Through the Stop the Vulture Culture Campaign, Africa Action, Jubilee USA Network, and TransAfrica Forum are working to halt the usurious practices of Vulture Funds.
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. These companies operate with little transparency; as shell companies (a company set up exclusively to pursue one goal – in this case, poor country debt), Vulture Funds are set up tax havens such as the British Virgin Islands to avoid financial constraints and oversight. Because of this, most funds have limited or no information on who manages them and their actions.
Poor countries that are eligible for debt cancellation are especially vulnerable to Vulture Funds, as the companies often track the debt relief process and then sue a poor country after it has received a windfall of resources thanks to debt cancellation. 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. Without the capacity to properly fight lawsuits in the U.S. and Europe, poor country governments almost always lose out big to the Vultures, which legally profiteer off of debt cancellation resources intended for the world’s poorest citizens.
Read on to learn more about the lastest news and advocacy efforts and to stop Vulture Funds.
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.)
The Stop VULTURE Funds Act (H.R. 6796) was also introduced in 2008.
Policy Resources
The Stop the Vulture Culture Campaign has raised awareness about the actions of Vulture Funds, and their harmful effects on poor countries. In a Halloween-themed action, activists across the nation wrote messages to their Congressional Representatives urging them to stop the scariest monsters out there: Vulture Funds.
To help stop Vulture Funds, TAKE ACTION: Send a Message to Congress
Grassroots Resources
April 8 - Vulture Fund activity became illegal in the UK today with the passage of the Debt Relief (Developing Countries) Bill in the House of Lords. The first law to protect poor countries from Vulture Funds profiteering off of debt relief resources, the law is likely to prevent two Vulture Funds from collecting $20 million from a November, 2009 case against Liberia.
Read more about the UK bill at the Jubilee Debt Campaign's website.
December 1 - This past week a British court ruled against Liberia and awarded two Vulture Funds $20 million from a debt that dates back to 1978. Liberia sits in the bottom 15 for worst living standards in the world; the $20 million siphoned off by the Vulture Funds is equal to 105% of the country's education budget and 155% of its health budget in 2008.
Please act now to stop this type of Vulture profiteering from world's poorest.
The Liberian government, currently headed by Ellen Johnson-Sirleaf, has shown itself as a model of responsible borrowing since the end of the war. Despite the illegitimacy of Liberia's loans, taken out by dictatorial governments and used to fuel and finance the 14 years of civil war, the new democratic government has done all it can to start fresh by clearing its past debts. In 2007, Liberia paid off its arrears to the World Bank and African Development Bank, and in April of this year successfully negotiated a $1.2 billion buy-back of its commercial debt - at 3 cents on every dollar it 'owed'.
These successes should be cause for celebration, but in late November, Liberia received a deafening blow to its recovery from the civil war when two Vulture Funds, Wall Capital Ltd. and Hamsah Investments, sued in British courts and were awarded $20 million. These Vulture Funds held the rights to a $6 million debt from 1978, which has been passed through many hands and has an unclear record of spending and repayment - the money may have even financed and fuelled the civil war. Unfortunately, because debt cancellation and buy-back mechanisms are voluntary, these Vultures refused to participate in the commercial debt buy-back. Instead, Wall Capital and Hamsah Investments held on to their loan and then swooped in to profiteer off of Liberia's poor and all the other creditors who participated in Liberia's debt restructuring.
READ Jubilee USA's press release on Liberia
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