After Public Bank Loan, Ethical Questions Taint Dogan Media Sale

A controversial bid for media purchase in 1999 sealed downfall of a government. Today, it proceeded without a problem.

In early 1999, the coalition government led by then-Prime Minister Mesut Yilmaz abruptly crumbled with a vote of no confidence in Parliament after an audio tape linking the prime minister to a corruption scheme leaked to media.

According to police records, the prime minister was exhorting businessman Korkmaz Yigit who had connections to organized crime to buy newspapers Milliyet and YeniYuzyil, apart from recently privatized Turkbank in a public tender. To nudge the businessman to budge, the prime minister even promised a sweetened loan worthy of $25 million from a public bank. What he expected in return was favorable media coverage by those newspapers after the supposed acquisition.

Wounded beyond measure, the embattled prime minister, instead, saw his downfall sealed by the tape saga. Not surprisingly, the incident went down in the history of relations between media and government as a high-water mark of corruption.

The aborted deal in 1999 loomed large in collective consciousness again when a pro-government conglomerate last month secured the acquisition of Dogan media outlets in a murky deal.

An ocean of skepticism is warranted after the move, with main opposition Republican People’s Party (CHP) urging Turkey’s anti-trust body to either bust or prune the acquisition over concerns of monopoly accumulated by a single media conglomerate that would stamp fair competition.

After the agreement, 21 of Turkey’s 29 daily newspapers will be under the control of companies affiliated with President Recep Tayyip Erdogan, according to the Birgun daily.

But calls from opposition parties fell on deaf ears on the side of authorities who appeared to have given go-ahead for the sale.

Demiroren Group, Dogan media, Hurriyet, Aydin Dogan, Erdogan, Mesut Yilmaz
Yildirim Demiroren (2nd-L) and Aydin Dogan at a ceremony to finalize the sale of Dogan media group.

Yildirim Demiroren, representing his father Erdogan Demiroren, and Aydin Dogan, a media baron whose presence in media world span four decades, signed the final deal at a ceremony at Hurriyet headquarters in Istanbul on Monday.

In his initial comments on why he finally gave up media ownership, Dogan said it was not an easy decision to come to this point. After weighing pros and cons of maintaining media assets, he decided to quit the sector, he told T24 news web portal last month.

During the ceremony, the media mogul, 81, expressed fatigue in a sector riven by bitter rivalry among barons, endless pressure by political authorities and ever-present economic challenges. He also said he lost his entire appetite and passion for the business.

During the handover ceremony, Hurriyet Editor-in-Chief Fikret Bila savored the event as marking the history of the Turkish press.

But weeks after the first announcement of the negotiations hovering around Dogan’s market value of $890 million, ethical questions abounded how Demiroren Group would finance the acquisition given its fleeting financial status in general. The final amount of the sale was announced to be $1,2 billion.

Further questions tainted the deal when media reports suggested that Demiroren Group sealed a favorable loan worthy of $675 million with low interest from the state-owned Ziraatbank to cover the cost. The loan was approved by the executive board of Ziraatbank on April 5.

According to Turkish media, the repayment of the loan was structured in a way that defied the normal working and regulations of Ziraatbank. Demiroren Group is expected to pay back the loan to the bank within 10 years and will not make any payment in first two years.

AKP Gov’t Abuses Public Banks For Media Business

But the controversial Dogan sale is not the first of its kind. Rather it has historical precedents under this government.

The Justice and Development Party (AKP) government allowed public banks to offer lucrative loan deals to friendly businessmen in media purchases. It bent the banking regulations to its will, conducting policies in a way that stamped out established norms that governed Turkey’s institutions.

In the mid-2000s, the AKP government was barging its way into media business through its cronies. Then-Prime Minister Erdogan encouraged his associates and friends to take over media companies wavering on the verge of collapse. Apart from showering his allies with largesse through sweetened deals, the prime minister also deftly used the Saving Deposits Insurances Fund (TMSF), a government agency, as a political weapon to design media landscape to his liking.

The first political involvement in a large-scale media sale was the case of ATV-Sabah Group in 2008. After businessman Turgay Ciner reneged on the terms of his purchase of the group from former boss Dinc Bilgin, TMSF seized Sabah-ATV.

Ahmet Calik, an Erdogan stooge whose Calik Business Group one of the fast flourishing business enterprises in the country thanks to its affiliation with Erdogan’s government, stepped in and bought Sabah-ATV from TMSF.  But to cover the cost of the purchase, $1,1 billion, he was also able to secure two $375 million loans from government-run Halkbank and Vakifbank. He was granted $750 million loans in total from those banks. He found other sources to compensate the rest.

The deal stirred heated debates in 2008 over the use of public banks for a pro-government businessman to extend the government grip over media.  The businessman sold the media outlets in 2013 to another pro-Erdogan business group, Kalyon Group, in a similar mechanism that steered the handover process.

Kalyon Group also benefited loans from public banks during the purchase.

The Hurriyet and other Dogan media outlets, CNN Turk, Dogan News Agency, were seen as the central pillars of mainstream media. Dogan already sold Milliyet and Vatan newspapers to Demiroren Group in a $74 million deal well under its market value in 2011.

Majority of Turkey’s media outlets were systematically hollowed out by political authorities over the past years. Most recently, they were either forced to co-opt or compromised with the government line in their editorial policies. Apart from shaping media world through purchases, the government also directly took control over opposition newspapers in brazen seizures that began before the 2016 coup attempt.

In a string of seizures, the government took ownership of Bugun, Millet, Zaman, Today’s Zaman newspapers directly under its control and shut down more than 180 media outlets, including these ones, in the aftermath of the coup.

According to Turkish Journalists Association, 154 journalists are in prison in Turkey.

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