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Tuesday, June 18, 2024 | Back issues
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‘Vultures’ Wage 2nd Circuit Lawfare With Argentina

MANHATTAN (CN) - Hedge fund billionaire Paul Singer wants Argentina to cough up information on dozens of its military and diplomatic assets around the world. And if this implicates state secrets, the Latin American nation should trust Uncle Sam's judge to sort those out, Singer's lawyers told the 2nd Circuit on Wednesday.

Singer's New York-based hedge funds, NML Capital and Aurelius Capital Management, represent the roughly 7 percent of bondholders refusing Argentina's restructuring terms for debt the nation accrued during its 2001 financial crisis.

These entities have been vilified as so-called "vulture funds" for buying the distressed debt of poor nations for pennies on the dollar and then suing for the full amount, a business model Singer also practiced in Peru and the Congo.

Alleging violations of the Vienna Conventions on Consular Relations, Argentina's lawyers want to prune the hedge funds' discovery demands in New York.

Singer has sparked diplomatic crises and international headlines before in his quest to collect on his debt.

In 2012, Singer tracked the course of its naval ship, Libertad, and convinced a judge in Ghana to hold the vessel in port until he collected his debt. Public celebration erupted in Argentina when an international tribunal for the law of the sea later ordered him to return the vessel.

U.S. courts meanwhile have found routinely that Singer holds legally binding contracts.

Last year, U.S. District Judge Thomas Griesa ordered Argentina to comply with a whopping discovery demand that Aurelius dropped seeking "each asset, debt or property of any kind whatsoever located anywhere in the world that Argentina owns or owned."

The sweeping requests reached Argentina's president and vice president, 127 under-secretariats of the government, 50 military and diplomatic entities, and 82 private corporations, the republic wrote in a brief.

Attorney Jonathan Blackman, an author of that brief representing Argentina for Cleary Gottlieb Steen & Hamilton, told the 2nd Circuit on Wednesday that this demand was impossible to process.

"How can [Argentina] possible respond to that discovery?" he asked.

Chief Judge Dennis Jacobs suggested that Argentina brought the situation upon itself by allegedly secreting its assets.

"Your client is hiding the ball," he said. "And they want to know where the ball may be hidden."

Denying this was true, Blackman replied: "There is no evidence except speculation."

Matthew McGill, who represents the hedge funds for Gibson Dunn, asserted that the breadth of the discovery is "proportional to the billions we are owed," and that Argentina could provide the records "tomorrow" through its national registries containing the information.

When asked about the sensitive nature of the Argentina's military and diplomatic information, McGill replied that Judge Griesa could handle its state secrets.

Griesa's pronouncements that Argentina is "lawless" has made him unpopular on the streets of Buenos Aires, where his face reportedly appeared on the neck of a vulture on propaganda posters.

Jacobs doubted that McGill's suggestion would work for other reasons, including the fact that federal judges only have security clearances for the United States.

"We have no security clearance for Argentina," he noted.

McGill conceded "that may be true," but said "it is simply not true that assets defined as military are not executable."

An Argentinean tank, for example, "could be a museum piece," he said.

Argentina's lawyer Blackman said that the federal rules of discovery do not permit the hedge funds' demand for military information, nor do the Vienna Conventions allow for the consular probe.

Judge Barrington Parker, who previously called Argentina a "uniquely recalcitrant debtor," asked whether the country would comply with even narrower requests.

Blackman said he would "recommend" his client's compliance, if the court took a "sensitive" approach.

"If it is a sufficiently sensitive, you will comply?" Parker drolly asked.

Blackman responded that there "are ways of saying things both substantially and tonally" that lead to a better outcomes in this international standoff.

The judges reserved decision on the matter.

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