Elliott Associates goes to Albany, again

By Felix Salmon
June 17, 2010
went to extreme lengths to try to collect as much money from the Latin country as it possibly could:


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Back in the late 1990s, Elliott Associates was embroiled in litigation with Peru. And it went to extreme lengths to try to collect as much money from the Latin country as it possibly could:

A federal district court in New York initially ruled against Elliott, finding that the fund had purchased the debt “with the intent and purpose to sue” and “rejected each and every opportunity to participate in Peru’s restructuring.” Elliott appealed and won. Then the fund began working the political system in New York. With the help of a lobbying firm in Albany, Elliott, through a subsidiary, persuaded the New York legislature to change an obscure law governing compound interest, increasing Elliott’s payout by $16 million, for a total, including interest, of $58 million. It was done so quietly that Peru’s lawyers didn’t find out until after the fact. A few years later the New York State Assembly eliminated another law that Peru had used to defend itself. Three months after the bill became law, Singer gave the lead sponsor, State Assembly Member Susan John, a $2,500 campaign donation.

Today, Elliott Associates is embroiled in litigation with Argentina. And it’s trying a very similar stunt, taking advantage of Albany’s broken system to try to maximize its payout:

Amid the chaos in Albany, the Senate has mooted the issue of deadbeat foreign government borrowers. Senator Brian Foley last month introduced a bill that would subject to special taxes any foreign governments that have defaulted on their debts and defied U.S. court judgments…

This bill is not about general principles. It’s about one judgment-evading foreign state, the only one that fits the bill’s criteria: Argentina…

The government has launched a new exchange offer, hoping to clean up the situation sufficiently to reestablish market access…

Rumor has it that one of the biggest holdouts, Elliott Associates, is behind this bill, which, if passed, would require New York banks, including the New York Fed, to collect a tax on any financial transactions conducted by Argentina. The law would impose new costs on the exchange and complicate it, leading to a delay or even forcing Argentina and its advisers back to the drawing board. That in turn would keep Argentina frozen out of the bond market.

At some point, financial markets are going to have to come to terms with the fact that when you issue a security under New York law, you’re engaging with a legal system which looks in some respects like that of many corrupt emerging markets. The jurists here are generally well-respected and honest, but the legislature is another thing entirely. Elliott might have been the first major hedge fund to work this out, but if it’s successful twice in a row, it surely won’t be the last.

Comments
8 comments so far

Opportunist vultures needs their wings clipped?

Posted by hsvkitty | Report as abusive

I’m especially fascinated by the change in the law that altered the amount of interest due on the debt. Wouldn’t that be ex post facto? Or do all contracts have an implicit clause saying “any or all terms can be altered by act of the legislature”?

No, wait, that can’t be the case. Contracts are sacred; at least, that is what was said last year, when the legislature was considering altering the executive compensation packages at TARP firms.

Posted by KenInIL | Report as abusive

The law would impose new costs on the exchange and complicate it, leading to a delay or even forcing Argentina and its advisers back to the drawing board. That in turn would keep Argentina frozen out of the bond market.

Posted by SGKingsley | Report as abusive

Sorry.

“The law would impose new costs on the exchange and complicate it, leading to a delay or even forcing Argentina and its advisers back to the drawing board. That in turn would keep Argentina frozen out of the bond market.’

What’s wrong with that? Do we really want Argentina to be able o access the bond market?

Posted by SGKingsley | Report as abusive

Things the vulture funders raping Central America fail to take into account include how marvelous they’d look in neckties from that part of the world.

Posted by HBC | Report as abusive

This is an outrage… It is a South American countries God-given right to regularly default on its debts to Western bondholders with little or no consequences to itself. How dare these bondholders try to enforce payment on loans, much better to pass the cost of lending to these firms to western taxpayers and account holders.

HBC, you are aware Peru and Argentina are in SOUTH America?

Posted by Danny_Black | Report as abusive

Danny_Black, it would seem after 10 years there would have to be penalties to squirm your way back into the market. Sadly,the parties will be duking it out while the vultures will move on to pick the bones of others who do not deserve such treatment.

Also, the regimes of the some of these countries rape the people, then vulture funds come and pick the carcass. They do harm. They do business from the Cayman Islands to avoid taxes. No one should support that.

Always look to the future as well as the past. If you can’t understand the Karma in reaping what you sow, then you might want to learn Chinese. After all, buying debt to sue for more then the original debt/interest is a good thing right?

Posted by hsvkitty | Report as abusive

Vulture Funds: a system of licensed usury invented by Elliott’s Paul Singer with the collusion of politicians in Washington DC and New York, NY.

Vultures obtain insider knowledge of where US taxpayer “aid” funds are headed, buy up paper debt in those destinations at cents on the dollar, then in remarkably impressionable not to say corrupt US courts of “Law” rabidly enforce preferential ius primae noctis pounds of flesh from, essentially, defenseless peasants. What’s more, everybody else doesn’t get paid and the “indebted” countries wind up in worse shape than ever before.

Of all the ways to make a living in this world, running a Vulture Fund has to be among the least savory and most dishonorable. Vulture targets in recent years have included Honduras in – hothead, please note – Central America, as well as necktie fashion capital Colombia, q.v.

You won’t get much out of Elliott without a writ but a relatively candid list compiled by their fellow predators may be viewed at
http://www.omnibridgeway.com/emerging-ma rkets/country-list/

That this systematically reduces emerging markets (their terminology, not mine) to carrion whilst robbing the unsuspecting US public is morally and Constitutionally improper. US jurisprudence is being blatantly subverted.

Public servants helping to feather Singer and his associates’ nests include New York’s most repulsive: Rudy Giuliani and “salty” homoerotic Eric Massa.

Elliott Associates aren’t the only ones in the game, but since they invented it the least they can expect is the brunt of blame for stealth credit so acquired. If America won’t shut down its own crooks, the rest of the world eventually will, in conclusion of a drama that’s been brewing for several years now.

That Paul Singer is a self-described “conservative libertarian who has given millions of dollars to Republican organizations that emphasize a strong military and support Israel” may afford comfort to the likes of Danny_Black but, to the less gullible, Elliott Associates plus bipartisan bribe-takers equals barely-legal embezzlement on a global scale. May soon they road-kill be.

Posted by HBC | Report as abusive
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