Judge holds Argentina in contempt over bond orders

http://abcnews.go.com/US/wireStory/judge-holds-argentina-contempt-bond-orders-25847002

By LARRY NEUMEISTER - Yesterday
NEW YORK (AP) - A judge, calling civil contempt a rarity, ruled that
Argentina was in contempt of court on Monday for its open defiance of
his orders requiring that U.S. hedge funds holding Argentine bonds be
paid the roughly $1.5 billion they are owed if the majority of the
South American nation's bondholders are paid interest on their bonds.
U.S. District Judge Thomas P. Griesa made the announcement after a
lawyer for U.S. hedge funds led by billionaire hedge fund investor
Paul Singer's NML Capital Ltd. argued that Argentina has openly defied
Griesa's court orders for more than a year. The judge reserved
decision on sanctions pending further proceedings.

"What we are talking about is proposals and changes and actions that
come from the executive branch of the Republic of Argentina," the
judge said.

He said repeated efforts to avoid paying U.S. bondholders after their
bonds - unlike more than 90 percent of outstanding Argentina bonds -
were not traded for lesser-valued bonds in 2005 and 2010 was illegal
conduct that could no longer be ignored.

"The republic in various ways has sought to avoid, to not attend to,
almost to ignore this basic part of its financial obligations," the
judge said.

He said Argentina had recently taken steps to attempt to remove a New
York bank as the custodian for bonds held by many of its bondholders
and transfer the financial obligations to a new trustee based in
Argentina.

New York-based lawyer Carmine Boccuzzi, representing Argentina, had
argued that a contempt finding was premature, saying Argentina
bondholders who accepted swaps for lesser-valued bonds after the
country defaulted on $100 billion of debt in 2001 had not been paid
interest, just as the judge intended.

Boccuzzi said the U.S. bondholders "want to punish Argentina. But
that's not appropriate."

"The republic did act responsibly," he said.

But he said paying the U.S. bondholders would require Argentina to pay
about $20 billion to other bondholders who were not part of the
litigation.

"We're hamstrung," he said.

As he left the courtroom, he declined to comment.

A lawyer for the U.S. bondholders, Robert Cohen, urged the judge to
make the contempt finding and impose a $50,000 daily penalty on
Argentina. He said penalties should be stiff enough that Argentina
realizes it needs to change its behavior.

"It's hard to imagine how it could get worse," he said.

Before the hearing, lawyers for Argentina forwarded to the judge a
letter sent to U.S. Secretary of State John Kerry saying the request
for a contempt-of-court finding was "completely absurd." Argentina
said such an order would be unlawful by international standards.

The Argentine Foreign Ministry said the judge's decision has no
practical effect "besides providing new elements to the defamatory
political and media campaign being carried out against Argentina by
the vulture funds." Argentine officials regularly refer to the U.S.
hedge funds that didn't swap their Argentine bonds at a discount as
vultures.