Leaders in Financial Services, Judiciary and Foreign Affairs Committees Introduce H.R. 6796
August 1, 2008
Press release from Friday night when Representative Maxine Waters (CA) introduced the Stop VULTURE FUNDS Act, an important step in the fight to end greedy and corrupt business practices that take advantage of the world's poor.
WASHINGTON – Today, African advocacy organizations and debt relief campaigners welcomed the introduction of a bill in the U.S. House of Representatives to prevent so-called Vulture Funds from making excessive profits off the debts of the world’s poorest nations. Vulture Funds purchase the defaulted debts of Heavily Indebted Poor Countries at much reduced prices and then litigate against the debtor for greatly inflated sums. Through the seizure of assets, litigation and political pressure, they seek repayments that are far in excess of the amount that they paid for the debt.
Neil Watkins, National coordinator for the Jubilee USA Network, an alliance of 80 religious denominations and faith communities, development agencies, and human rights groups working for debt relief, said, “We welcome the strong leadership showed by the Congressional co-sponsors of this important new legislation. Vulture funds are grabbing the proceeds from debt relief of some of the poorest countries in the world. This bill should make vulture funds think twice before suing the poor for profit.”
Lead sponsor Congresswoman Maxine Waters said, “The Stop VULTURE Funds Act would protect the world’s poorest countries from the predatory practices of vulture funds and allow these countries to use their limited resources to meet the needs of their people.”
The Stop VULTURE Funds Act (H.R. 6796) outlaws profiteering from sovereign debt by capping the amount of profit that a fund can reap through litigating against poor countries to collect defaulted debts. It also requires disclosures from any fund which pursues Vulture Fund activity through the U.S. courts. Introduced by Financial Services Committee member Representative Maxine Waters (D-Calif), the bill counts original cosponsors Representative John Conyers, Jr. (D-Mich.), Chairman of the Judiciary Committee and Representative Donald Payne (D-N.J.), Chairman of the Subcommittee on Africa and Global Health.
The International Monetary Fund, the World Bank, U.S. Treasury Secretary Henry Paulson and leading NGOs have all condemned the activities of the Vulture Funds. Secretary Paulson stated in Congressional testimony that he “deplore(s) what the Vulture Funds are doing.”
“The profiteering tactics used by these Vulture Funds are undercutting progress made towards relieving the debt burdens of the world’s poorest countries,” says Nicole Lee, Executive Director of TransAfrica Forum. “HR 6796 is a key step in closing the legal loopholes which have allowed these Vultures to operate in such a devious way.”
“We’ve seen how these greedy lawsuits can hinder health and education programs in countries such as Zambia,” said Michael Swigert, Associate Director for Policy and Communications at the social justice organization Africa Action. “This bold legislation would help protect vulnerable African countries like Liberia that may become future targets for Vulture Funds.”
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. Their activity has increased the debt burden of the world’s poorest citizens and made the task of securing debt relief harder.
Last May, some of the world’s major creditor governments publicly committed not to sell or transfer any of their debt claims on HIPC countries to creditors who do not intend to provide debt relief under the HIPC initiative, safeguarding this debt from litigation by Vulture creditors. Many countries, however, continue to on-sell their debt claims from vulnerable countries.
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