Greg Palast is an admirably bulldoggish reporter. Pop over to his blog, and you’ll see that the last six entries are all on the subject of vulture funds in general, and the Donegal vs Zambia case in particular. Palast reported on the subject for BBC’s Newsnight: You can see the full video here, or get essentially the same gist in text form here.
At the same time, the Guardian’s Ashley Seager has been following the news of the case from a decidedly Palastian perspective. Here are some of his recent headlines, which give a pretty good idea of the tone he’s taking:
All of this reporting is predicated on the basic notion that vulture funds are inherently evil things, doing things which can and should be banned. (This notion is not confined to leftist journalists, by the way. It is shared by sophisticated international economists, such as Anne Krueger, the former first deputy managing director of the IMF.)
I am broadly sympathetic to where people like Palast and Seager and Krueger are coming from: I think that debt relief for heavily-indebted poor countries is a very good idea, and I think that poor Africans struggling under their governments’ enormous debt burdens care little about distinctions between different types of creditors and other matters which I’m going to discuss here.
At the same time, however, I’ve seen the vulture funds get almost no defense in the press, and there are in fact quite a lot of reasons why they perform a good and useful function. (In this respect, they’re rather similar to the birds after which they’re named.) So read Palast if you want the argument against the vultures: What I’m going to write here is a deliberately one-sided defence of what they do and how they do it. With luck, I’ll be able to get Palast to respond.
(One big hat-tip before I start, to Andrew Leonard, whose blog entry on the subject I read just as I was heading into a completely unconnected meeting with Palast’s wife on Thursday. Another participant in the meeting asked for a “primer” on all this: I think between Palast’s stuff and my own, we should be most of the way there – assuming that the length of this entry doesn’t disqualify it from primer status.)
So. What is a vulture fund? Here’s Palast’s definition (actually, I should be accurate here – the byline on the piece is actually Newsnight’s Meirion Jones, who was the producer on Palast’s report):
Vulture funds – as defined by the International Monetary Fund and Gordon Brown amongst others – are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest – which might be ten times what they paid for it.
There’s a lot of stuff to unpack here. But to begin at the end, vulture funds – or distressed-debt investors, as they prefer to be known – are no great fans of litigation strategies. Yes, they do sue countries in US and UK courts, on occasion. But there are lots of other ways they can make their money. For instance, consider a vulture distressed-debt fund which bought Ecuadorean Brady bonds at 25 cents on the dollar in 1999 after that country defaulted, and then tendered into Ecuador’s 2000 debt exchange, in which bondholders were given securities worth about 70 cents on the dollar.
That was a highly lucrative trade, which involved no legal fees and which probably made more money, in terms of annualized return net of fees, than most if not all of the litigation strategies which vulture funds get into. As for debt which “is about to be written off”, that might be true in the Donegal-Zambia case, but it is far from being the norm. In fact, I don’t know of any other distressed-debt situation in which a vulture fund “swooped in” (sorry, these things are unavoidable) and bought debt which was about to be cancelled. I daresay there might be one or two situations that I don’t know about, but such trades are emphatically not the norm. In the vast majority of situations, vulture funds buy debt from investors who, for whatever reason, no longer want to hold it. And in doing so, they provide a very useful service.
Consider this: You’re an investor, and you buy the bonds of the sovereign nation of Ruritania for 100 cents each. The bonds pay their 7% interest for a couple of years and you’re happy, until one morning Ruritania decides it is going to default and not pay you anything. Now what do you do? “Oh well,” you can say to yourself, “easy come, easy go, I guess I lost all of my money”.
You could say that, but that would be pretty unlikely, because you’re a bond investor – and bond investors tend to be reasonably risk-averse. If you wanted to risk losing all your money, then you would have invested in something much riskier, like stocks.
But that’s not your only option. A bond is, after all, a legal contract, and Ruritania is contractually obliged to pay you your interest and principal in full and on time. Just as your bank can sue you if you stop making your mortgage or credit-card payments, you can sue Ruritania if it stops making its coupon payments.
But there’s a problem here. Legal fees are expensive, and you don’t have any money. What’s more, Ruritania has high-powered lawyers of its own, such as William Blair QC, Tony Blair’s brother, and can call at will on the awesome might of huge international law firms such as Cleary Gottlieb Steen & Hamilton.
There’s no way you can even retain, let alone afford, that kind of legal firepower – and in any case you have no appetite for a drawn-out legal fight which could last for years. What’s more, even if you win the legal fight, there’s still no guarantee that Ruritania will have any more respect for a court judgment in your favor than it had for the original bond contract. In other words, you could win in court and still be no better off than you were to begin with – worse off, in fact, since you’d be down all those legal fees.
Back to square one, then, it would seem: You’ve lost all your money. Except – there is one more option. Bonds, after all, are securities, which can be bought and sold. At any point in time, including now, any bondholder is free to sell his bonds to the highest bidder (or anyone else). And it turns out that in the market for Ruritanian bonds, there is a bid at 50 cents on the dollar.
Rather than losing your entire 100-cent investment, you can sell your bonds for 50 cents instead, and lose only half rather than all of your money. Ruritanian debt hardly turned out to be a fabulous investment, but at least it didn’t wipe you out completely.
Who would pay 50 cents on the dollar for Ruritanian debt? Well, bonds in default are known as “distressed debt”, so by definition anybody buying such a thing is a distressed-debt investor. Or, to use the more abusive term, a vulture.
From the point of view of bondholders, however, these particular vultures look more like white knights. Many large institutional investors will never pursue legal strategies against deadbeat debtors: that’s simply not their skill-set. And most of them aren’t even allowed to hold defaulted debt in the first place: they’re forced to sell their bonds if an issuer defaults. So what they need in such a situation is a market in such instruments which will give them some kind of non-negligible recovery value on their defaulted paper. Without such a market, there’s a good chance that they would never take the risk of investing in any foreign country’s debt in the first place.
I can hear Palast in the back of my head already. “Good!,” he’s saying. “Countries shouldn’t run up burdensome debts which will ultimately have to be repaid, with interest, by poor future generations.” Well, Palast is entitled to think that – if, indeed, that’s what he thinks. There’s certainly a case to be made that development institutions such as the World Bank should move away from loans and towards more grants to poor countries.
I’m not going to get into that debate here. I’m simply going to point out that ever since the 18th Century, successful nations have been those which have been able to finance themselves through the issuance of debt securities. (See James Macdonald for much, much more on this idea.)
More generally, debt is a Good Thing. On a personal level, few of us would ever be able to buy a car or a house without some kind of debt finance – and on a sovereign level, countries which desperately need roads or ports or schools or hospitals can build them today, rather than having to save up for years before being able to build them, only because they can raise debt capital.
Obviously, too much debt is a bad thing – that’s what “too much” means. But every democracy in the world borrows money, and it’s the worst type of paternalism to tell poor countries that they can’t or shouldn’t do something which all countries do and which its own citizens have voted for.
For debt finance to work, you need three things: a borrower, a lender, and a contract. The contract can be as simple as a verbal agreement that “I’ll pay you back tomorrow,” or it can be an inch-thick loan agreement with repayment schedules and covenants and negative pledges and waivers of sovereign immunity. But the important thing is that the borrower contracts to repay the lender. And one of the interesting things that lenders have learned over the years is that abstract sovereign entities, such as governments, are actually more reliable in this respect than sovereign individuals, such as kings or emperors.
Governments can and do repay their debt for ever. (Britain started issuing perpetual bonds in 1853, and by 1935, perpetual bonds made up more than 60% of the UK’s debt issuance.) Individuals, by contrast, die – and when they do, it’s often impossible to collect on their unsecured debts. Today, the safest debt instruments in the world are US Treasury bonds – the sovereign debt of the US government. Indeed, the rate of return on Treasury bonds is known as the “risk-free rate”.
So there’s nothing obscene about the idea that governments should owe individual creditors money, and there’s nothing remotely unusual about those debts being enforceable in a court of law. Pretty much every government in the world, with the possible exception of Cuba, has implicitly accepted the fact that they are responsible for the debts incurred by previous governments – and that, in turn, they can compel future governments to make certain repayments. Every so often, sovereign debts become overwhelming, and they are restructured by the mutual agreement of the debtor and its creditors. But outright repudiations of outstanding debt are very rare – and even when they do happen, as in the case of Cuba, the bonds continue to trade on the secondary market for 30 cents on the dollar or more – in the expectation that, sooner or later, a future Cuban government will finally make good on the debt.
If a government defaults on its obligations, then, the debt doesn’t simply disappear. It’s still there – and, sooner or later, it will have to be dealt with. Vulture funds are long-term investors who buy defaulted debt and then try to persuade the issuer to deal with it. Because they buy the debt cheap, they’re often willing to settle at much less than face value – in the famous case of Elliott vs Peru, for instance, the vulture fund, Elliott Associates, made numerous attempts to settle with Peru at a discount, all of which failed.
So Elliott resorted to litigation, and eventually got paid off, by Peru, in full.
Here’s how Palast puts it (it’s worth knowing that Paul Singer is the founder of Elliott Associates):
Newsnight went to New York to try to interview Paul Singer – the reclusive billionaire who virtually invented vulture funds.
In 1996 his company they paid $11m for some discounted Peruvian debt and then threatened to bankrupt the country unless they paid $58m. They got their $58m.
Now they’re suing Congo Brazzaville for $400m for a debt they bought for $10m.
I have some idea where the $400 million number comes from – I’m very familiar with the Congo case, having written about it at length in the September issue of Euromoney. I think that here Palast is wrong, and that he’s confusing the amount that Elliott is claiming from Congo with the amount that Elliott is claiming from French bank BNP Paribas in a separate, if related, case. And as for Elliott threatening “to bankrupt” Peru – what does that even mean? The only thing that Elliott threatened was that they would try to attach payments which Peru was making to other creditors. Elliott’s position was simply that Peru shouldn’t be able to get away with paying some of its creditors in full and on time, while ignoring the claims of other creditors of equal or greater seniority. How that’s related to bankruptcy, I have no idea.
But back to Donegal vs Zambia. In this case, Donegal and Zambia signed an agreement in April 2003, enforceable under UK law, under which Zambia would make certain debt payments to Donegal. Prior to that, in 1999, Zambia had officially recognized Donegal as a legitimate creditor. In the 2003 agreement, Donegal settled its $44 million debt for 33 cents on the dollar, to be repaid over the course of 36 monthly payments. Does that sound to you like they sued for repayment in full? Not at all: they were perfectly happy to take 33 cents on the dollar, and signed a legally binding agreement to that effect. It was only after Zambia defaulted on the 2003 agreement that Donegal took Zamiba to court, under the terms of the same legally binding agreement that had allowed Zambia to pay Donegal just 33 cents on the dollar.
It’s worth bearing in mind, here, that if Zambia had simply paid Donegal the payments it agreed to make in 2003, neither Palast nor anybody else would even have noticed, let alone cared. A country making debt repayments is simply not news. But when Zambia stopped paying and Donegal sued, then, suddenly, Zambia making the debt payment is tantamount to Donegal killing children, or at the very least preventing them from being educated. In the BBC piece, Palast finds a Zambian who says that if the country makes the payment, “you are talking about in excess of 300,000 children being prevented from going to school” – as if the payment is coming out of Zambia’s education budget, which it clearly isn’t. (In fact, it’s coming out of Mofed, a UK company owned by the Zambian ministry of finance.)
Half of the outrage against Dongeal comes from the fact that it is pursuing a legal strategy against Zambia – that it’s using a UK court to force Zambia to pay up. But it’s worth bearing in mind here that Zambia has broken its legally binding promises with regard to this debt not once but three times. It defaulted on the original debt it owed to Romania and which it promised to pay Romania in 1979; it broke its 1999 agreement with Donegal that it would recognize the transfer of the debt from Romania to Donegal; and it broke its 2003 agreement with Donegal setting out a repayment schedule at a highly discounted rate.
Zambia’s apologists would have you believe that we should pay no attention to the country’s previous promises. Zambia is poor, they say, and therefore it should be able to break its promises with impunity. But that simply doesn’t work. Countries need debt finance in order to be able to grow. That original debt, for instance, was used to buy tractors – material of immediate financial benefit to the Zambian economy. Zambia either didn’t have the money to buy the tractors outright, or it felt it had better use for that money, so it borrowed the money instead. But if it can’t pay for its tractors in the present, all that means is that it has to pay for the tractors in the future. If Zambia wants to invest in its economy today, it will similarly have to borrow money. But no one will lend the country anything if Zambia can simply decide on a whim to stop repayment agreements made as recently as 2003.
There’s a fascinating subplot running through the Donegal-Zambia case about corruption. The anti-Donegal types mutter darkly about the fact that Zambians may or may not have accepted bribes from people who may or may not have had association with Donegal, before signing the 1999 and 2003 agreeements. As a result, they say, any repayment obligations associated with those agreements are null and void. (Or, to use the legal term, ex turpi causa, known in the US as “unclean hands”.) The world of distressed debt is secretive and shadowy, and in his 134-page ruling, Mr Justice Andrew Smith spends a lot of time trying to unpack who paid what to whom, and when and why. Although he finds Donegal’s evidence unreliable on many occasions, ultimately he does side with them. And the main allegation of outright bribery relates to a payment of just $4,000 – which, as the judge says, “seems to me a very modest payment if the Acknowledgment [the 1999 agreement] had the value to Donegal that Zambia assert.”
Palast tends to ignore the $4,000 payment and concentrate more on a much larger payment of about $2 million in debt that Donegal made to Zambia’s Presidential Housing Initiative (PHI) in 1999. This payment is very much in line with the kind of thing that Donegal’s principal, Michael Sheehan, used to do before he founded Donegal, when he worked at an American not-for-profit corporation called Debt-for-Development Coalition, Inc. The idea behind the non-profit was exactly the same as the idea behind more contemporary calls for debt relief: that if a country owes money to a creditor, then the creditor writing off the debt has the same kind of development effects as the creditor donating money to the country in question. Donegal’s donation was debt relief, which makes it kinda ironic that Palast is so keen to portray it as a bribe.
It’s worth noting that Zambia’s PHI was a real development initiative, and that Donegal’s donation of $2 million in debt was not a bribe to any individual. It’s true that Donegal’s donation was not entirely selfless. When Zambia accepted the donation, it acknowledged formally and legally that Donegal did indeed own the debt that it was donating, and that the debt was legitimate. Both of these things were true. But from a tactical legal standpoint, the acknowledgment was something of a mistake, because until that point Donegal would have found it very difficult to successfully sue Zambia for recovery of the money it was legitimately owed.
Yet even after getting that formal acknowledgement, still Donegal did not sue Zambia for anything. Instead, it looked for debt-to-equity conversion opportunities: swapping its debt for ownership of a Zambian lottery, or a local bank, or Kafue Textiles, or other parts of the Zambian privatization program. It was only when these ideas went nowhere that Donegal started negotiating with Zambia for repayment in cash. Naturally, Donegal threatened legal action should they not come to an agreement, and indeed did eventually start to sue Zambia in the British Virgin Islands. While that litigation was pending, in 2003, Zambia and Donegal signed an agreement whereby Zambia would pay Donegal back 33 cents on the dollar.
Zambia made a few payments under the 2003 agreement before defaulting again. And so yet again Donegal started negotiating with Zambia. Donegal could have declared default as early as October 2003, thereby trebling the amount of money they were owed – but they didn’t, preferring intead to negotiate in good faith with Zambia for the arrears that Zambia owed under the agreement they had signed just a few months earlier. It was only when it became abundantly clear that Zambia had no interest in remaining current on the agreement that Donegal finally declared Zambia in default, ultimately giving rise to the proceedings which culminated in the court case in London.
Much of the literature on this case makes it seem as though Donegal simply bought debt from Romania for about $3.3 million, then turned around and sued Zambia for over $50 million, including legal fees. In fact, Donegal spent many years in negotiation with Zambia before it ever sued anybody for anything. It is Zambia, not Donegal, which has most egregiously violated its legal agreements, and it is Zambia which has chosen to spend its money on expensive lawyers rather than simply follow through on its own promises. Really, it’s the Zambians, not Donegal, who decided on a litigation strategy. It turns out that their strategy was not successful, and that they would have been better off simply paying Donegal what they agreed to pay Donegal in 2003. That’s not Donegal’s fault – it’s Zambia’s.
Palast also tries to explicitly tie the money that Donegal is receiving as a result of these court proceedings to the debt relief that Zambia has received from rich countries under the Heavily Indebted Poor Countries (HIPC) initiative. He asks Donegal’s Sheehan, in an ambush interview, “aren’t you just profiteering from the work of good people who are trying to save lives by cutting the debt of these poor nations?”. But in fact Sheehan’s court case against Zambia has no relation whatsoever to the HIPC initiative, and would surely have gone ahead whether or not Zambia received debt relief from the Paris Club of creditor nations or the World Bank or the IMF or anybody else. If Gordon Brown gives Zambia debt relief and Michael Sheehan doesn’t, that doesn’t mean that Michael Sheehan is “profiteering” from Gordon Brown’s work. It just means that Zambia doesn’t need to repay Gordon Brown on top of what it needs to pay Michael Sheehan.
There’s one other big beef which Palast, and Leonard, and Seager, and other journalists covering the case, seem to have with Sheehan: that he’s making a profit on his transaction. Well, yes, he is. But profit, in and of itself, is not a bad thing. There are plenty of other financiers who are making much more money than Sheehan, and some investors, such as Warren Buffett, are treated not as villains but as heroes for their ability to make money.
It’s also worth noting that Sheehan’s profit isn’t nearly as large as most of the journalists are making out. The stories concentrate on the $55 million that Donegal is claiming, rather than the $20 million or so that Donegal is likely to actually receive at the end of the day. And they tend to ignore the fact that Zambia really did borrow a lot of money back in 1979 to buy tractors – money on which it agreed to pay interest. If you take the $15 million or so that Zambia borrowed, and add on any reasonable interest rate on top of that, the result will take you to far more than the $20 million that Donegal is going to receive in settlement of that debt, including its own non-negligible legal costs. The real loser in this whole case is not Zambia but Romania, which sold its $30 million debt for $3.3 million. Even there, however, Donegal is a hero: Romania was in negotiations to sell the debt back to Zambia, but because there was another bidder involved (Donegal), Romania ended up receiving roughly twice as much money as it would otherwise have been able to receive.
Donegal’s opponents like to portray Zambian sovereign debt as debt of the Zambian people. Here’s Peter Otto:
While the judge was bound by the law to find in favour of the vulture fund, it is disappointing that he did not give a more imaginative decision. Remembering the judge in The Merchant of Venice, it would have been more to the point to require Michael Sheehan of Donegal International to collect the money “owed” in person from each of the Zambians, in cash. I think $7 per head is about right. And to add a clear explanation to each one as to why they should not eat for the following week would make the “justice” more personal.
Does Otto really think it would be more just for Donegal to force individual Zambians to pay $7 each in cash than for Donegal to receive $20 million from a company owned by the Zambian ministry of finance? ($7 multiplied by Zambia’s population of 11.5 million comes to over $80 million, so maybe $1.75 might have actually been more apropos.) Does he think that forcing individuals to starve is a good way of paying sovereign debts? Because certainly Zambia can pay this debt without forcing any Zambians to go without food.
And more to the point, does it make sense to think of a sovereign debt as being owed by the citizens of that country severally? Let’s say that the US government owes China $1 trillion. Should the Chinese government try to collect more than $3,000 from each US citizen, in cash? Maybe it should just go to each person and collect $150 or so in annual interest payments? Sovereigns, and sovereigns alone, have the ability to demand payments from their citizens. (They’re called taxes.) And so far, there has been no indiation whatsoever that Zambia will raise taxes as a result of this judgment. So let’s be a little bit careful with the rhetoric.
And let’s not take articles like this one from Ashley Seager, claiming that “President Bush could come to the aid of Zambia,” too seriously either. If you’ve come this far in this blog, you’ll be able to pick out the weaknesses in the report quite easily.
For instance, Seager says that
Donegal bought the debt, with a face value of $30m, from Romania in 1999 for less than $4m. Zambia agreed to pay Donegal $15m in return for a payment to the then president’s favourite charity. This payment, exposed by Mr Palast but which Mr Sheehan denies was a bribe, could mean Donegal falls foul of the US Foreign Corrupt Practices Act.
The idea that Zambia agreed to pay Donegal “in return for a payment to the then president’s favourite charity” is profoundly silly. After all, the payment to the charity was in the form of the very debt which Zambia was agreeing to pay. If the debt was worthless, then the donation to charity was worthless. And the payment was hardly “exposed by Mr Palast” – it’s all there in Zambia’s defense papers, and I’m sure that Palast was simply given the information on a plate by William Blair, QC.
(For the record: I have spoken to nobody about this subject since the Zambia news started coming out. All of my information comes from publicly-available sources, primarily the court judgment in the UK. I have never spoken to Michael Sheehan or any of his colleagues. I have spoken to some of the principals at Elliott Associates in the past. But since my story on their Congo case, I seem to have persona non grata status there, and I doubt that they would consider me particularly friendly to vulture funds in general.)
But back to that alleged bribe. Here’s some of what the judge has to say about the payment to PHI, and Zambia’s claim that Donegal’s offer to make a payment to PHI was tantamount to a bribe:
There is no reason to suppose that [PHI] was inherently an improper scheme or that it was set up with improper motives or that Donegal did or should have supposed at any relevant time that the PHI was other than a worthy scheme…
Mrs Chibanda was aware, before the debt was assigned by Romania to Donegal, that the purchasers of the debt had indicated that they might contribute, or that they proposed to make a contribution, to the PHI… However, there is no reason to suppose that that information was given to Mrs Chibanda covertly, …and it is apparent from Mr Mbewe’s evidence that she did not keep that information secret. It has been suggested that the information was given to Mrs Chibanda in order to influence her to obstruct the delegation’s proposal, and so was something in the nature of a bribe or improper inducement… I am unable to accept that. The mischief of bribes, or secret commissions, is that they are secret. It might be that Mrs Chibanda thought that the prospect of support for the PHI was attractive, and it might be that… Mrs Chibanda thought that the potential benefit to Zambia of having finance for housing those on low incomes was something properly to be weighed when deciding upon the relative benefits of Zambia buying back the debt and allowing it to be bought by a third party. I am unable to conclude that it was in itself improper for Mrs Chibanda to be made aware of the possibility that Donegal might contribute to the PHI.
In other words, nothing improper happened.
As for the idea in the Guardian article that “Mr Bush has the power to block collection of debts by vulture funds, either individual ones or all of them, if he considers it to be at odds with US foreign policy,” I’m not entirely clear where that comes from. Apparently Congressman John Conyers thinks that “the Foreign Corrupt Practices Act and the comity doctrine brought from our constitution allows the president to require the courts defer in individual suits against foreign nations” – and that’s something I simply don’t understand.
In any case I’m quite sure that Treasury, if and when they get wind of such a proposal, would swiftly squash it. There are hundreds of billions of dollars of dollar-denominated sovereign bonds traded under New York law, and all of them include a waiver of sovereign immunity. It seems to me that Conyers is asking Bush to reinstate precisely that sovereign immunity which the bond issuers have voluntarily waived – and that’s something that no debt-issuing country would want. If countries reverted to having absolute sovereign immunity in New York courts, then none of them could ever borrow money in dollars again. Capital flows to emerging-market countries would dry up overnight, and there would probably be an enormous rush to dump any bonds issued under New York law – creating a monster liquidity crisis in the financial markets, and probably consigning most of Latin America, at the very least, to another brutal recession like that seen in 1998. So the chances of anything like this happening are precisely zero, even if it were constitutionally possible, which I doubt it is.
The fact is that private-sector capital flows to emerging markets are vastly larger and more important for development than public-sector flows from the likes of the World Bank. All of those private-sector capital flows are predicated, ultimately, on contract law. When trillions of dollars in flows are based on contract law, eventually some contracts are going to end up in court. And when a country gets taken to court, sometimes it will lose.
But if you add up all of the judgments awarded against all of the emerging-market countries which have ever been sued in the history of the international capital markets, the final number would be so minuscule in comparison with the magnitude of international capital flows to emerging-market sovereigns that it would barely constitute a rounding error. And yet the tiny outside chance that a country might one day be taken to court is absolutely crucial if that capital is to continue to flow. Big institutional investors don’t like doing the work of suing sovereigns, so they essentially outsource that work by selling their defaulted debt to vulture funds. People might not like what the vulture funds do, but what they do is utterly necessary for everything else to function smoothly.
Oxfam has launched a campaign against Donegal entitled “Don’t let the debt vultures make a killing”. They should remember that vultures don’t kill anything. There are lots of reasons why Zambians are living in abject poverty today, and Donegal’s lawsuit is not one of them. Vulture funds create the conditions under which countries like Zambia can raise money for investments in health, education, and infrastructure.
Maybe Oxfam should consider sending them a thank-you letter instead.