INDEPENDENT NEWS

Cablegate: Sentencing of Turkey,S 2nd Richest Man and Media

Published: Fri 12 Feb 2010 01:26 PM
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TAGS: ECON EINV ETRD EFIN PGOV PREL PHUM TU
SUBJECT: SENTENCING OF TURKEY,S 2ND RICHEST MAN AND MEDIA
MOGUL NOT SEEN AS POLITICAL
REF: 09 ANKARA 1705
1. (U) On February 10 Mehmet Emin Karamehmet, President of
Cukurova Holding, was sentenced to 11 years and eight months
of jail for embezzlement by Istanbul's Heavy Penal Court.
Known as Turkey's second richest man, Karamehmet was
convicted of embezzling funds from Pamukbank, a bank he owned
before it was seized by the Savings, Deposits, and Insurance
Fund (TMSF) in 2002 due to a US $2 billion capital shortfall.
The Istanbul court also fined him 472 million Turkish Lira
(nearly US $312 million) for misusing loans provided by the
bank. The court case against Karamehmet was opened six years
ago in response to complaints from the Turkish Banking
Regulatory and Auditing Board (BDDK) and the TMSF.
Karamehmet is expected to appeal to the Higher Court of
Appeals.
2. (U) The Cukurova Group's business activities range from
media and telecommunications to energy, transportation, and
finance. The Group's Genel Enerji company is very active in
northern Iraq. The group owns a number of media companies
including Aksam and Tercuman newspapers, Show TV, and
Digiturk cable. Although Aksam is more mainstream, Tercuman
is considered ultra-nationalist and anti-government.
Tercuman's former editor-in-chief, Ufuk Buyukcelebi, was
briefly detained during a round of Ergenekon raids in 2008.
Presently, the media is not portraying the sentencing of
Karamehmet as politically motivated, in contrast to much of
its reaction to the government's tax case against rival Dogan
holding (reftel). The media instead has focused on the
financial difficulties of tycoon Karamehmet, who has long
eschewed the public limelight. (Note: Journalist contacts at
Aksam have told us that they had not been paid for three
months, while Digiturk seemed to be able to afford a US $1.5B
five-year bid for premier
football league broadcast rights).
3. (SBU) Comment: The Cukurova Group's evident economic
problems and its comparatively less controversial media
influence lead us to caution against assuming that Karamehmet
is another Dogan. This case instead arises from the 2001
Turkish financial crisis, which was triggered in part by
Turkey's then-poorly regulated banks making huge,
non-collateralized loans to owners like Karamehmet that were
never repaid. Interbank, another Cukurova Group bank, failed
in 1999. Pamukbank went under early in 2002 after its assets
were distributed (via unpaid loans) to various Cukurova Group
companies. The GOT spent US $43 billion to restructure its
financial system after the crisis. Part of that process -
done with IMF and World Bank help - involved taking over 23
bankrupt banks, including Pamukbank. The Karamehmet
prosecution grew out of that clean up process. However, as
one of post's investment analyst contacts notes, such cases
will not make attracting foreign investment any easier. End
Comment.
WIENER
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