Monday, February 19, 2007

The Vultures Swoop in on Zambia

Anyone who has eyes sees all the injustice that goes on in the world today. But in my case it has always been something affecting other people - a country far off, a place I've never been to, whose effects only trickle down towards me. That is until now. Recently, my elder brother showed me an article which struck pretty close to home.

The whole story is about how a certain company called Donegal International bought an outstanding debt owed by Zambia and then sued Zambia for an exorbitant amount. The fiendish companies that exploit poor countries in this manner have become what are known as the 'Vulture Funds'. I further researched the story and found some very interesting facts. An investigative reporter with the BBC, a Mr. Greg Palast, followed the story to its roots and made a very informative report on the Donegal vs Zambia case. The transcript of this report, the audio and video streams are available online on an independent news site - I strongly recommend you watch the report's video stream, but you will need at least a 256kb/s connection to do so. My post is based on this report and some other sources (links provided) with the aim of putting this story into a reader-friendly form as opposed to the report's transcript. I have also made a diagram/flowchart so that the connections are vividly portrayed. I will use this as reference in trying to get the information across.

1. The story begins back in 1979 when Romania loaned $15 million to Zambia. This money was meant to be used for the purchase of tractors for farming. However, Zambia did not pay back its debt. And as time went on the interest kept piling up.

2. By 1998, Zambia's economy was in a dire state with no viable means of repaying the entire debt plus interest. Zambia and Romania engaged in talks over this debt and Romania agreed to write it off for a sum of $3 million. I cannot help but think that this agreement was linked to the Jubilee 2000 campaign. Little did most Zambians know that something sinister was about take place.

3. A company called Donegal International, based in the British Virgin Islands, stepped into the picture. From my own searches on the Internet I have found Donegal to be quite an obscure company with almost no web presence (except for this story). Donegal International is owned by another company called Debt Advisory International that owns many other companies like Donegal. At the head of Debt Advisory International is a man called Michael Francis Sheehan, a man who has dubbed himself 'Goldfinger' and whose pastime is Cadillacs with fancy rims. Enough of the hierarchy stuff.

Just before Zambia and Romania finalised the writing off of the debt with a $3 million payment, Donegal swoops in and buys this debt from Romania for $3.28 million. This, as you may have guessed made more monetary sense to Romania. I am not familiar with the legal details involved in purchasing debt and I am not well-read enough to comment on that aspect. This resulted in a scenario where Donegal had the right to collect on Zambia's debt and they wasted no time in wringing the neck of a nation in distress. They sued Zambia for the original loan with interest added over the years, a sum amounting to at least $42 million.

4. Mr. Greg Palast went further to name an unprecedented culprit in the big picture. He uncovered some emails between Sheehan and none other than the former President of Zambia, Frederick Chiluba. Dr. Chiluba, it must be mentioned, is facing charges of corruption during his 10 year tenure of office. The emails describe a deal between the two profiteers in which Sheehan 'donates' $2 million to Chiluba's 'favorite charity' and in return Chiluba ensures that Donegal collects on the ensuing law suit. How exactly Chiluba is supposed to ensure this is not mentioned in Mr. Palast's report. The Guardian, in this article states that Zambia agreed to Donegal's purchase of the debt and later agreed to pay $15 million for it. I cannot even begin to comprehend why Zambia agreed to pay $15 million instead of outbidding Donegal when they offered to buy the debt for only $280,000 more than what Zambia was offering? The stench of foul play is undeniable and despicable.

Coming to Chiluba's 'favorite charity'. Mr. Palast was forced to hunt down Sheehan as it was the only way he could get to interview him. And he did so on one of Sheehan's morning walks, reeling in a reluctant and impromptu interview. When questioned about the dubious donation, Sheehan retorted that the money went to help the people of Zambia building thousands of houses. Now, the only such endeavor I can think of in those days was the Lusaka Housing Project. This indeed did build many houses for Zambians, but Zambians bought these houses! It was not charity! There was probably international aid going into the project but I am not sure. Such a scenario, with the copious flow of large sums of money, I feel, is a perfect place for $2 million to end up in somebody's pocket!

5. This is where the plot thickens. One shrewd aspect of the U.S. political system is the strong influence lobby groups have in government decision making. Have a strong lobbyist pushing your agenda in government and you have the capability of even rewriting the laws of the U.S., as long as you have the financial backing to boot, of course. You may ask how is it that lobbyists gain so much influence in government. It is pretty simple. The people behind these lobby groups are the biggest sponsors of American presidential election campaigns. So whoever is elected usually ends up fulfilling the wishes of his sponsors. After all the sponsors are in it for their own gain. This is legal and something the Americans have come to accept as normal (for the most part anyway).

Sheehan's company, Debt Advisory International, has been known to hire lobbyists, and one in particular, a firm owned by a Jack Abramoff. Abramoff is currently serving a five-year prison sentence for bribing a couple of politicians! I think the connection is pretty clear that Sheehan and others with the money and a political agenda are able to redirect government decisions, even at the highest levels, to their advantage. This will become clearer at the end of this trail.

6. This year, President Bush, during his 'State of the Union' speech seemingly sincerely pledged his support for the alleviation of the debt crisis faced by third world countries like Zambia. He convinced congress to grant a whooping $280 million in debt relief to Zambia. This money logically comes out of the coffers of the American taxpayer, a people already plagued by the woeful management of the American economy by the Bush administration. Nevertheless, many American people are willing to bear the burden of debt relief and they deserve all the respect and gratitude in the world. This truly is a noble deed.

7. From the $280 million in debt relief Zambia received, she stood to save in the region of $40 million in interest. This money was specifically earmarked to be used in the fight against HIV/AIDS and also in providing an education for 300,000 children. We are talking about the future of no less than a few hundred thousand people that can be transformed for the better. I feel mere numbers do not relay the magnitude of the change this money can make. So I ask you to take a moment to stop and think about it. Take that number - 300,000 and transform it to something you can relate to personally. For me it would be the number of people in Cluj-Napoca (the city I live in), that is the number of children that will have a chance for a better future. That is immense.

8. Many of us already know the outcome of the trial. Zambia lost the case on the 15th of February, 2007 since Zambia had a valid and legal contract with Donegal International. However, the court judge did mention that Donegal's case did have quite a few discrepancies. The Guardian speculates that the judge will order Zambia to pay an amount less than the sought for $42 million. The final decision will be announced next month.

9. Zambia's assets in the U.K. have been frozen at the moment meaning that Zambia cannot use its money located in U.K. accounts. However, the judge proposed to end this freeze. Hopefully, this will fall through and the money will reach projects (again hopefully) where it can help the Zambian people. But Donegal and Sheehan have another trick up their sleeves - the U.S.A. Using the court ruling from the U.K., Donegal can then go to the U.S. and seize the $40 million savings Zambia has made from debt cancellation by the U.S. And with the strong influence they enjoy there, this would be a more viable option to claim their prize before any Zambian reaped the benefits of that money. Sinister indeed, don't you think? But it doesn't get any better.

10. Among all the other presidential powers George Bush bestows on himself and his minions, he has something that is called the power of comity. I have tried to look up what exactly it means but have found nothing apart from its use in this story. According to Mr. Palast, this gives Bush the absolute power to stop any of the Vulture Fund companies from seizing debt relief money. Bush hasn't shown the same zeal in exercising this power as he has for powers given to him in the Patriot Act for example. The Vultures have already taken millions upon millions of dollars that was meant to finance various projects in poor countries under the nose the only man with the power to stop this atrocity, the same man who last month pledged to help indebted countries. But somehow this is not surprising. Why would he stop the very people who sponsored his election campaign from collecting their prize money? His loyalty has been evident for what now seems like an eternity.


In spite of all this, for a country in Zambia's shoes, the last thing we should give up is hope. So the question I ask now is, what are the leaders of Zambia going to do? Are they going to send a delegation to the U.S. to convince Bush to exercise his power of comity and prevent Sheehan and his goons from snatching money that is so desperately needed in Zambia? Why should the children of Zambia pay with their future for the selfish acts of a former president? Why should they be chained by a contract that is legal but immoral whichever way you look at it? What is the global community going to do? Zambia is not the first country in this predicament and certainly not the last. There have been about 40 countries that have fallen victim to these vultures so far. Are we going to sigh, take a breath, move on and watch it happen again and again? Or are we going to say, "This is wrong and it should end here." These thieves use corrupt leaders and laws that they have had a hand in writing to snatch away the dreams of children, all to add a few millions to their billions. Does it get it get any lower than that? The corrupt leaders must be weeded out and these laws changed. That is the goal, but the road is long.

Now, what can I do? Today, I will raise awareness among my friends and family, my colleagues and acquaintances of the injustice that I see. And hopefully one day when enough people know, the wheels of change will begin to turn. Will you join me?


mcmumbi said...

Shane! I searched for "interesting blogs Zambia" and yours came up first. I read your vulture fund story with keen interest. I had similar distaste (my blog on the same subject), but didn't research it nearly as thoroughly as you did. Nicely done! Keep up the great blog, my friend.


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