09 February 2010

The Imedi Ownership Scandal: Is State Control over National TV Becoming Clearer?

One of the most sustained criticisms of Georgian democracy is that the government has nontransparently wrested control and/or ownership over the two most professional television channels in Georgia, the private nationally broadcast Rustavi-2 and Imedi, which together enjoy over 60 percent of the market share of Georgian broadcast television and, according to a 2009 poll by the Caucasus Research Resource Centers, enjoy at least some trust among 59 percent of the population (while more than 50 percent of respondents trusted the two stations enough to opt for a response of at least 7 on a 10-point scale).

In recent months, however, Rustavi-2 and Imedi have come to look like identical franchises, utilizing the same journalistsincorrect news stories, and innuendo. It has also come to light that the government provides unspecified "state aid" to the broadcast media: the government says that Foreign Minister Grigol Vashadze's October 2009 reference to such aid in front of a London audience concerned only legal guarantees and tax breaks. Unrelatedly, the NGO Transparency International Georgia has observed that the 2008 revenues reported by all private, non-satellite television stations amounted to between double and triple their estimated advertising revenues, a gap it attributes to subsidies from "unknown sources" (which, presumably, could be owners, the state, or others who "order" media stories and coverage).

A perhaps not so coincidental set of circumstances last week has highlighted this issue of nontransparent ownership of Georgia's influential private broadcast stations, as well as the need to clarify the state's role in Imedi and Rustavi-2 in advance of the upcoming local election campaign (since most of the country gets its news from these national private stations).

The circumstances pertain to the ownership of Imedi, established by the late Badri Patarkatsishvili, a Georgian oligarch who openly turned against the government in 2007, using his finances and media holdings to promote mass demonstrations in favor of Saakashvili's resignation. Now, Joseph Kay, an (alleged) half-cousin that arrived in Georgia brandishing a power of attorney giving him the right to manage the deceased Patarkatsishvili's holdings, seems to have faced negative verdicts in three European courts against his claims to be a rightful executor of Patarkatsishvili's estate. More strikingly, a United Arab Emirates' investment company, to which Kay reportedly sold a 90% stake in Imedi in February last year and which is one of Georgia's biggest foreign investors, has unexpectedly denied ownership of Imedi, saying it doesn't know who its owner is.

Let me back up a few steps. In November 2007, Badri Patarkatsishvili swore to spend every "last [cent]... to liberate Georgia from this fascist regime," enraged as he was at the violent dispersal of protestors. Authorities subsequently shut down Imedi, froze Patarkatsishvili's assets, and accused him of seeking to overthrow the government (he later died of a heart attack, after an unsuccessful January 2008 bid for the presidency). Against the objections of Patarkatsishvili's widow, daughter, and sister, Joseph Kay (aka Kakalashvili) acquired control over Imedi, an acquisition that was upheld by the Tbilisi city court.

If the arrival on the scene of the locally unknown Joseph Kay wasn't enough to raise suspicions of murky dealings, less than a year later Kay said he sold 90 percent of his shares to RAK Georgia Holding, an affiliate of Rakeen Georgia, the local branch of the "property development arm" of RAKIA, the investment authority of Ras Al-Khaimah, one of the United Arab Emirates and a major investor in Georgia (which has a long-term management concession in Georgia's Poti port and reportedly leased a Tbilisi amusement park previously developed by Patarkatsishvili -- at least until his forty-nine year contract was cancelled after November 2007).

It was then announced that the new general director overseeing the finances of the Imedi media group would be Giorgi Arveladze, a longtime associate of Saakashvili, with past positions as secretary general of the United National Movement, the president's chief of staff, and minister of economic development.

So what has happened in recent days? First, the lawyers of Patarkatsishvili's family have issued a statement saying that courts in London, Gibraltar, and Lichtenstein have determined that Kay's claims to control various of Patarkatsishvili's properties are suspect. The statement says that the rulings include orders to freeze Kay's assets. (I have not seen independent accounts of the rulings, and Kay's lawyers have previously disputed the family's interpretation of court rulings.)

Second, in an interview with the English-language Abu Dhabi newspaper The National, RAKIA CEO and Rakeen executive chairman Khater Massaad denied that any firm related to either company owned Imedi -- the first disavowal of its kind since Joseph Kay and one Mark Monem, claiming to represent RAK Georgia Holding, held a press conference in February 2009 to report the sale, which the Georgian president's press office reportedly confirmed later that month.

How did Massaad explain the confusion? “There is somebody in Georgia who has created his own company with the name RAK Georgia Holding....This company exists indeed. But we have nothing to do with it. The problem is that I have not registered the name RAK as a brand.”

Indeed. So someone stole the RAK brand and, with the connivance of Joseph Kay, pretended that they purchased Imedi as a representative of Ras al Khaimah, one of Georgia's largest investors? And the emirate's investment companies didn't bother to correct this blatant misrepresentation? And the Georgian government went along with it? And then a ruling party stalwart took control of the media holding under the new ownership and allowed the misrepresentation to continue?

Actually, Transparency International Georgia unveiled a hint at the end of last year that this is, indeed, what happened -- even though neither they nor anyone else noticed at the time. In a report on television ownership, control, and regulation, TI Georgia indicated that the 90% owner of Imedi's parent company, according to Imedi's lawyer, was RAAK Georgia Holding, with two "As," a misspelling that, given the recent revelation, appears to have been an attempt to intentionally misrepresent the ownership of the company while avoiding any potential legal trouble.

But now that Joseph Kay may be running into legal trouble elsewhere, there is a chance that the new owners may not be as successful as they had hoped. At a minimum, the affair confirms suspicions about Joseph Kay which Georgia's courts must now find impossible to ignore with regard to his initial acquisition of Imedi.

For that matter, someone should ask Giorgi Arveladze, the Georgian National Communications Commission, the presidential press office, and any other official personnel or structures that have referred to Ras al Khaimah as the owner of Imedi what they have or haven't known about Ras al Khaimah's (non-)involvement in the purchase of Imedi; why Joseph Kay and "RAAK Georgia Holding" have never been taken to task for their misrepresentation; whether such misrepresentation has any legal consequences in Georgia; and, finally, who really owns Imedi.

Next up: Rustavi-2.