When Argentina defaulted on its national debt in 2001, US hedge funds swooped in to buy the nation’s bonds at pennies on the dollar, confident they would eventually prevail in the US legal system and force the country to pay out in full.
That battle is set to reach the Supreme Court later this year, but the country’s creditors on Wall Street – labeled “vulture capitalists” by their critics – are also making their case in Congress and the court of public opinion, with a current media campaign aimed at painting Argentina as an increasingly rogue nation in bed with Washington’s enemies.
The public relations effort, which focuses on Argentina’s increasingly friendly relations with Iran, comes as the administration of US President Barack Obama is weighing whether to side with Argentina before the Supreme Court in its battle with Wall Street. According to The Washington Post, officials from the Justice Department, Treasury Department and State Department met Jul. 12 with lawyers from both sides to discuss the case.
In previous court filings, the Obama administration has argued that Argentina’s debt is not a matter for the US legal system, reflecting concerns that a victory for its holdout bondholders could cause another default and complicate future debt restructuring plans for other nations.
However, Argentina’s bondholders, including one of the top financiers of right-wing politics in the US, have a string of victories under their belt. In October 2012, a federal appeals court ruled that the South American nation and member of the G20 must pay out more than 1.3 billion dollars to its creditors.
Meanwhile, the International Monetary Fund (IMF) announced Jul. 24 that it would not formally side with Argentina in its US legal battle. An IMF statement cited opposition from the Obama administration.
That the White House is backing away from its earlier defenses of Argentina indicates that the millions of dollars US hedge funds have spent lobbying members of the administration, Congress and the press are starting to change the debate, with Iran about as popular as Iraq was in 2002.
“We do whatever we can to get our government and media’s attention focused on what a bad actor Argentina is,” Robert Raben, executive director of the American Task Force Argentina (ATFA), recently explained to The Huffington Post.
An assistant attorney general under President Bill Clinton (1993-2001), Raben’s group was founded by Argentina’s holdout bondholders and, to date, has spent at least 3.8 million dollars on its efforts to paint Argentina in a bad light. But the money it has spent pales in comparison to what ATFA’s funders stand to gain.
In 2008, hedge fund NML Capital – whose parent company Elliott Management, led by major Republican donor Paul Singer, is spearheading the legal and political battle over Argentina’s debt obligations – paid 48 million dollars for bonds that prior to the country’s default had been valued at over 300 million dollars.
After the default, more than 92 percent of Argentina’s bondholders agreed to accept a fraction of what they were originally owed as part of a negotiated settlement. NML, however, insists Argentina pay out the full 370 million dollars, which would be a return of more than 770 percent on the firm’s initial investment.
Singer has done this before, purchasing bonds worth around 30 million dollars from the world’s poorest country, the Democratic Republic of Congo, and suing for repayment of over 100 million dollars. In the case of Argentina, the groups behind ATFA stand to gain more than 1.3 billion dollars.
Including fights going on in other jurisdictions, however, Singer alone ultimately stands to gain more than two billion dollars in his battle with the South American nation. But it’s not just about debt anymore.
A request for comment from ATFA was not responded to by deadline.
Fear of an Iranian planet
Paul Singer is a very rich man – one of the 400 richest in the world. According to Forbes, the hedge fund manager and founder of Elliott Management has a net worth of 1.3 billion dollars. That wealth has enabled him to become one of the top funders of the Republican Party.
In 2012, he gave more than one million dollars to the party’s failed presidential candidate, Mitt Romney, and millions more to those lower down on the ballot. Employees of his firm, meanwhile, gave more than three million dollars to various politicians, making his company one of the top 100 funders of US politics. And those politics are decidedly to the right.
In 2007, Singer described himself as a believer in American exceptionalism, noting that he has given “millions of dollars to Republican organizations that emphasize a strong military and support Israel.” Speaking to the New York Times, Singer explained that he believes the West “finds itself at an early stage of a drawn-out existential struggle with radical strains of pan-national Islamists.”
In the case of Argentina’s relations with Iran, which have grown to more than one billion dollars per year in trade, he finds his financial interests and fear of radical Islam perfectly aligned: by stoking fear of the latter, the US government may be less inclined to interfere with the former.
“What’s the TRUTH About Argentina’s Deal With Iran?” asks a recent full-page ad from ATFA placed in The Washington Post. The deal in question concerns an agreement announced by the governments of Argentina and Iran to open a “Truth Commission” examining the 1994 bombing of a Jewish community center in Buenos Aires, the Asociación Mutual Israelita Argentina (AMIA), which killed 85 people and injured more than 300.
Another ATFA ad featuring photos of Argentina’s president Cristina Fernández de Kirchner and outgoing Iranian president Mahmoud Ahmadenijad poses the question: “A Pact with the Devil?”
A 2006 report from Argentine prosecutor Alberto Nisman fingered Iran as the culprit, allegedly using the Lebanese group Hezbollah as a proxy. That led to INTERPOL arrest warrants being issued for several high-level Iranian officials.
An updated 2013 report from Nisman, oft-cited in the media campaign against Argentina, claimed the attack was but one piece of evidence for the existence of an extensive Iranian intelligence apparatus throughout South America that has only grown since the AMIA attack, a conclusion that contradicts the US State Department’s recent assessment that any influence Iran had in the region is now “waning”.
No one has ever been convicted in the AMIA case, which has been hampered by a botched prosecution and judicial corruption. Concerns have also been raised about the veracity of Nisman’s report, which claims Iran’s Supreme Leader, Ayatollah Khamenei, approved the bombing at a meeting in Tehran just months prior to the attack, a finding that is based on the testimony of a former Iranian intelligence official known as Aboghasem Mesbahi who defected from the Islamic Republic in 1996.
That defector previously told US officials that Iran had funded and facilitated the Sept. 11, 2001, terrorist attacks in New York and Washington, claiming he was made aware of the authorization by secret messages in newspapers. His testimony was dismissed by the 9/11 Commission.
In its ad, ATFA quotes a letter from Senators Kirsten Gillibrand, a Democrat from New York, and Mark Kirk, a Republican from Illinois, to President Kirchner expressing concern that the opening of the commission “will lead to a dismissal of charges and the whitewashing of this heinous crime”.
The ad also quotes a defiant Iranian politician stating that under “no circumstances” will the Islamic Republic allow its senior officials to be questioned by any Argentine judges or prosecutors.
Though not mentioned in the ad, Iran’s refusal to submit to the Argentine legal system is the ostensible reason for the “truth commission”, which would create a panel of independent jurists from third-party nations to assess the case and, alongside Argentine jurists, interview suspects in Iran.
The details of Argentina’s relationship with Iran – which consists mostly of agricultural exports – are not terribly important to ATFA, however. Instead, as its executive director put it, that group would simply like to know: “Why is Argentina willing to negotiate with Iran, but not with its law-abiding creditors?”
Argentina has of course successfully negotiated with nine out of 10 of its creditors. But the holdouts, led by Singer, think they can get the whole pot.
The promise of a huge payday has led the Wall Street hedge fund manager to sink a small fortune into a campaign against the South American nation portraying as a close – and anti-U.S. – ally of the Islamic Republic of Iran. (See series, Part One)
One way he has done this is by issuing press releases through the American Task Force Argentina (ATFA), a trade group he helped found, and buying full-page ads in major newspapers.
Giving money to politicians is another way to affect the debate in the United States.
Senator Mark Kirk, an Illinois Republican, has been a vocal critic of Argentina, writing a letter to the country’s president denouncing her agreement with Iran to investigate the the 1994 bombing of Asociación Mutual Israelita Argentina (AMIA) in Buenos Aires. That letter was later quoted in an ATFA ad.
As it turns out, Kirk has received more than 95,000 dollars from employees of Singer’s firm, Elliott Management, according to the Center for Responsive politics. Indeed, many letters expressing concern about Argentina’s ties to Iran appear are signed by lawmakers who have received campaign cash from Singer and his close associates.
A Jul. 10 letter to Attorney General Eric Holder, for instance, urged the Justice Department not to side with Argentina in its legal battle before the Supreme Court, citing both the AMIA agreement and Argentina’s expanding trade with the Islamic Republic “at a time when the rest of the world (including the United States) is attempting to isolate Iran to pressure it to give up its nuclear program.”
“Rewarding Argentina’s decision to flout well-established international principles regarding the orderly restructuring of sovereign debt has clearly emboldened its leaders to defy other international norms with impunity,” the 12 lawmakers wrote.
Those who signed the letter received more than 200,000 dollars last year from companies and PACs tied to Singer.
One signer, Congressman Michael Grimm, a New York Republican on the House Financial Services Committee, was reelected to Congress last year after receiving 38,000 dollars from Elliott Management, nearly twice as much as his next largest donor.
Grimm has cosponsored legislation demanding “full compensation” for Argentina’s bondholders – the sponsor of that bill, former Congressman Connie Mack, took in 39,000 dollars from Singer’s company – and has urged the Barack Obama administration to investigate Argentina’s relationship with Iran. ATFA has commended Grimm for his work.
Another lawmaker who signed the letter to Holder is Ileana Ros-Lehtinen, a Florida Republican who chairs the House Foreign Affairs Committee. She accuses the Argentine government of colluding with the Islamic Republic to cover up its alleged role in the AMIA bombing and undermining US interests “by giving Iran a larger footprint in the Western Hemisphere”.
But she isn’t just worried about Iranian-backed terrorism. In a 2012 press release, she said it was “troubling that Argentina refuses to honor its outstanding debts, and evades US court decisions.”
[Ros-Lehtinen received 108,000 dollars last year from the American Unity PAC. The PAC was founded in 2012 with a one-million-dollar investment from Singer, accounting for more than a third of the group’s budget.
New Jersey Republican Scott Garrett, chair of the House Financial Services subcommittee on capital markets, also signed the letter to Holder. On Jun. 7, 2012, Garrett held a hearing to address the Obama administration’s support for “deadbeat foreign governments . . . at the expense of our own US investors.”
At the hearing, he decried that “US investors are taking billions of dollars in losses, despite Argentina having the money to pay the bill.”
Garrett received 35,000 dollars from employees at Elliott Management last year, more than all but one of his other campaign contributors.
On Jul. 9, a House subcommittee chaired by South Carolina Republican Jeff Duncan held a hearing entitled, “Threat to the Homeland: Iran’s Extending Influence in the Western Hemisphere,” the primary purpose of which was to rebut a recent report from the State Department that said Iran’s influence was on the decline.
Duncan received 10,000 dollars in 2012 from the Every Republican is Crucial PAC, which was heavily supported by the executives of Wall Street hedge funds, including Singer.
At the hearing, Douglas Farah, a former Washington Post reporter turned right-wing foreign policy analyst, testified that Argentina “is rapidly becoming one of Iran’s most important allies.”
He accused the government of Cristina Fernández de Kirchner of taking steps “aimed at absolving senior Iranian leaders of their responsibility in a major terrorist attack,” while also embracing “a series of seemingly irrational economic and political polices that favor transnational organized crime, are overtly hostile to US interests, and could offer Iran a lifeline in both its economic crisis and its nuclear program.”
That testimony was followed by a Jul. 11 letter to Secretary of State John Kerry, signed by a bipartisan group of politicians, including Singer-supported lawmakers Duncan and Grimm.
The letter, which warned that “Argentina may be seeking to aid Iran’s illicit nuclear weapons program,” urged the secretary to weigh the Kirchner government’s “ties with the world’s leading sponsor of terrorism” when considering whether the State Department will side with Argentina in its legal battle with US hedge funds.
Farah, whose testimony was cited in the letter, wrote a Jun. 26 column for the Miami Herald in which he called out Argentina’s “increasingly cozy relationship with the ayatollahs,” citing the 2012 Nisman report to claim Iran is using the country as a base from which to conduct intelligence and terror operations with the ultimate goal of “exporting the Iranian revolution”.
The column also asserts that the president-elect of Iran “would have been infinitely familiar with the planning” of the 1994 AMIA bombing, a claim echoed by other right-wing pundits but which Nisman himself rejected a day before the column was published.
The column was co-authored by Mark Dubowitz, executive director of the Foundation for Defense of Democracies (FDD), a neoconservative think tank that has been highly critical of Argentina’s relations with Iran. This year, FDD and its analysts have published more than a half-dozen such critiques.
“Why is Argentina letting Iran examine the 1994 AMIA bombing in Buenos Aires, a crime Hezbollah surely committed?” asked Lee Smith, an editor at The Weekly Standard and fellow at FDD, in a column for Tablet magazine. In The Atlantic, FDD’s vice president of research, Jonathan Schanzer, explored the “dark connections between Argentina’s government and Tehran”.
Since 2008, Singer has given FDD at least 3.6 million dollars, according to a 2011 tax filing seen by IPS.
FDD is but one of many neoconservative organizations with ties to Singer. Since there aren’t that many neoconservatives to begin with, those who don’t recoil at the label all tend to know each other – and serve on each other’s boards.
William Kristol, publisher of The Weekly Standard, serves on the board of the Singer-funded FDD, as well as the Manhattan Institute, a New York think tank that advocates hands-off capitalism and an interventionist military policy; Singer is the chairman of the institute’s board.
In the small world of neoconservative politics, even when there aren’t necessarily financial ties, everyone still knows each other. Still, there are usually financial ties.
In March, Roger Noriega, another former Bush administration official, wrote a piece with José Cárdenas – another Bush official who now works at Noriega’s consulting firm – calling on the US government to hold Argentina accountable “for its failures to abide by its obligations to international financial institutions” and “troubling alliances with rogue governments”. The piece was published by the American Enterprise Institute (AEI), an influential neoconservative think tank in Washington.
Noriega has been paid at least 60,000 dollars (in 2007) by Elliott Management to lobby on the issue of “Sovereign Debt Owed to a US Company.” A tax filing that was mistakenly disclosed and reported on by The Nation shows that the publisher of Noriega’s piece, AEI, received 1.1 million dollars from Singer in 2009. Filings for subsequent years have not been made public.
Asked to comment, an AEI spokesperson told IPS that the think tank had “looked into the matter” and found Noriega “has no conflicts of interest in this regard”.
The other people and organizations named in this article did not respond to requests for comment.
Money is power
Singer has used his riches the way a lot of other wealthy people do: to get richer, of course, but also to promote what he believes – and fund the politicians and pundits who will promote it too.
At the very least, those who benefit from his generosity are going to think twice about opposing his interests; one doesn’t bite the hand that feeds. Some may even see the money they receive from Singer as a reason to actively promote his interests.
One thing is clear: no matter how his case against Argentina turns out, Paul Singer is going to be a very rich and powerful man. If he wins, though, he will be richer. And money in the United States means the power to shape the debate not just on financial matters, but war and peace.
A Shifting Message
Though founded by those suing Argentina, ATFA once claimed to have the country’s best interests at heart. In 2007, co-chair Bob Shapiro, a former Clinton administration economist, told the Financial Times that paying its bondholders in full would be good for the debtor.
“Argentina cannot continue to ignore her outstanding obligations without its people paying the price of lower foreign direct investment and being barred from global capital markets,” he said.
In 2012, foreign companies invested more than 12 billion dollars in Argentina, up 27 percent from the year before and only a hair below close US allies Mexico and Colombia. So the message changed.
By 2012, ATFA had dropped the pretense of helping. In an op-ed published by the Telegraph, CO-chair Nancy Soderberg, an ambassador during the Clinton administration, urges policymakers to, “Hit Argentina where it hurts – in the wallet.”
The country “has enjoyed several years of steady economic growth; its fundamentals compare favorably with its peers in the region,” wrote Soderberg. “Argentina can perfectly afford to pay its bills.”
On Jul. 15, Kristol’s The Weekly Standard published a piece by former Bush administration ambassador to Costa Rica, Jaime Daremblum, entitled “The Iranian Threat in Latin America,” in which Daremblum warned that the Islamic Republic has built an extensive intelligence operation throughout Latin America in order to commit acts of terrorism and “spread Iran’s revolution across the hemisphere”.
Daremblum is a senior fellow at the Hudson Institute, another right-wing think tank where in 2011 Singer was invited to deliver remarks on the meaning of “true Americanism”. Joel Winton, a former personal assistant to Hudson president Kenneth Weinstein, now works for Singer in his family office.
Conflict of Interest?In 2008, Singer hosted Supreme Court Justice Clarence Thomas at a fundraiser for the Manhattan Institute. Justice Samuel Alito was the guest of honor at a 2010 fundraiser for the institute.
Both justices will be asked to rule on whether the high court should take up the case of Argentina and its holdout bondholders. If the court does choose to weigh in, they could make a rich man even richer.
Inter Press Service