Two lawyers have spent much of the past decade defending Argentina in front of the same U.S. judge in dozens of lawsuits arising from the South American country’s 2001 default on $95 billion in sovereign debt.
Jonathan Blackman and Carmine Boccuzzi, partners at New York’s Cleary Gottlieb Steen & Hamilton LLP, have represented Argentina in litigation that began in 2002. The two share a history with U.S. District Judge Thomas Griesa, the Manhattan jurist who has presided over the fate of billions of dollars of Argentine debt over the same period.
The work, on behalf of a government that has criticized and ignored Griesa, has put the lawyers in a difficult position with the 82-year-old judge who oversees litigation over the defaulted bonds. Their conflict with opposing counsel and even the judge may only intensify as the landmark case heads toward a dramatic hearing before a federal appeals court early in the new year.
At a Nov. 9 court conference, Griesa asked Boccuzzi about press statements by Argentine President Cristina Fernandez De Kirchner and Economy Minister Hernan Lorenzino that the Republic wouldn’t pay what it called the “vulture funds” that are trying to collect on the defaulted bonds.
“Is that the position of the president of the Republic?” Griesa asked. “Is that the position of the economic minister, Mr. Boccuzzi?”
Boccuzzi made several attempts to argue that Argentina’s officials weren’t publicly announcing their defiance of Griesa’s court and the U.S. Court of Appeals in New York. After questioning Boccuzzi for several minutes, Griesa gave up.
“I don’t think there is any utility in me going back and forth with Mr. Boccuzzi further,” he said. “Obviously, Mr. Boccuzzi does not really want to say that the Republic is saying what is reported in the press.”
A spokeswoman for Cleary Gottlieb didn’t respond to voice-mail messages seeking interviews with Blackman and Boccuzzi.
The litigation also has drawn in Ted Olson, a former U.S. solicitor general, and David Boies, who represented the U.S. government in its antitrust case against Microsoft Corp. Olson and Boies opposed each other in the litigation that decided the 2000 U.S. presidential election -- Olson for Republican George W. Bush and Boies for Democrat Al Gore. More recently they joined forces to challenge California Proposition 8, the voter-approved measure that banned gay marriage in that state and is now before the U.S. Supreme Court.
Olson represents Elliott Management Corp.’s NML Capital Ltd., which is trying to collect on its defaulted bonds in a case involving $1.3 billion of debt and interest. Boies represents a group of investors who traded their defaulted bonds for new ones, at a discount, when Argentina restructured its debt.
Argentina issued the bonds beginning in 1994. Since the 2001 default, its government has refused to make any payments on principal or interest.
In 2005 and 2010, Argentina offered an exchange to holders of the defaulted bonds. The investors could trade for new exchange bonds, at a discount of as much as 75 percent. Holders of more than 91 percent of Argentina’s defaulted debt participated, according to the appeals court. Argentina has made all required payments on the exchange bonds while continuing to refuse payment to the holdout bondholders.
Some of the holders of the defaulted bonds bought them before they were repudiated by Argentina and have held them since. Others, including Paul Singer’s Elliott Management and Aurelius Capital Management, bought the bonds later, as distressed debt. They are the investors Argentina’s officials call “vultures.”
The U.S. Court of Appeals in New York on Oct. 26 ruled that Argentina must pay the holdouts if it goes forward with scheduled payments to holders of the exchange bonds, affirming rulings by Griesa. The appeals court noted Argentina’s “continual disregard” of the rights of its creditors and the authority of the U.S. courts considering the litigation. The court sent the case back to Griesa to clarify two issues.
The case is now back in front of the appeals court, which is set on Feb. 27 to hear arguments over how the defaulted bondholders are to be paid and how the Oct. 26 ruling will be applied to third parties, including banks.
Griesa’s Nov. 21 ruling that Argentina had to pay $1.3 billion into an escrow account if it went ahead with the scheduled payments of about $3 billion sparked a rout in Argentine bonds and prompted Fitch to cut ratings on the country’s debt.
Griesa was appointed to the bench in 1972 by President Richard Nixon, a Republican. In New York, he’s one of about 40 judges in the federal courthouse in Manhattan. In Argentina, he’s famous for his rulings in the case.
In 2010, when Griesa refused to block an $18.3 billion bond swap, he was portrayed as a hero in Buenos Aires newspapers. Later, when he ruled in favor of a bid by NML Capital to seize $105 million in Argentine assets held in New York, an Argentine business daily printed a caricature of him with a vulture on his shoulder.
Boccuzzi and Blackman are experts on laws that give foreign countries immunity from being sued in the U.S. under some circumstances, a key defense for Argentina. While many investors have won judgments for the money they claim the country owes them on their bonds, they’ve had much less success in trying to collect on the government’s assets located in the U.S. and elsewhere.
Boccuzzi, who received his undergraduate and law degrees from Yale University, joined Cleary Gottlieb in 1994 and became a partner nine years later. Blackman, with a bachelor’s and a law degree from Harvard University, has been a Cleary Gottlieb partner since 1985.
‘Intention to Defy’
Griesa’s courtroom experience with Argentina has complicated the job of Blackman and Boccuzzi, at least in his most recent rulings.
“I have had some modest amount of experience, and that is that the Republic will not comply with the judgments which have been entered against it,” he said in the Nov. 9 court conference. In the rulings Argentina is appealing, Griesa cited the country’s “intention to defy any money judgment issued by this court.”
Lawyers from Sullivan & Cromwell LLP, led by partner Joseph Neuhaus, also have some history with the litigation. Neuhaus, who earlier represented Argentina’s central bank, now represents the Clearing House Payments Co. LLC, which operates a cross-border and domestic wire-transfer system. The Clearing House Interbank Payment System, known as Chips, handles almost $2 trillion of transactions daily, according to its website. In-house lawyers Paul Saltzman and Joseph Alexander are also working on the case.
Representing NML Capital with Olsen is Robert Cohen of Dechert LLP. Joining Boies in representing the exchange bondholders is Sean O’Shea of New York’s O’Shea Partners.
A key lawyer early in the bond litigation was Marc Dreier, who in 2003 tried unsuccessfully to get Griesa to certify a class action on behalf of debt-holders. Dreier, formerly of New York’s Dreier LLP, is serving a 20-year prison sentence for selling phony promissory notes to hedge funds, including Elliott Management.
Hundreds of Italian pensioners who invested in Argentine bonds at face value years ago and didn’t agree to exchange them in the restructuring are also involved in the litigation. Initially, they were represented by Dreier’s firm. When that firm imploded after its founder’s arrest, some of the pensioners hired Michael Spencer of Milberg LLP while others turned to Rudolph DiMassa of Duane Morris LLP.
Spencer said that Argentina owes his clients “in the range of $525 million” not including post-judgment interest.
While DiMassa’s clients weren’t parties in the case in the district court, they expect to file a friend-of-the-court brief in the appeal case. DiMassa has said his clients have been hurt financially and reputationally.
“Argentina for so long has said that all of the debt holdouts are vulture funds and speculators,” he said. His clients, like Spencer’s, are individuals who “all paid 100 cents on the dollar for their bonds,” DiMassa said.
One of DiMassa’s clients, Sabrina Parodi, said in a letter, “We are not rich people and we are not speculators, we are just workers who are trying to save and invest our money to allow us to be comfortable in our old age, and to ensure a good start to the future of our children.”
The case is NML Capital Ltd. v. Republic of Argentina, 08-cv-06978, U.S. District Court, Southern District of New York (Manhattan).