Judge Threatens Argentina With Contempt of Court

MANHATTAN (CN) - A federal judge called a last-minute hearing Friday to admonish Argentina again for its failure to pay $1.5 billion to holdout bondholders, and threatened a contempt of court order if it doesn't stop issuing "false and misleading statements" to the media about its debt obligations.

U.S. District Judge Thomas Griesa called the emergency meeting to address a two-page ad that ran Thursday in The New York Times and The Wall Street Journal, which states that Argentina had satisfied the judgment at issue in 2002.

The ad fails to mention that holdout bondholders who didn't swap their old bonds for new ones in 2005 and 2010 still have not been paid, Griesa said.

"The latter part is highly important," Griesa said before a packed house in a high-rise courtroom. "Payment of part is not payment of all."

He threatened to hit the country with a contempt of court order, but added, "I earnestly hope and desire that the matter will not get into that posture."

Attorney Jonathan Blackman, representing the cash-strapped nation, said neither he nor his firm, Cleary Gottlieb, wrote the ad, nor did they even know about it.

"The ad that the court refers to was not prepared by me or my firm," Blackman said. "The Republic of Argentina is a state, the state takes positions," and those decisions may not be legal decisions and might be contrary to the advice of lawyers.

Last week, two days after Argentina defaulted on its obligations, Judge Griesa admonished the country for issuing "half-truths that do not comply with the law" and ordered them to stop.

After a 12-year trial, Griesa ordered the judgment to NML Capital and Aurelius Capital Management, a pair of hedge fund holdouts that refused to accept the new bonds.

Argentina claimed this week that it was not technically in default because it tried to make a $539 million interest payment on the bonds by the June 30 deadline, but Griesa blocked it from going through because it violated his order that the country pay holdout investors first.

"What the republic has done over substantial time is to make various public pronouncements which on the face are supposed to describe the obligations of the Republic," Griesa said Friday. "But these various pronouncements have regularly and systematically omitted a vital part of the obligations of the republic.

"There has been no payment," he continued. "Let me repeat: There has been no payment."

He urged the parties to continue to work on a settlement with the federal monitor, Daniel Pollack, whom he appointed to help with negotiations.

"The really important thing is to recognize that this matter will not be resolved without a settlement," the judge said.

Blackman, who represents Argentina, said the country "has made it clear" it wants to pay its obligations.

But on Thursday, Argentina's Cabinet Chief Jorge Capitanich criticized Griesa, accusing the 82-year-old judge of not understanding the issues and displaying bias.

That same day, Argentina's President Cristina Fernandez urged President Barack Obama to intercede.

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