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Default Battle Continues…US Firm May Face Terrorism Charges in Argentina
Argentine President Cristina Fernandez de Kirchner (AFP Photo / Norberto Duarte)
By Ken Parks, WSJ – August 15, 2014 – http://tinyurl.com/m5qmny7
BUENOS AIRES—Argentine President Cristina Kirchner said late Thursday that her government will press criminal charges against the local subsidiary of U.S. printing company RR Donnelley RRD +0.15% for allegedly trying to destabilize the country’s struggling economy by firing hundreds of workers.
Mrs. Kirchner’s threat to invoke a controversial antiterrorism law for the first time comes two weeks after the country defaulted on some of its debt in a dispute with a small group of hedge-fund creditors in a U.S. court. Analysts say the default likely will deepen the recession that began earlier this year.
In a speech broadcast on national television, Mrs. Kirchner questioned RR Donnelley’s decision to close its local printing operations and dismiss more than 400 workers even though the finances of its Argentine subsidiary were sound.“We are faced with a true case of a fraudulent maneuver and attempt to sow fear in the population,” Mrs. Kirchner said. “We are also going to the [U.S.] Securities and Exchange Commission.”
In an SEC filing Monday, RR Donnelley said it would record a one-time charge of up to $20 million after its Argentine subsidiary filed for bankruptcy in a local court due to “untenable business conditions.” The Kirchner administration has said it would do all it can to protect jobs at the company.
Chicago-based RR Donnelley and its subsidiary couldn’t immediately be reached for comment.
The antiterrorism law that took effect in 2011 gives the government broad powers to prosecute businesses and individuals for trying to destabilize the economy and financial system through speculative maneuvers. In recent years, Mrs. Kirchner frequently has blamed banks and big business for orchestrating runs on the Argentine peso and the central bank’s foreign-currency reserves in a bid to undermine her government.
RR Donnelley’s exit from Argentina potentially marks one of the biggest factory closures this year as the economy struggles with inflation close to 40%, dollar shortages that have forced the government to restrict vital imports, and sluggish trade with neighboring Brazil.
Big layoffs in Argentina’s heavily unionized manufacturing sector are rare due to high severance costs and stiff resistance by organized labor and the government. Instead, many companies furlough workers on reduced salaries rather than paying the steep financial and political costs of handing out pink slips.
That has been the case this year in the automobile sector, where car makers and parts factories have furloughed hundreds of workers amid a 25% drop in car sales.
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