramatic situation, which both Congressman Conyers, the chairman, powerful chairman, and Don Payne, head of the Africa Committee, two powerful cats, were both heading to the White House for meetings, both of them listening to Democracy Now!. They both had the same idea: "We don’t care what’s on the agenda with the President. This, the "Vultures" is what we have to talk about at — these billions of dollars. And, as Conyers said, until they heard the Democracy Now! report, a lot of members of Congress listen to this program! They had no idea that the money was being sucked up. They were voting for billions of dollars for Africa, and they didn’t know that Bush’s friends — now when I say Bush’s friends — you have to understand, the biggest single "Vulture Fund", the biggest predator is, uh, operations owned by a guy named Paul Singer, who is the number one donor for George Bush and the Republican Party in New York. He’s also the big fund-raiser, he’s raising 10 million dollars for Rudy Giuliani. This isn’t the sidelight for this guy, this is the only way he makes money. So George Bush has to know that his big money is basically coming from kickbacks, from money taken from aid for Africa. If he didn’t know before, Conyers and Payne, after hearing Democracy Now! put it right in his face. The reason is, they didn’t want they don’t want the President to say "I don’t know, it’s a lower-level thing." The President knows. And the G8 members, personally. When I say G8 — these are the world leaders, Chancellor Merkel in Germany...
AMY GOODMAN: Did Bush do something about it at the G8 summit?
GREG PALAST: Um, I think he hid in the boy’s room. He didn’t come out when they were supposed to some discussions, you know. So it’s been this kind of, you know, duck and run operation.
AMY GOODMAN: Well we’re gonna have to leave it there, but we’ll continue to follow the story. Greg Palast is on the case–Investigative Reporter with the BBC. His latest book is called Armed Madhouse: From Baghdad to New Orleans, Sordid Secrets and Strange Tales of a White House Gone Wild.