In his recent State of the Union address, President Bush declared the United States was taking on the challenges of global hunger, poverty and disease, and urged support for debt relief, which he called the best hope for eliminating poverty. But what exactly are wealthy nations doing to reduce the debt of impoverished countries?

Today we take a close look at companies known as “vulture funds.” Vulture fund companies buy up the debt of poor countries at cheap prices, and then demand payments much higher than the original amount of the debt, often taking poor countries to court when they cannot afford to repay. For an in-depth look at this issue, we turn to a BBC Newsnight documentary by investigative reporter Greg Palast.

Greg Palast’s BBC report on vulture funds.

Today a high court judge in London rules on the case of whether a vulture fund can extract more than $40 million from Zambia for a debt which it bought for just $4 million. To tell us more about this case and more we now turn to Greg Palast.

Greg Palast. Investigative reporter with the BBC and author of the books “Armed Madhouse”, “The Best Democracy Money Can Buy” and “Democracy and Regulation.”

AMY GOODMAN: Today, we take a close look at companies known as vulture funds. Vulture funds buy up the debt of poor countries at cheap prices, then demand payments much higher than the original amount of the debt, often taking poor countries to court when they cannot afford to repay. For an in-depth look at this issue, we turn to BBC Newsnight documentary reporter, Greg Palast.

BONO: So, this is our moment. This is our time. This is our chance to stand up for what's right. We're not looking for charity. We're looking for justice. [singing] It was a beautiful day…

GREG PALAST: And it was a beautiful day. Bono asked, and the world responded. It was a heartwarming story. All the nations of the world getting together with the International Monetary Fund and the World Bank to reduce the debts crushing the poorest nations on earth and killing their people. It all looked good. Then, down swooped the vultures, who bought up the debt cheaply and then squeezed these poor countries to pay them ten times what the speculators originally paid for the debt.

Five years ago, Gordon Brown told the United Nations that the vultures were perverse and immoral: “We particularly condemn the perversity where vulture funds purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed, a morally outrageous outcome.”

Yet today, the vultures are still demanding huge payoffs. One of them expects to win $40 million this week from Zambia. We thought we’d track him down. We set out on our vulture hunt by going to their natural habitat: Washington, D.C.

PRESIDENT GEORGE W. BUSH: Our priority is to make sure our troops have what it takes to do their jobs.

GREG PALAST: Our hunt took us to a man who loves Cadillacs, customized with mag wheels. On the Caddie owner's website, he calls himself Goldfinger.

SHIRLEY BASSEY: [singing] Goldfinger, he’s the man, the man with the Midas touch.

GREG PALAST: Who is Goldfinger? We know that Michael Francis Sheehan owns Debt Advisory International, which manages vulture companies run out of the British Virgin Islands, including one called Donegal, which is suing Zambia. It's quite a complex web. And we hoped Sheehan -- Goldfinger -- would untangle it for us, but he wouldn't grant us an interview. So we thought we’d say hello to him, while on his morning stroll through the wooded suburbs of Washington.

Greg Palast, BBC Television Newsnight. I just want to ask you, Mr. Sheehan, why are you squeezing the poor nation of Zambia for $40 million? Doesn't that make you a vulture?

MICHAEL SHEEHAN: No comment. I’m in litigation. It's not my debt.

GREG PALAST: Well, you’ve been avoiding this question. Aren't you just profiteering off the good work of people who are trying to save lives by cutting the debt of these poor nations?

MICHAEL SHEEHAN: Well, there was a proposal for investment, but that's all I can talk about.

GREG PALAST: A British court is about to rule on whether the Goldfinger-linked companies will walk away with $40 million from the Zambian government. I asked an adviser to Zambia's president what this judgment means to a nation where the average wage is a dollar a day.

If these bondholders get their $40 million, what does that mean to Zambia?

MARTIN KALUNGA-BANDA: The kind of money we are talking about, in excess of $40 million, is literally wiping out Zambia's annual savings arising from debt relief.

NELSON MANDELA: Sometimes it falls upon a generation to be great…an end to the debt crisis for the poorest countries.”

GREG PALAST: Celebrities and pop stars campaigned for ten years for debt relief. And the wealthier nations responded.

ADVERTISEMENT: A child dies completely unnecessarily as a result of extreme poverty every three seconds.

GREG PALAST: Speculators, the vultures, realized they could make massive profits off everyone else's generosity by diverting into their own pockets the debt relief meant for the poor.

UNIDENTIFIED 1: You look at an animal. The meat’s all been picked off. The country seems bankrupt. And these guys can double, triple or make even more of their money. Debt relief is actually just clearing a path for the vultures to walk in right behind them.

GREG PALAST: Here's how the vultures got Zambia. In 1979, Romania lent them $15 million. By 1998, Zambia was broke, so Romania offered to write off the entire debt for just $3 million. But before the deal was final, a vulture swooped in, and somehow snatched Romania’s cheap offer for his own company.

Michael Sheehan and his associates are now suing Zambia, not for the $3 million they paid, but for the original debt, plus interest: $42 million. But even bigger money is to be made in the US courtrooms, where Sheehan and others are asking for hundreds of millions of dollars from several desperately poor nations.

And George Bush can put an end to it all with a stroke of a pen. Under the US Constitution, the President has the power to stop the vultures from collecting a penny in a US courtroom, but he hasn't done it, even though just last month George Bush publicly committed his government to debt relief.

PRESIDENT GEORGE W. BUSH: And let us continue to support the expanded trade and debt relief that are the best hopes for lifting lives and eliminating poverty.

GREG PALAST: To ensure that President Bush won't put his words into action, the debt speculators will need political clout. The money trail has led us up Pennsylvania Avenue to this building, right up close to George Bush's house. Sheehan’s operation, Debt Advisory International, paid a quarter million dollars a year to this outfit for their political advice and access, until they got into a bit of trouble.

These are the offices of Goldfinger's former lobbyists, once the most powerful in Washington, ’til one of their partners was caught bribing a couple politicians. Jack Abramoff was recently sentenced to five years in prison for the bribery. His partners at the firm of Greenberg Traurig use more traditional legal means to stay tight with President Bush and Republican powerbrokers.

UNIDENTIFIED 2: Well, the White House is just on the other side of this park.

GREG PALAST: You ever get over there?

UNIDENTIFIED 2: Yeah, absolutely. These are the agencies, the places we have to go to help our clients do what they want to do.

GREG PALAST: And many others, besides Goldfinger and crew, were doing it. Preying on third world debt is a global industry with dozens of players worth hunting.

I’ve decided to get out of town, because I’ve heard there's an even bigger flock of vultures up north, here in New York City. One hot dog, please.

JAY-Z: Welcome to the Empire State, home of the World Trade, home of Biggie Smalls, Roc-A-Fella headquarters. Ladies and gentlemen, I’m a BK brawler…

GREG PALAST: Here they are feeding on poor nations all over the globe. 36th floor, Elliott Associates, home of billionaire Paul Singer. Singer practically invented the vulture fund. In 1996, he bought up some of Peru's debt for $11 million, then threatened to bankrupt Peru if they didn't give him $58 million. He got his $58 million. Then Singer bought some discounted debt from Congo Brazzaville for only about $10 million. His company then sued the Congo and turned the $10 million into $127 million. But that still wasn't enough.

I’m right here, in fact, at 712 Fifth Avenue. OK, is there any time or any place where I can meet with Mr. Singer? Absolutely no way ever?

Singer's company says the Congo government is corrupt and hid assets from creditors. Courts have agreed, allowing Singer to seek tripled damages under US racketeering law. They could get $400 million. Not bad for a $10 million bet. Congo was counting on George Bush to use his legal authority to stop Singer's court action. That hasn't happened. Paul Singer is the number one donor to George Bush and the Republican cause in New York City. In the run-up to the 2000 election, he gave them $300,000. In 2004, he gave them $1.2 million, including money for the so-called Swift Boat campaign, which smeared the war record of George Bush's opponent. His spokesman told us, “We have nothing to hide. We just don't do interviews.”

Back in London, in this courthouse, the government of Zambia alleges that Goldfinger paid a bribe, $2 million to the previous president of Zambia to make sure they’d collect. And we've obtained this email. It says that they'll collect more money from Zambia in return for a donation to, quote, "the president's favorite charity." The president at the time was Frederick Chiluba. He’s now on trial on wide-ranging charges of corruption. As it happens, Goldfinger’s old lobbyists are also experts on bribery law, the Foreign Corrupt Practices Act.

UNIDENTIFIED 3: Even for a charitable organization, you simply can't offer something of that value to a foreign official with the understanding you're going to get something in return.

GREG PALAST: You can't say we'll give the money to the charity, you give us a better deal on our agreements?

UNIDENTIFIED 3: Yeah, that's going to be a problem.

GREG PALAST: Jail time?

UNIDENTIFIED 3: Well, hopefully not, but you're certainly -- if you're found out and the government can prove that case, you're looking at multimillion-dollar fines from the company, for sure.

GREG PALAST: We showed him the email. He hadn't seen it before.

We’re looking at this. The deal is going to get done for political reasons. We are going to discount a bunch of whatever to get to the president's favorite charity. Does that make you nervous, if your client wrote that?

UNIDENTIFIED 3: Extremely, extremely.

GREG PALAST: Mr. Sheehan says it wasn't a bribe. They were only trying to help the Zambian people.

MICHAEL SHEEHAN: We offered to donate debt to a low-income housing initiative, which was a charitable initiative, which did end up building over several thousand houses for the poor. You're contorting the facts. You're on my property, and I would ask you to step off.

GREG PALAST: We showed this to the current president's advisor. He was not impressed.

MARTIN KALUNGA-BANDA: When you are talking about any amount, $40 million or thereabout, to be paid to service some unfair debt, you are talking about in excess of 300,000 children being prevented from going to school.

GREG PALAST: Bribery or not, donation or payoff, British courts are only concerned with legal technicalities, not moral verities. Does Zambia stand a chance? If they lose, that would be another $40 million for the speculators, and the debt relief meant for the poorest people on the planet would just go to feed the vultures.

AMY GOODMAN: And special thanks to producer Meirion Jones and cameraman Rick Rowley. This is Democracy Now!,  http://www.democracynow.org. That, Greg Palast's BBC report on vulture funds. Stay with us.

[break]

AMY GOODMAN: I’m Amy Goodman, joined by Greg Palast, who just filed that report with BBC Newsnight and Democracy Now! Yesterday, a high court judge in London ruled on the case of whether a vulture fund could extract more than $40 million from Zambia for a debt which it bought for just $3 million. To tell us more about this case, we turn to Greg Palast, investigative reporter with BBC Newsnight, author of the bestselling Armed Madhouse. Welcome to Democracy Now!

GREG PALAST: Glad to be with you, Amy. We're still waiting for word outside the courthouse for the judge to issue the order, but we have no doubt that under British law, they're going to order the poor nation of Zambia to give up 100% of the value of its debt relief to this vulture fund. And then they're going to come to the United States to try to collect it. And that's where George Bush comes in.

AMY GOODMAN: OK, first, start with the vulture fund, for people who are not familiar with this term.

GREG PALAST: Yeah, vulture fund is a term that’s used for bond speculators who take the bonds, the cheap debt of the third world, that may sell ten cents on the dollar, because no one expects to ever collect on these debts, they buy up the debts really cheap, and then they use political muscle, bribery or lawsuits to try to squeeze, not only get back the money that they put down -- in the case of Zambia, $3 million by Mr. Goldfinger -- or they'll try to get $40 million. In the case of the number one vulture here in New York City, Paul Singer, he's paid about $10 million and expects to collect $400 million from the Congo.

AMY GOODMAN: And tell us who these people are.

GREG PALAST: Who they are, in the case -- for example, Paul Singer is the number one donor to George Bush at the moment, has given over a million-and-a-half dollars in the last campaign. He’s Rudy Giuliani's chief fundraiser, raising $15 million now for his presidential campaign. He's a billionaire. He controls a $7 billion fund, and he's obviously very close with the Bush administration, which is crucial, absolutely crucial to his making these profits.

AMY GOODMAN: Why?

GREG PALAST: Under US law, the President of the United States has the absolute power to stop any vulture fund from collecting money from a poor nation, under the US Constitution. It’s called the power of comity. The African nations are pleading with George Bush to stop his big donors from collecting. Now, what's happening is, is that in the State of the Union, George Bush said we have to give debt relief to the poorest nations. The US taxpayers are putting up more than a billion dollars to write off the debts of the African nations, but what Bush isn't saying is that he is then allowing that money to be captured by his biggest donors, like Paul Singer, so that the money for debt relief is not going to the African nations, where they're desperately in need for, you know, funding for medicine for AIDS, for education, which is what it's earmarked for. These guys are actually going into US courts and saying, “Give us the money.” Now, George Bush, again, has the absolute power, and the judges are waiting for him to write a note. They're saying, “George Bush can ask us to dismiss this case in one minute, but we need something in writing from the White House.”

AMY GOODMAN: At the end of 2005, Zambia announced the United States had agreed to cancel debts owed by Zambia worth $280 million. So what’s happened in this past year?

GREG PALAST: OK. The US taxpayer takes a hit. We pay $280 million. Zambia saves, in interest, around $40 million. The problem is, is that you have the vulture go into court in London and then use the court judgment in London to come into the United States and seize the $40 million from the government of Zambia's bank accounts in the United States, so that the money never gets to Zambia or never gets to be used by Zambia to buy medicine--

AMY GOODMAN: The guy you caught up with on his walk, Michael Sheehan?

GREG PALAST: Yes. Michael Sheehan, he uses the domain name “Goldfinger” and, you know, uses his money for mag wheels and fancy Cadillacs, and you saw he has a mansion out there in Virginia. The other point that we're making there is that these vultures are able to do this not just because they have a political end, but in his case $2 million was paid to what he called a charity of the Zambian president. And I have to say that while the Bush administration hasn't acted -- the Justice Department has just asked me to provide the information to them, because it is against the law to bribe a foreign president to make this money. But again, George Bush can put an end to it tomorrow morning. All he has to do is just sign a piece of paper saying debt relief goes to the nation, it does not go to the vultures, and as far as the courts are concerned, that's the final word.

AMY GOODMAN: Do you expect him to do that?

GREG PALAST: We've asked the White House again and again. We called 10 Downing Street. The British government is absolutely adamant that the money should not go to the vultures. They call them vultures. It should go to the people of Zambia, the people of Congo and other suffering people in Africa. The Bush administration has been completely silent. Completely silent. We can't get them to respond. I stood outside the White House. I’m trying to get some type of response.

I mean, you have to understand, like the guy that uses the Goldfinger moniker, he hired Jack Abramoff’s firm for influence. These guys are rewriting the laws, for example, of New York, to make it easier for them through their lobbyists, to make it easier for them to seize Africa's money. Tremendous political clout. You're talking, you know, like I say, the number one donor for Bush, the number one donor for Giuliani. They've hired the big heavyweight lobbyists, like Abramoff's firm, and then they’re even, in one case we know, they're making payments that are seriously questionable right now to, you know, to corrupt the governments of Africa.

AMY GOODMAN: And the effect on the ground in Zambia?

GREG PALAST: Horrendous, because this $40 million for Zambia was specifically earmarked for fighting AIDS, where there's a 20% HIV/AIDS rate among adults in Zambia, and for education. 300,000 school kids are not going to be able to go to school because of this, unless Bush steps in. What's horrendous is the kind of con that's going on. You have a president of the United States standing up in front of Congress, saying give us money, give us billions to write off, in the State of the Union. He puts it in the budget, without anyone saying that, in fact, it's not getting to Africa, it's going to his biggest donors, who are short-stopping it by interjecting themselves and buying up the right to collect and then using the US courts and the British courts. Bush can put a stop to it tomorrow morning. The problem is, is that he's not been responding.

I know that the president of Congo came to visit the White House, and the vulture, Paul Singer, his operation ran a whole smear campaign in the US press about what a terrible Marxist, horrendous president this is of the Congo. They did kind of a Hugo Chavez on the guy, to try to dissuade Bush from listening to him. But it's not the corrupt government that would be making the -- it’s not the guys who’ve put money in their Swiss bank accounts that will be making the payments to the vultures, it's the people of the Congo, the people of Zambia. That's the problem.

AMY GOODMAN: Greg Palast, thank you very much for joining us. Greg, investigative reporter for BBC, he’s author of the bestselling books, Armed Madhouse and The Best Democracy Money Can Buy.

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