Vulture Fund

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Some vultures have feathers, but some have fancy offices and huge homes.
Tonight, BBC investigative reporter Greg Palast follows the trail of one
"vulture fund" chief, from a locked office door in New York to mud-brick
houses in Africa.

How strange. When I arrive at the offices of Eric Hermann at hedge fund
FH International, just outside New York City, the company's corporate
sign is unbolted from the wall and the suite number removed from the door.

But wait ... I hear noises inside the office. Huh? I knock on the locked
door and out steps the office building's security manager.

"Guys, they don't want to be interviewed. They don't want to be seen. So
we are going to have to ask you to leave the building."

"And do you know why they took the sign off?"

His reply to our cameras, "I have no clue."

But we do.

Mr. Hermann is the principle owner of a so-called "vulture fund" which
attempted to seize more than $20 million from the war-wounded nation of
Liberia.

Mr. Hermann is known in the finance business as a debt "vulture." He and
his associates buy up the debt of the poorest nations on the planet,
usually for pennies on the dollar, then sue or use other means to
squeeze the nations to pay ten times, even a hundred times, what the
vulture fund paid for the debt.

The effect of Hermann's financial maneuvers earns little applause in
Liberia. In that African democracy, diplomat Winston Tubman tells us
what he would say to vulture fund operators, "'Do you know you are
causing babies to die all over Liberia?'"

liberia
Reporter Palast speaks with T. Bai Flahn, Demeh Village elder.

That's strong language, but in Liberia, we see the effects of the threat
of losing over $20 million from this desperately poor nation's budget.
In the village of Demeh, I meet Howa Murvee. During Liberia's recent
civil war, her grandfather was beaten to death in front of her. Every
home in the village was destroyed. Now, with money from selling donuts
at a rural bus stop, she has raised the $100 needed for materials to
rebuild her mud-and-thatch home.

The sums sought by Hermann and the vulture funds equals the cost of
rebuilding a quarter million homes for displaced war refugees like Howa.

Back in New York, I located court documents which show that Hermann and
associates sued Liberia for nearly $20 million for the debts which cost
Hermann's firms a fraction of that sum. Hermann sued in February 2002,
Liberia's capital had neither electricity nor water. It was under siege
from warlords and under UN sanctions and had no functioning government.
Not surprisingly, Liberia failed to appear in court and lost
automatically. The poor nation was ordered to pay Hermann and associates
the millions he demanded.

Hans Humes, CEO of Greylock Capital, a major player in the foreign debt
speculation business, was willing to speak to us about how the industry
operates. At his Park Avenue, New York, office, he explains how his own
firm got hold of Liberia's debt, dirt cheap during the civil war:

"I ended up buying a lot of the loans that we had in Liberia. When I
called one of the banks that was going through a merger 13,14 years ago,
I said, "Hey, by the way, you're a lender to this African country.' And
the guy said, 'No I'm not; and a couple days later he said, 'You know
what, you're right. We found this box in this warehouse that had files
for all these loans. Do you want to buy all of them?'"

But Humes is no "vulture." When peace and democracy came to Liberia, he
accepted Liberia's offer of 3 cents on the dollar for the debt the
nation owed. So did every other creditor — except for Hermann and
associates. In the middle of the negotiations with Liberia, Hermann
transferred a portion of his Liberia holdings to a hedge fund called
"Hamsah."

liberia
Liberia's President Ellen Johnson Sirleaf and BBC reporter Greg Palast
in her home in Monrovia, Liberia.
Hermann's firm would have received only $1 million under the 3-cent deal
accepted by Humes and others. But this firm called "Hamsah" and
associates ended up across the Atlantic, suing Liberia in a London court
for $28 million.

Humes is infuriated by such manipulation. Without naming Hermann nor
Hamsah, he says, "All they're trying to do is to exploit the system,
hold the system hostage, to get some sort of excessive returns."

Nor was the President of Liberia too pleased with this new legal attack
by the vultures. At her home in the capital, she has a message for the
vulture funds. President Ellen Johnson Sirleaf is Africa's first elected
female head of state. She pleaded with the vulture fund, "Here's a
country having two decades of turmoil, death and destruction, trying to
find its way back trying to give its young people a future. You should
not be the one to become an obstacle. Have a conscience and give this
country a break."

The British Parliament heard her. Last Friday, the day after our London
broadcast, Parliament voted to bar vulture funds, like Hamsah, from
using the British courts.

President Sirleaf is thrilled by Britain's swift action. "Bravo! We've
been waiting for a parliament or an assembly to take this kind of hard
decision to be able to bring these funds into reason."

Now she is asking America to act on similar legislation before the US
Congress. "Maybe the US Congress ... will pick up this gauntlet and will
follow the example of Britain and move that — because it's just so
unfair to poor countries."


--------------------------
Eric R. Hermann, President
FH Asset Management LLC
Eric R. Hermann, President, is the owner of FH International Financial
Services, Inc. Mr. Hermann has been active in emerging markets finance
for two decades and has advised and managed funds investing in emerging
markets debt instruments denominated in OECD currencies since 1992. In
association with Carlson Investment Management, Mr. Hermann managed the
First African Asset Fund Limited and the Africa High Yield Fund as well
as the ML XVII Carlson (Cayman) CBO. In 1998, he began investing a
managed account which was converted in 2000 into the FH Emerging Markets
Debt Fund, LP. Mr. Herman is also a principal of Montreux Capital
Management LLC, the General Partner of Montreux Partners, L.P. a
partnership with the objective of actively managing deeply distressed
sovereign debt. From 1986 to 1989, Mr. Hermann helped establish the
emerging markets trading and corporate finance units at Bear, Stearns &
Co. Inc. From 1981 to 1986, he worked in The Chase Manhattan Bank’s
international banking group’s Africa and Middle East department. Prior
to that, he was an economic consultant to the World Bank and the United
States Agency for International Development, and received a Fulbright
Fellowship to the Cote d’Ivoire. He speaks English, French and Spanish.
Mr. Hermann holds a Masters of Arts in Law and Diplomacy from the
Fletcher School of Law and Diplomacy.

**********
Dit bericht is verzonden via de informele D66 discussielijst (D66 at nic.surfnet.nl).
Aanmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SUBSCRIBE D66 uwvoornaam uwachternaam
Afmelden: stuur een email naar LISTSERV at nic.surfnet.nl met in het tekstveld alleen: SIGNOFF D66
Het on-line archief is te vinden op: http://listserv.surfnet.nl/archives/d66.html
**********