News Center

A Fund Promises to Fight to Collect on Argentine Bonds
La Nacion
July 20, 2008

By Hugo Alconada Mon

NEW YORK.- Soon after winning a legal battle of ten years against the Congo to collect the principal and interest on debt bonds that had fallen into default, the "vulture" fund Elliott Associates will concentrate its efforts on the intention to collect on Argentina's unpaid public titles for a nominal value of US$1 billion.

A team of some 100 people at Elliott, among them lawyers, accountants, financial experts, economists and researchers of every kind, are charged now with the "Argentine case." The majority formed part of the task force that in the past launched a study against the Republic of Congo, which set off for the Caribbean Islands, Hong Kong, London and Paris to find hidden frozen oil and monetary assets of phantom companies, front men and fictitious operations.

"Our dispute with Congo took more than 10 years to resolve. As far as Argentina, we are in this for the long haul," the most visible face of the fund, Jay Newman, threatened to LA NACION in his first formal meeting with an Argentine media outlet since he set his eyes on the country, shortly after the debacle of 2001. The African precedent appears to back up his words.

At the end of the 1990s, Kensington International, a subsidiary of Elliott Associates, bought Congo bonds for a nominal value of US$100 million. They paid pennies for them, since that country had already declared a default. Soon after, the "vulture" fund led a legal fight to collect on these titles, that went on to various continents and would reveal cases of corruption that involved the son of Congolese President Denis Sassou-Nguesso. From twisting his arm and his government's, the debt plus interest was grudgingly paid.

The president agreed to negotiate with Elliott soon after the fund made public his son's luxurious spending with credit cards and without a salary or an inheritance to justify it in the shops of Christian Lacroix, Ermenegildo Zegna and Louis Vuitton. It also reported that father Sassou-Nguesso's delegation spent more than US$ 400,000 during its hotel stay for one week, in this city, in September of 2005.

"According to the hotel bill, the room rates cost US$8,500 per day paid in cash more than the average Congelese citizen earns in a decade," Newman wrote in a column in the Wall Street Journal. Sassou-Nguesso accused them of being "sea serpents" and "gangster louts" that hide in fiscal paradises like the Cayman Islands, where Kensington International maintains its fiscal domicile. "Who is stealing from the poor?" he accused them, infuriated.

Measured words

Elliott also went after the Congolese state oil company and its turbines connected to BNP Paribas bank. They denounced them in court for possible corrupt and mafia practices under U.S. law. There, Sassou-Nguesso agreed to negotiate a confidential agreement. Money in return for the withdrawal of charges against officials and bankers. With this chapter closed, Newman's team concentrated its energies on seeking Argentine assets around the world.

"Argentina is different from the Congo in that it has an ample private sector," Newman says. With a barely audible voice, he explains that he sees that difference as an opportunity: "The private sector, as much as the public sector, needs capital under competitive conditions, which is impossible until the question of the debt is resolved."

Newman carefully chooses each of his words as he does the tone in which he says them. He is measured and speaks almost in whispers. The meeting with LA NACION was in an austere office, but with a view of Central Park. And, in a cruel metaphor, from its large windows it's possible to lord over the movements at the Argentine consulate.

The director accepts that his fund is the focus of criticism and hate from countries with fiscal problems, like Argentina; from government leaders that promote the forgiving of debts for the poorest countries, like Britain's Gordon Brown; from singers like Bono of U2; and still from the number two leader of the International Monetary Fund, Anne Krueger. But Newman argues that the Elliott fund and others like it, like Kenneth Dart's, play a necessary role in global finance, like vultures on the African plains, and sees countries that are "corrupt and in default sinking the legal system (of the United States) while despising the ultimate rule of law."