LITHUANIA'S CORRUPT MEDIA HURTS EVERYONE,

C O N F I D E N T I A L SECTION 01 OF 03 VILNIUS 000648

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/12/2017
TAGS: PGOV PHUM ECON KCOR LH
SUBJECT: LITHUANIA'S CORRUPT MEDIA HURTS EVERYONE,
INCLUDING U.S. BUSINESSES


Classified By: CDA Damian Leader for reasons 1.4 (b) and (d).


1. (C) SUMMARY. Some media outlets in Lithuania, newspapers
especially, extort politicians and businessmen using rewards
of positive coverage and the threat of negative coverage.
Media corruption damages media credibility, undermines
Lithuania's democratic institutions, and intimidates
politicians, businesses, and civil society. It also hurts
U.S. businesses, who are less apt to "play the game" than
their local counterparts. End summary.

Context: Picture is bleak, regulation weak
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2. (C) Government officials, businessmen, NGOs, and others
criticize Lithuania's media for being corrupt, in addition to
the usual complaints that it is scandal-focused and
sensational. Media owners, with business and/or political
interests, have a heavy hand and often operate as de facto
editors.


3. (U) Lithuania's toothless media watchdogs do little to
stop corruption. The 1996 law on public information was
watered down in 2002. The maximum fine that any media
regulatory agency can impose is 10,000 litas (about 4,000
USD). In 2006, the largest fine levied was 3,000 litas
(1,200 USD) for airing a program unsuitable for children
early in the evening. When the Journalist and Publishers
Ethics Commission finds an ethical violation, media outlets
often do not run the "required" retractions. The Commission
then announces the retraction or correction on the national
radio network.

Politics
--------------


4. (C) Former journalist and current advisor to the Prime
Minister
Vilius Kavaliauskas told us, "you must buy the right not to
be attacked." He added, "A daily can replace a minister --
any daily any minister." Government officials seem paralyzed
by the media. In meetings at all levels, GOL officials often
shrug their shoulders in resignation when we point out the
lack of media ethics.


5. (C) Media outlets have clear favorites, as in many
countries, but in Lithuania direct payments are also
involved. A Labor Party official told us that for him to
place a positive article in Lietuvos Rytas, a leading daily,
it would cost him 25,000 litas (10,000 USD),but it would
only cost the Social Democratic Party 5,000 litas (2,000
USD). He was not complaining about paying for an article --
he accepted that as common practice. He was complaining that
his party had to pay more than another party. These paid
political advertisements misleadingly appear as original
journalism. In another example of playing favorites, Vale
Cepleviciute, a journalist who worked at the daily Respublika
for 13 years, said at a recent conference on media corruption
that for years Vitas Tomkus, Respublika's owner and de facto
editor, told staff not to criticize the well-known
businessman turned politician Viktor Uspaskich.


6. (U) Politicians occasionally get caught paying for media
coverage. Lithuania's Chief Ethics Commission recently ruled
that over the last two years Kazimiera Prunskiene, current
Minister of Agriculture and Lithuania's first Prime Minister
after independence, inappropriately promoted herself and her
party in a public education campaign that ran advertisements
in newspapers. In September, the Parliament voted not to
reprimand Prunskiene for her actions.

Squeezing businesses
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7. (C) Raimundas Voishka, General Manager of the Lithuanian
office of Pfizer, a U.S. pharmaceutical firm, told us that,
several years ago, Tomkus personally told him that for one
million litas (400,000 USD) his Respublika newspaper would
"kill" Pfizer's competition. Tomkus used vulgar language and
was not ambiguous. Tomkus told Voishka he had two weeks to
think about his offer. After two weeks, advertising staff
from Respublika approached Voishka, who said Pfizer had
nothing to advertise. Shortly after that, Respublika carried
an article about people dying from Viagra, one of Pfizer's
products. The paper followed up with stories about Pfizer
charging too much for its products, taking advantage of poor
hospital patients and sick people. They put Voishka's
picture on the front page.


8. (C) Respublika ran an article that said Voishka beat up a
child (he had, in fact, had an altercation with a
neighborhood boy). Respublika sent the article to Pfizer's

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headquarters. When the Prosecutor's office and Pfizer's
internal investigations cleared him of any wrongdoing in the
incident, Respublika claimed that Voishka had bribed
Lithuanian officials and Pfizer management. Another story,
published in Respublika and other papers owned by the
Respublika Group, claimed that a Pfizer executive got drunk
with one of the Prime Minister's advisors and, in the wee
hours of the morning, urinated on a restaurant window.
Police came to investigate, the story continued, but the two
drunkards bribed them to avoid arrest. Pfizer investigated,
questioning police and restaurant workers and examining the
scene of the alleged incident. They found no evidence that
the incident occurred.


9. (C) Voishka told us that most American companies are
unwilling to pay bribes to the media, European companies are
a little more willing, and for local companies it is part of
doing business. For example, an executive at a local bank
told us Respublika published several negative articles about
the bank. The bank began paying Respublika for advertising
and the negative press stopped. The bank felt it made the
right choice to play the game.


10. (C Mykolas Katkus, CEO of the Lithuanian affiliate of
the U.S. public relations firm Hill & Knowlton, told us that
media corruption is important, but added that perception of
corruption is equally or more important. He said that many
people suspect that any positive or negative article is
either paid for or an attempt at blackmail. Katkus added
that, ten years ago, the media was the most trusted
institution in Lithuania, with approval ratings in the high
70 percent range -- more trusted than the Catholic Church --
and now it is one of the least trusted institutions, with
ratings around 40 percent.


11. (C) Voishka and others, including Katkus, worry about the
role of Lithuanian "oligarchs" in many business sectors,
including media ownership. Voishka noted that the biggest
companies in Lithuania are small by international standards,
but in Lithuania (population 3.4 million) they are
proportionately larger than their infamous counterparts in
Russia or other countries. Voishka added that Lithuanian
oligarchs are keen to limit foreign entry into media in
particular and business in general. Until recently, the
regional daily Kauno Diena was owned by a Norwegian group and
it was, according to the PM's adviser Kavaliauskas, "the only
objective paper in the country." Recently it was bought by
local firm Hermes Capital, and, Kavaliauskas feels, it joined
the lowest common denominator approach to media, with
apparently purchased articles and biased reporting. (Note:
We agree.) Katkus, the PR company CEO, told us that the
media business model in Lithuania trades short term financial
gains for long term losses in credibility. The only major
media outlet in Lithuania with foreign ownership is the
business daily, Verslo Zinios, which is owned by a Swedish
firm.

A journalist's view
--------------


12. (C) Kristina Kuncinskaite Grudiene, a journalist who
worked for Respublika for 8 years and now works for TV3, told
us that owners are the problem and journalists work under
very bad conditions, including a low basic salary and a
constant fear of firing. At Respublika, staff assume that
management often eavesdrops on all phones. Grudiene told us
that Tomkus, Respublika's owner, often comes to the office
late at night to nix any story he does not like. Staff are
constantly trying to write stories that will please and not
offend him. Grudiene told us that Tomkus once fired 20
people for running a story he did not like.


13. (C) Tomkus's capriciousness extends to attacks on
businesses. Respublika was a long time sponsor of the
Zalgiris basketball team, but in May he told Grudiene to
resign for writing a neutral story about the team's proposed
new stadium. Apparently, she told us, Tomkus had recently
received some bad financial news and the same day Zalgiris
approached him for sponsorship money. His petty response for
bad timing was a negative story in the press. Usually,
though, attacks on businesses are about advertising money.
Grudiene told us that earlier this year Respublika ran
several articles criticizing Mercedes cars when Mercedes'
local affiliate did not renew its advertising contract with
Respublika.

Critics beware
--------------


14. (U) Rytis Juozapavicius, a former journalist and current
head of Transparency International (TI) in Lithuania, is a
vocal critic of media corruption. TI recently did a survey

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of over 500 business leaders (owners, CEOs, etc.) to learn
about their perceptions of and experiences with the media.
It found that: 91 percent of business leaders surveyed
believe the media has the power to destroy businesses; 63
percent said they were "aware of the existence of paid
slander against companies and/or individuals" in the media;
and 43 percent said that when they purchased advertising with
national newspapers, it also meant favorable publicity in
addition to advertising.


15. (U) Several media outlets, especially the weekly Ekstra,
a supplement to the national daily Lietuvos Rytas, regularly
attack Juozapavicius and TI. Stories have insinuated that TI
board members are linked with the mafia. Ekstra also alleged
in one story that Juozapavicius tried to bribe a journalist
by offering a laptop computer in exchange for advertising a
certain company on television.

Glimmers of hope: legislation, internet, new owners
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16. (C) TI has worked with the Journalists and Publishers
Ethics Commission, the Inspector of Journalists Ethics, and
the Lithuanian Journalists Union to draft legislation that
they hope the Government will bring to the Parliament in fall

2007. Currently, most media pay a Value Added Tax charge of
five percent, far less than the 18 percent other businesses
pay for most items. The draft legislation proposes that
media sources that the Journalist and Publishers Ethics
Commission finds in violation of the Journalists' Code of
Ethics would lose this privilege and be charged the 18
percent VAT. The 18 percent VAT would also apply to
pornographic, violent, or majority advertising (80 percent or
more of the publication is ads) media. Juozapavicius,
however, fears the bill is unlikely to pass and that MPs who
support it would face pressure from the media lobby as well
as attacks in the mass media.


17. (C) Since owners are the major source of corruption, a
change in ownership could bring a rapid improvement in
Lithuanian media. However, media owners seem to prize the
power they wield. If anything, the trend in Lithuania is for
large companies -- MG Baltic, Hermes Capital, Achema Group --
to consolidate media ownership. The worst offender,
Respublika Group, remains strong. Despite a decline in sales
of its flagship daily Respublika, its tabloid Vakaro Zinios
is the best selling newspaper in the country.


18. (U) Alternative forms of media are gaining in popularity,
in particular internet news portals and the free wire
service-based daily 15 Minutes. These sources of news seem
relatively free of hidden paid advertising and are less
biased than their print counterparts. They are not strong
enough to dispel the influence of the major print media,
however.

Comment
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19. (C) A combination of increased foreign ownership, an
improved legal framework, and alternative media, such as
internet news portals, could reduce media corruption in
Lithuania, but such a combination is unlikely to happen soon.
In the meantime, the media will continue to be a menace that
serves the few at the expense of the many -- including U.S.
businesses in Lithuania. Post has worked to improve the
situation by sponsoring International Visitor programs, the
Ambassador hosting a recent round table discussion with young
journalists, and meeting with Government regulators and
relevant civil society groups. We will continue with these
efforts and will look for ways to encourage the Government to
draft stronger legislation.
LEADER