US appeals judge: Argentina's bullying Citibank in bond dispute as it ignores US court orders



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NEW YORK — Judges on a federal appeals court panel Thursday said they suspect Argentina has gone rogue, ignoring court orders and bullying a U.S. bank to try to prevent it from obeying a court order.

Judge Reena Raggi of the 2nd U.S. Circuit Court of Appeals made the South American nation sound like it was adopting the ways of the Wild West, saying it was "basically holding the gun" to the head of Citibank's branch in Argentina by suggesting it could face criminal prosecution if it failed to process Argentina's payments to some bondholders at the end of this month.

"We have a party who will not conform itself to the law," Circuit Judge Barrington Parker said.

The bank has been told by a New York judge not to process the payments to comply with a court order. That order requires U.S. hedge funds holding fully valued Argentina bonds to be paid $1.5 billion if Argentina pays bondholders who traded their bonds in 2005 and 2010 for bonds of lesser value.

The U.S. hedge funds led by New York billionaire hedge fund investor Paul Singer refused to swap their bonds at a discount after Argentina's record $100 billion default on its national debt in 2001.

Argentina's president, Cristina Fernandez, has labeled them "vultures" and vowed to pay them nothing unless they accept the same deal as other bondholders. Last week, she signed a new law letting Argentina pay bondholders locally to dodge the U.S. financial system. Economists differed over whether the law will help or hurt the country's economy.

Citibank Attorney Karen Wagner told a three-judge panel that it was too late for the bank to avoid processing payments at the end of September. Later, though, she said the bank will obey any appeals court ruling, but could face "very serious damage" if the ruling does not go its way.

"We have a gun to our head and the gun will probably go off," she said.

She asked the judges to stay the effect of U.S. District Judge Thomas P. Griesa's order banning the processing of bond payments if the court did not agree that the order did not apply to Citibank because its branch is in Argentina and subject to Argentina laws.

At one point, Raggi asked Attorney Carmine Boccuzzi, representing Argentina, if he knew if his client would comply with court orders.

"As an officer of this court, I am not able to make a representation about what Argentina is going to do," Boccuzzi said.

He said Griesa's orders had had an "enormous impact" on Argentina and had been discussed by top government officials. He added that Argentina does want to resolve its outstanding debt and has a desire to "solve this and move on."

Still, he said, "We're talking about a huge amount of money."

Roy Englert, representing the U.S. bondholders, urged the appeals court to ban Citibank from making payments, saying to rule otherwise would "feed Argentina's efforts to evade" Griesa's orders.

The appeals court reserved decision.

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