Oct 30, 2020
The China Bond Scam of American Bondholders Foundation, LLC
President Trump’s administration supports the claims of American bondholders against the People’s Republic of China in the amount of approximately $1.3 trillion dollars. This claim is championed by Joanna Bianco and the organization she found in 2001, American Bondholder Foundation, LLC. Ms. Bianco’s organization claims to support the rights of American Bondholders to get paid on bonds issued by the Republic of China. While a seemingly noble sentiment ABF, LLC. and Ms. Bianco stands to reap the benefits of any settlement. Based on a review of publicly available information I find Bianco’s claims entirely self-serving and legally dubious.
Her organization also appears to have violated securities law based on a recent SEC judgment against Ms. Bianco in the amount of $65,000 for selling securities without a license. It should not be the policy of the United States government to enrich these profiteers at the expense of our relationship with China. As an American, it disgusts me to see this brazen fraud go unchallenged by the Republican Party and Fox News.
SEC Verdict & Selfish Activism
It seems ABF, LLC buys and sells old Chinese Bonds to Americans without offering a prospectus to investors or a license to engage in the sale of securities. Their ability to market these old securities is based on the idea “China” will someday repay them. This means ABF, LLC must lobby the United States government to pressure payment from the PRC. Without the lobbying undertaken by ABF, LLC there would no market for these bonds. Ms. Bianco engaged in speculation by buying these bonds and has encouraged others to speculate with her against the People’s Republic of China.
It should be no concern of the US government she made a bad investment based on a dubious legal theory she appears to have invented. It is a problem for me as a US citizen that she undermines our relationship with China in an effort to enrich herself.
The Immorality of Forcing China to Pay
Personally, I find Ms. Bianco’s efforts to get paid on these bonds morally reprehensible given the manifest injustices committed by the United States against the nation and the people of China. Think of the horrors of the Chinese Exclusion Act and self-serving economic policies enacted by the USA against China prior to the Xinhei revolution in 1911.
The warlord period that resulted after the overthrow of the Qing Dynasty meant China was without an effective central government. Constant internal conflict and inviting led to years of war and devastation culminating in the Invasion of Manchuria by Imperial Japan. Think of the Rape of Nanjing and the horrors committed against China during the time period these bonds were allegedly issued. China was fighting for its life and I find demanding payment for these bonds morally reprehensible. Even if technically “legal” I condemn any effort to force payment as un-American. China paid these bonds with the blood of its Citizens who died during World War II.
The demand for payment by Ms. Bianco seems only to benefit her at the expense of America and China. Our Republic should not be subverted into the service of this seemingly malicious profiteer who’s advocacy appears entirely self-serving.
Dubious Legality at Best
We are continuing to research the actual validity of Ms. Bianco’s claims as a point of law since it appears legally dubious at best when consulting applicable public records and case law.
Based on an initial review of academic literature there is no clear requirement under international law for the People’s Republic of China to assume the debt per “The Responsibility of the Succesor State for War Debts.” (Hans 1950)
Allied powers reached no comprehensive agreement about sovereign debts related to construction bonds. It should be noted that Hans discusses clear precedent for “war debt” being repudiated by successor states along with other debts classed as “odious.”
In my opinion the bond claims advanced by ABF, LLC. appear “odious” given the underlying immorality of insisting on their payment. These bonds also should have been addressed by the World War II peace process between the Allied Powers and Japan. Questions about payment of war debts were handled by the 1951 San Francisco Peace Treaty. Based on a reading of past treaties between Allied Powers and Japan the bonds held by ABF, LLC are arguably null and void.
Finally, I don’t understand how the PRC as the legitimate government of China inherited debts incurred by the Republic of China, since a condition of US recogtion of the PRC as the legitimate government of China was not conditional on an assumption of ROC debts. The ROC government exists in exile on the island of Taiwan and never ceased to exist as a separate entity from the PRC. There is no reasonable basis for China to pay the debt when the ROC still holds independent territory and taxing power.
Recognizing the People’s Republic of China as the legitimate government of China does not entitle ABF, LLC to a massive pay day and rests on a flawed interpretation of the “One-China Policy.” An interpretation that undermines the wider geo-political interests of the United States of America for no legitimate reason whatsoever. It appears that ABF, LLC picked an easy target due to the general dislike Americans hold for Communist regimes which subjects claims against them to less scrutiny.
Further compounding the issue for ABF’s claims is wether the ROC was ever the legitimate government of China after the 1911 Revolution since it failed to control most of China’s territory after the collapse of the Qing Dynasty. We should also note the communists established a Chinese Soviet Republic that could also be considered the legitimate government. ABF’s claims about bonds rest on an overly simplistic read of history that suits their narrative. Once a comprehensive review of history is conducted ABF’s claims crumble.
Sadly for ABF LLC, I am a registered Republican and actively donate to partisan causes. And it honestly amazes me how ABF,LLC has been able to peddle this nonsense for so long.
Update: According to US-Sino Joint Agreement, all claims prior to 1949 were settled by a payment of $80.5 to the USA by the PRC. All claims prior to this date should be null and void. Claims prior not included in this settlement were the Railway bonds 1987 Legal review notes these claims were dismissed by the US 11th Circuit Court of Appeals on the grounds law did not apply retroactively. Supreme Court of the United States denied further review of
SEC Judgement Link:
https://www.sec.gov/litigation/admin/2020/33-10779.pdf.
Cahn, Hans J. “The Responsibility of the Successor State for War Debts.” The American Journal of International Law, vol. 44, no. 3, 1950, pp. 477–487. JSTOR, www.jstor.org/stable/2194025. Accessed 30 Oct. 2020.
https://www.justice.gov/sites/default/files/pages/attachments/2014/06/27/china_as.pdf
