U.S. Debt Collector Sues Poverty-Stricken African Country

International efforts to provide debt relief to impoverished countries are creating opportunity - for private debt collectors. So-called "vulture funds", a term used by the International Monetary Fund and others in the international community, take advantage of outstanding debts not yet forgiven, buying them at steep discounts and suing to force countries to pay the full amount plus costs and interest.

Zambia is a case in point, as it has just been ordered to pay a vulture fund, possibly more than the debt relief it recently was granted by a G8 international summit meeting.

Donegal International, a U.S. company owned by U.S. Citizen Michael Sheehan according to The Guardian in the UK, is registered in the British Virgin Islands. The company bought Zambia's debt, incurred in 1979, eight years ago at a price of $3.2 million. At that time, Zambia approved the sale of the debt, and later agreed to pay $15 million to settle the debt. Donegal later sued in British court.

According to Zambian media The Daily Mail, the story is slightly different - the original Romanian debt was incurred during the cold war to buy Romanian tractors, during a time when the country was under "an undemocratic system" according to a presidential adviser and Oxfam consultant, and while Zambia originally defaulted, they agreed in 1999 to pay $3 million to settle the debt. Before the deal could be finalized, Donegal, part owned by U.S. based Debt Advisory International stepped in and bought the debt for less than $4 million.