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Liberian leader urges MPs to back action against vulture funds

An investigation for BBC's Newsnight, to be broadcast tonight, Thursday
at 10:30pm GMT, has uncovered allegations that speculators subverted the
international debt relief process.

By Heather Stewart and Greg Palast for The Guardian
Thursday, February 25, 2010

liberia
BBC cameraman Rick Rowley in Liberia, reporting with Greg Palast from
the village of Demeh, Liberia.
Ellen Johnson Sirleaf, the president of Liberia, is urging MPs to back a
bill banning vulture funds from using British courts to prey on poor
countries when it comes to a vote on Friday. Liberia lost a $20m (£13m)
case in London last year against two so-called vultures. Such funds buy
up the loans of poor governments, wait for them to win from the
international community, and then use courts to pursue the countries for
assets.

Sirleaf said: "We've been waiting for a parliament or an assembly to
take this kind of hard decision. I hope the US Congress and maybe some
others in Europe will pick up this gauntlet and will follow the example
of Britain."

An investigation for BBC's Newsnight, to be broadcast tonight, has
uncovered allegations that speculators subverted the international debt
relief process for Liberia, in an attempt to gain more money from its
government and international donors than 97% of its other creditors
accepted.

Liberia received debt relief worth $4bn from the international community
in 2007 under the heavily indebted poor countries initiative, including
$2bn from private-sector bondholders. Insiders to negotiations allege
that two US financiers, Eric Hermann and Michael Straus, allowed other
creditors to accept a low payout from Liberia, then quietly transferred
their holdings to two other firms, which then sued in Britain for the
debt in full.

One of Liberia's biggest creditors, Hans Humes, owner of New York's
Greylock Capital, criticised the behaviour of speculators in the
negotiations over the country's debts. "[They were] just sitting there
and saying: 'OK, we're the last guys and we're going to hold up any
process by which the country can grow unless somebody takes care of us.'
It's extortion," he said.

Two others who were involved in the negotiations confirmed that Humes's
criticisms must refer to Hermann and Straus.

The private member's bill, which will receive its second reading on
Friday, would prevent vultures from pursuing any of the 40 countries
that have qualified as heavily indebted poor countries. Sponsored by
Labour MP Andrew Gwynne, it would prevent assets being seized, even in
cases that have already been brought - so campaigners say it should help
Liberia.

When a Newsnight crew went to Hermann's New York office to question the
financier, the company's nameplate had been unbolted from the wall, the
suite number removed and the firm's staff locked inside the office. A
security guard said he had been ordered to look out for the BBC crew and
keep it out of the building.

In 1998, a US judge found lawyer Straus guilty of "champerty" - buying
poor nations' debts just for the purpose of suing them. An appeals court
later reversed the finding.

In February 2002, Straus and Hermann sued Liberia for $18m for debts
they had obtained for a fraction of that sum. They filed the suit in the
US, the week Liberia's capital was under siege from rebels, without
electricity, water or a functioning government. Straus and Hermann won a
judgment for the $18m by default.

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