Rudy's Bird of Prey
Editor's Note: A February 1, 2012 report by the New York Times has revealed that Elliot Associates hedge fund manager Paul Singer donated $1 million to the pro-Mitt Romney Super PAC, Restoring Our Future, in the last three months of 2011. Singer's conservative fundraising didn't begin with the 2012 election, however, as this 2007 article describing his involvement in so-called "Vulture funds" makes clear.
When the New York Daily News obtained a leaked 140-page strategy memo from the Giuliani campaign in January "one name," according to the article, appeared "throughout the document: Paul Singer, a discreet hedge-fund tycoon who has been described as the Republican George Soros." The Upper East Side billionaire and longtime contributor to Republican and conservative causes was asked by the campaign to raise cash from Wall Street, recruiting other big-money donors and even contacting 9/11 survivors and victims' family members to support Giuliani's bid for the Republican nomination.
Since then, Singer has become one of Giuliani's most important fundraisers, bundling more than $500,000 for the campaign. Singer and employees of his hedge fund, Elliott Associates, have chipped in an additional $168,000. The campaign frequently uses his private jet.
In late September Singer was once again in the news. Republicans in California with ties to the Giuliani campaign were pushing a ballot initiative that would award the state's electoral votes by Congressional district rather than winner-take-all, a move that could potentially throw a close election to a Republican. The group leading the drive was funded via a previously unknown organization in Missouri with exactly one donation of $175,000. When that outfit refused to divulge who made the contribution, the two GOP strategists in charge of the initiative quit in frustration. Eventually, as questions mounted, Singer admitted to being the sole contributor but claimed complete independence from the Giuliani campaign. Democratic lawyers in California believed otherwise, so they filed a complaint with the Federal Election Commission alleging a Giuliani-connected "money laundering operation."
That Singer was at the center of the controversy should come as no surprise. In the 1990s Singer's hedge fund pioneered a shadowy, lucrative and often ruthless form of investing whose practitioners earned the not-so-generous moniker "vulture funds." Vulture funds--or "sovereign debt investors," as they prefer to call themselves--buy old defaulted debts, usually from the poorest countries in the world, and then drag the debtors into court, seeking a settlement far above what the funds originally paid for the debt. These are debts that are usually forgiven when the countries are granted relief by wealthy nations like the United States and multilateral institutions like the World Bank. An official at the Bank likens vulture fund activities to giving up your seat on a bus for an old lady, only to see a young college jock swipe it.
Large hedge funds like Singer's Elliott Associates often operate in secret, through shell companies in tax shelters like the Cayman Islands. Since the end of 2005, more than a third of the countries receiving debt relief have been targeted by at least thirty-eight hedge funds, which have gotten judgments in excess of $1 billion. This reverse Robin Hood scheme has drawn criticism around the globe, including from Nelson Mandela and British Prime Minister Gordon Brown.
It all started in 1996, when Elliott paid $11 million for $20 million of debt, dating back to 1983, theoretically owed by the government of Peru. In 1989, then-US Treasury Secretary Nicholas Brady had urged rich countries to forgive the debts of poor ones in order to spur economic growth and global development. Instead of settling with Peru, as its 180 other creditors did, Elliott took the government to court. "Pay us in full or be sued," Singer threatened.
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.