BREAKING NEWS: 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
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.) ‘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 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. 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. The Stop VULTURE Funds Act (H.R. 6796) was also introduced in 2008.
