In October of 2012 hedge fund manager Paul Singer pulled off a stunning trick. As collateral for a decade-long, billion dollar debt, he convinced a Ghanaian Court to impound an Argentine military vessel, La Fragata Libertad, sitting in one of the African nation’s harbors — indefinitely, 200 person crew aboard.
A lawyer for Ghana’s Ports and Harbor Authority called it an “international disaster.” The International Maritime Court of the Sea had to get involved. As you can imagine, Argentina’s President, Cristina Fernandez de Kirchner, was enraged at the “vulture” hedge fund manager.
She may take Singer’s next trick even more personally.
A Judge in Nevada has granted Singer’s request to dig into over 123 shell companies allegedly set up by an Argentine businessman named Lazaro Baez.
In Argentina, Baez has been accused of laundering money for the President and her late husband, former President Nestor Kirchner, since they got to power in 2003.
Singer’s lawyers allege that around $US65 million in Kirchner ill-gotten gains could be sitting within those companies — and thanks to a June Supreme Court ruling upholding a part of the Foreign Sovereign Immunities Act, he’s allowed to chase Kirchner money to the end of the earth.
It’s all in an effort to seek some payment of the over $US1.3 billion worth of sovereign debt the country owes him and a group of hedge funds known collectively as NML. Back in 2001 they bought Argentine debt for pennies on the dollar and refused to take haircuts on that debt. Argentina, in turn, refuses to pay them even under an American Court’s order.
Until Argentina pays up, NML is trying to get whatever Argentine money it can through what seems like dogged detective work — this investigation into 123 Nevada companies is just one example of that.
“We will have a much clearer road map to the source of the funds that funded these 123 corporations [once discovery is complete],” said Robert A. Cohen who serves as legal counsel to Singer and the group of hedge fund creditors known as NML Capital. “It is believed that at the end of the rainbow we will find high powered Argentine official.”
Here’s why: Last year an Argentine TV show called Periodismo Para Todos (Journalism For Everyone) aired a series called The “K” Money Route. It was an expose attempting to answer a simple question; In the 11 years since the Kirchners came to power, how did their wealth explode from $US1.4 million to $US14.1 million according to government filings?
The President’s annual salary equals a little more than $100,000 a year according to the Council of Hemispheric Affairs.
The series alleged that that $US14.1 million number might low, and focused on Baez, a construction magnate who won millions in government contracts after Nestor Kirchner took power. Two businessmen — one allegedly working as a courier for Baez, and another as a financier — admitted that they had a hand in laundering money for the Kirchner’s.
One was even caught on tape weighing bags of cash to be sent abroad.
After the segment aired, though, the two businessmen retracted their statements. One of the businessmen is now in jail for tax evasion, according to the Wall Street Journal.
Also, an Argentine prosecutor named Jose Maria Campagnoli, who produced a big report on the matter was suspended in December. The report spoke of 150 companies Baez set up in the United States to funnel kickbacks from his government contracts back to the Kirchners.
Baez denies any wrongdoing. He also denies that he has any business ventures outside of Argentina — let alone shell companies in the American desert.
The way Baez tells it, he’s only a good friend of the Kirchners; The kind of friend who allegedly rents out 90 hotel rooms from the Kirchners’ boutique hotel a year — rooms that stay empty, according to the Wall Street Journal.
The kind of friend who offers to pay $US1.6 million in eight installments for a property worth $US1.5 million — as long as $US200,000 of the last instalment go to the President’s reelection campaign.
Baez also built the mausoleum in which Nestor Kirchner’s body rests.
One can only imagine what Paul Singer was thinking when he heard about all this. His pursuit of Argentina’s funds has shown no limits, and his tracking skills have led him to assets everywhere from Belgium to Elon Musks company, Space X.
“We’re not terribly sensitive to where the money is,” said Cohen on a conference call to journalists on Thursday.
That lack of “sensitivity” is how, according to a Court filing, NML’s lawyers tracked down these 123 shell companies in Nevada set up by a Panamanian law firm called Mossack and Fonseca. In Cohen’s own words, Mossack and Fonseca operates “close to the edge of the law”, with operations in Seychelles, a popular tax haven.
In a Court filing NML wrote:
NML suspects that 123 Nevada corporations were used to launder $US65 million of embezzled Argentine funds. Now, as Argentina suffers its second sovereign default in thirteen years — (in part because of this action) — NML seeks information from these corporations to locate the $US65 million. In August of 2013, NML served subpoenas on the 123 corporations and their commercial registered agent, M.F. Corporate Services. M.F. Corporate Services produced responsive documents; but the corporations did not. They contend that no responsive documents exist. NML contends this is false.
The custodian of the 123 companies is one of the firm’s attorneys Leticia Montoya. In response to a subpoena from NML’s lawyers issued in August of 2013, she conceded that “the 123 corporations are shell corporations without any offices, business, or personnel in Nevada.”
With this response in hand, NML rolled its eyes and filed a motion to compel discovery — forcing Montoya to cough up any and all documents related to the 123 — and a Nevada Judge granted that motion.
“We really don’t know the extent of the corruption and how much has been stolen,” said Cohen. He admitted that $US65 million might just be the tip of the iceberg here.
“It would be a mistake for us to disclose what our plans are,” said Cohen, “but I assure you we will follow [Argentina’s funds] the ends of the earth.”
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