C O N F I D E N T I A L ANKARA 000778

SIPDIS

SIPDIS

TREASURY FOR INTERNATIONAL AFFAIRS - JROSE

E.O. 12958: DECL: 04/04/2017
TAGS: PGOV EFIN TU
SUBJECT: DESPITE ALLEGATIONS, MEDIA TAKEOVER PROBABLY NOT
POLITICAL


Classified By: Economic Counselor Tom Goldberger for reasons
1.4(b) and (d).


This cable was coordinated with Congen Istanbul.


1. (C) SUMMARY. The Turkish Savings Deposit Insurance Fund
(SDIF) re-seized a major media group (including Sabah
newspaper and ATV television) and other companies nominally
belonging to businessman Turgay Ciner on April 1. The SDIF
acted after it came to its attention in March that Ciner had
entered into secret contractual agreements with the group's
former owner, Dinc Bilgin. These contracts apparently gave
Bilgin some ongoing control over the group despite it having
been seized from him and auctioned following the 2002
collapse of Etibank, which he also owned. The contracts were
not made known to the SDIF when the Fund sold the group by
auction to Ciner in 2002, believing -- apparently wrongly ---
that it was an unrelated party to Bilgin. The case
illustrates the opaque web of connections between Turkey's
big business establishment, the press, and the government.
Predictably, opponents of the government and the AK Party
have jumped on the seizure to make allegations of government
interference in press matters. However, the SDIF has left in
place the editorial staff at the seized businesses, including
Sabah editor Fathi Altayli, who has been notably critical of
the Government. SDIF also has a track record of holding
media properties seized from the owners of failed banks
without misusing them. SDIF and its Chairman, Ahmet Erturk,
are widely respected by the IMF, World Bank, and other
observers of Turkey's once-troubled banking sector as an
efficient, effective means of cleaning up the sector. End
summary.

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Media Takeover
--------------


2. (U) On the evening of April 1 (reportedly timed to not
disrupt the markets), officials of the Savings Deposit and
Insurance Fund (SDIF, roughly equivalent to the Federal
Deposit Insurance Corporation) swept into offices in Ankara,
Istanbul, and Izmir, and took over operations of Ciner

Group's media assets, Merkez Group and Dinc Bilgin's Medya
Group. The takeover involves 63 companies, including Sabah
newspaper, Takvim, Dunden Bugune Tercuman, ATV television,
Kanal 1, Aktuel weekly, and Merkez Reklam advertising. SDIF
said it acted because of secret agreements signed by the
current owner, Turgay Ciner, and the previous one, Dinc
Bilgin, who lost his media assets to the SDIF after the
failure of Bilgin's Etibank. In other words, SDIF asserts it
is justified in taking over these companies from Ciner
because Bilgin fraudulently and secretly violated agreements
with SDIF and retained a degree of control and ownership.

-------------- --
Why the Deposit Insurance Fund is Controversial
-------------- --


3. (C) Following the 2001 banking collapse SDIF was given a
mandate to resolve the assets of failed banks and recover as
much as possible the $50 billion plus bill to the taxpayer
for bailing out the banking system. An independent
regulator, its Chairman -- Ahmet Erturk -- was appointed by
the current government in 2004. He is a prominent figure who
is also reportedly close to Prime Minister Erdogan and
Finance Minister Unakitan. Among his many successes was
resolving the 2003 collapse of Imar Bank following a colossal
$6 billion fraud by the bank's owners, the Uzan family. He
reached favorable agreements with the Uzan's many creditors,
including a an agreement that enabled Motorola to recoup
approximately $910 billion of the $2 billion owed by the Uzan
family when TMSF sold Telsim to Vodafone.



4. (C) In doing his job, Erturk has angered many business
insiders from Istanbul's traditional big business community,
many of whom thrived through opaque dealings with other
companies and corrupt government officials. In many cases,
Erturk used extraordinary powers under Turkey's banking laws
because he believed -- with reason -- that the judiciary was
part of the nexus of corruption. Erturk's enemies have
seized on his connections to the AKP to accuse him of going
after them for political reasons. Some failed bank owners,
such as the Suzers, even made these allegations despite their
bank having been taken over prior to Erturk or the AK Party
coming to power.

--------------
Allegations that the Takeover is Political
--------------


5. (C ) Ironically, Erturk claims that the secret agreements
were brought to his attention only last month by Bilgin
himself. In press interviews, Erturk says he consulted with
Prime Minister Erdogan, Deputy Prime Minister Abdullatif
Sener and Finance Minister Unakitan, who advised him that he
should act in accordance with the law.


6. (C) It is commonly perceived by the public that the
government has been displeased with Sabah newspaper's
reporting. Media reports have claimed that the Prime
Ministry's press center prepares monthly media analysis
reports for the PM and that these reports have observed an
increase in "negative trends" at Sabah. Yet, the SDIF has
left key Sabah editors, including editor-in-chief Altayli, in
place. The SDIF did not interfere in the former Uzan media
properties' editorials during the period of SDIF control.
Moreover, the Merkez Group is composed of over 60 companies,
many outside the media sector.

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COMMENT
--------------


7. (C) As the details of the seizure story emerge, the legal
basis for the SDIF's action is becoming clear. However some
observers will undoubtedly continue to allege an AKP
clampdown on free press. For example, even AKP-ally Yeni
Safak newspaper reports that close friends of Ciner claim he
says, "They have silenced us before the presidential
election." Nationalist Action Party (MHP) deputy chairman
Oktay Vural opportunistically described the takeover as a
crime against democracy. True Path Party (DYP) leader Mehmet
Agar called for SDIF to sell the properties as soon as
possible before the November general elections, while
Democratic Left Party (DSP) leader Zeki Sezer observed that
"government pressure should be questioned." The response to
this decision by the SDIF vividly illustrates the tension
beneath the surface as Turkey's election season proceeds.

Visit Ankara's Classified Web Site at
http://www.state.sgov.gov/p/eur/ankara/

WILSON