Profiteering by Vulture Funds in Liberia

Advocacy Groups Decry Profiteering by Vulture Funds in Liberia

UK Judge Awards Funds $20 million, More Than Liberia’s Total Spending on Education Last Year

Wednesday, December 2nd, 2009 (Washington, DC) – Leading global development and Africa advocacy groups reacted with outrage today to news that a London court recently awarded two Vulture Funds a $20 million judgment against Liberia. This amount of money represents the country’s entire education budget and 150% of their spending on health in 2008.

On November 26, the British High Court announced that Vulture Funds Hamsah Investments and Wall Capital were to be awarded $20 million based on a default judgment received in 2002 by previous creditors in New York courts. The Vulture Funds had recently acquired the loan to Liberia on the secondary market. The original credit, dating back to 1978, was estimated to be worth $6 million, but it had been in default since 1984.

Advocates point out that Liberian President Ellen Johnson-Sirleaf’s government has demonstrated its commitment to start fresh by clearing its past debts, even those incurred by dictatorial governments and used to fuel and finance the 14 years of civil war. 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. Under the aegis of the World Bank, the process was widely acknowledged by creditors to be fair and open.

However, Hamsah Investments and Wall Capital were the only two private creditors that refused to participate.

"The Liberia case is a textbook example of kicking a country while it’s down,” said Ruth Messinger, President of American Jewish World Service. “Liberia has done everything right to gain debt relief, yet our system allows an off-shore, unaccountable corporation to hold out on the deal and instead profiteer in international courts by squeezing the country for funds representing more than its entire education budget.”

“U.S. taxpayers who finance debt relief for poor countries intend for that money to be redirected towards poverty alleviation, not into the private accounts of Vulture Funds that operate in secret and without any sense of corporate responsibility,” said Melinda St. Louis, Deputy Director of Jubilee USA Network.

Gerald LeMelle, Executive Director of Africa Action stated, “We call these debts illegitimate precisely because of irresponsible lending policies by U.S. and UK based international financial institutions, and military support that protected and defended the regime of a dictator, Samuel Doe, while he mismanaged the country's resources and looted Treasury. The final insult is that now poor Liberian people are being asked to pay back wealthy investors.”

This judgment in favor of the Vulture Funds sets back much of the progress made in Liberia, a country that ranks 169 out of 182 in the UN’s Human Development Index. In response to last week’s news, the Liberian Finance Minister Augustine Ngafuan has told reporters that the country is unable to pay the awarded judgment.

The advocacy groups note that because Vulture Funds are set up in tax havens of the British Virgin Islands and the Cayman Islands, Hamsah Investments’ and Wall Capital’s actions and their principal beneficiaries are almost impossible follow.

“There is an ever-urgent need for the U.S. and the UK to prevent raw exploitation of poor countries and profiteering on their debt relief. The most recent judgment will unfortunately result in Liberia facing ever larger barriers to providing the necessary social services to lift its population out of poverty,” said Nicole Lee, Executive Director of TransAfrica Forum.

Advocacy groups dismayed by this latest attack by Vulture Funds point to the urgent need to pass legislation currently before the U.S. House of Representatives and the UK government to prevent the further misuse of US and UK courts for debt profiteers. The Stop VULTURE Funds Act, H.R.2932, introduced by Representatives Maxine Waters and Spencer Bachus on June 18 of this year, would prohibit sovereign debt profiteering from poor countries and require greater levels of transparency by creditors suing those poor countries.

“These Vulture Funds are violating the promise of debt relief and Liberia’s path to peace and economic stability,” decried Emira Woods, a Liberian national and Co-director of Foreign Policy in Focus at the Institute for Policy Studies. She added, “After 26 years of war, Liberia’s schools and healthcare centers remain severely underfunded. Unemployment is over 80%. The government and people of Liberia cannot have scarce resources funneled to Vultures. Women and children will pay the heaviest price. Congress and the courts must act urgently to clip the wings of these Vultures.”

Africa Action is the oldest organization in the U.S. working on African affairs. We are a national organization based in Washington, DC. Our work dates back to 1953, the year our oldest predecessor organization was founded in New York. Today, in partnership with activists and civil society organizations throughout the United States and in Africa, Africa Action is working to change U.S. foreign policy and the policies of international institutions in order to support African struggles for peace and development. If you wish to unsubscribe to our media list, please e-mail michael.stulman@africaaction.org and write“Unsubscribe” in the subject line.

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