#6 - JRL 7303
The Russia Journal
August 28, 2003
MORE PIES, LESS BLACK EYES FROM THE RUSSIAN OLIGARCHS
By John Helmer
When Russians gather to drink, they often offer each other a traditional rhyming toast that can be roughly translated as: "May we have more pies and doughnuts, fewer black eyes and bruises!" It's a formula which Russia's most powerful businessmen have been quietly offering the advertising-starved managements of some of the world's leading newspapers, in order to play down, if not deter altogether, investigative reporting of Russia's corporate malpractice.
The formula usually begins with a black eye or bruise in the form of a defamation writ, served up in London, Paris, New York, or Frankfurt by a well-known local law firm. The pattern began with a suit by the discredited media oligarch, Vladimir Gusinsky, against the Wall Street Journal; Gusinsky is currently sitting in an Athens prison awaiting a hearing on an extradition request from Moscow. That media support for his plight has been muted indicates how little he has been paying to the media since he was forced into exile.
Gusinsky's ploy against the Wall Street Journal was followed by Boris Berezovsky against Forbes. Mikhail Khodorkovsky, the principal shareholder of Yukos, Russia's leading oil company, then sued the Times of London. Oleg Deripaska, an oligarch who is waging hotly contested takeover battles in several sectors at once, including paper and pulp and insurance, is currently suing Le Monde in Paris and Frankfurter Allgemeine Zeitung in Frankfurt. Mikhail Fridman, a banking and oil oligarch, some of whose companies are currently being sold to British Petroleum, is suing Les Echos, France's leading financial daily, and Le Parisien.
None of these cases has gone to final judgement; almost none to trial. That's because, once the lawsuit is launched, the pies and doughnuts are put on the table. A European lawyer involved in one of the current cases explains there are a variety of inducements, aimed primarily at the revenue management of the newspaper, especially its advertising executives; and sometimes also at the law firms that are engaged. In one case, the source said, it was discreetly suggested to his law firm that a lucrative piece of legal due diligence might be placed in the firm's way if it either pulled out of the newspaper's defence, or recommended an out of court settlement to the client. In other cases, the investigative reporters whose stories incurred Russian wrath, concede the concern that their editors may be pressured by the management to abandon the defence of what they reported, notwithstanding the management's belief in its truthfulness. Editors profess that their reputation for independence is as valued by their advertisers as by their readers, and is supported by a strict separation of editorial from advertising. But they aren't present when their admen make their deals. And they are in the dark about the private relationships of their reporters in Russia. They can hardly ban unmarried correspondents from sleeping with PR agents of firms they write about. Nor do they always know what benefits may flow from their reporters' despatches to their spouses' businesses. Such ignorance or naivety in the United States or Europe is viewed as an asset by Moscow's PR professionals.
In most of the international media cases that have been started to date, relatively mild, even generous out of court settlement terms have been proffered on the basis of an understanding that, for the future, the Russian oligarch and his companies can be counted on to be generous with advertising and promotional contracts, so long as the newspaper's reporting avoids the type of investigation that leads to reputational problems for the oligarch and his companies in the loan, bond, and stock markets. While the media budgets of the major Russian companies are estimated in the double-digit millions of dollars per annum at the moment, the calculation in Moscow is that if the result is a raising of credit ratings and a lowering of charges to hedge against Russian risk, then the money is a good investment, and litigating against media good business. When settlements are protected by confidentiality agreements, of the type Khodorkovsky struck with the London Times, nothing but the positive coverage is visible. You can't see the chilling effect on what isn't published. This has enabled Khodorkovsky to deflect much of the force of the current prosecutorial attack on his imprisoned partner, Platon Lebedev, and his Menatep holding, by having the western media endlessly sing the tune that what is happening is a political conspiracy against the blameless, not a criminal case against the culpable.
The spread of oligarch lawsuits across Europe, and the distribution of their largesse, have produced a serious problem of divided loyalty for English-language and other international editors. On the one hand, the charges against the Russian oligarchs are serious; and if they succumb to them, the media should welcome the chance to be free to report the impact on Russia's economic welfare, as they see fit. On the other hand, if the oligarchs survive, there is the risk they will take their revenge on those who bit the hands that fed them.
One way out was suggested by recent coverage from The Moscow Times, a newspaper controlled by mining and banking oligarch, Vladimir Potanin. After promoting Potanin's latest ventures in its news columns, the Times ran a commentary by Lilia Shevtsova, a Moscow political scientist, who claims that the oligarchs really don't exist; their power is a figment of a policeman's imagination; and the downfall of Khodorkovsky is threatened simply because his was "the first Russian company that started to look for legitimacy, not through maintaining cozy relations with the [government] apparatus, but by making the switch to transparency and legality." If this Washington-funded commentator is to be believed, nothing more nor less than "a cornered and exasperated" President Vladimir Putin is to blame for getting in the way of such benign pro-western standards.
Inside Russia, domestic journalists have less illusions about the reality of the oligarchs. That is because they have been on the receiving end of attacks that are less discreet, more ruthless, mainly because the local courts can be easily bought by the plaintiffs, and the evidence just as easily corrupted. An experienced Russian trial attorney explains that when he deals with judges, he makes them an offer he believes they won't refuse. If bribes are to be paid, he counsels, the judge should decide which side to be on. "Take from us, or not at all", the attorney claims he says. When under-capitalized and uninsured Russian newspapers find themselves up against the deep pockets of the Russian oligarchs, they reckon they have no defence. Deripaska, for example, has threatened legal action against several Russian publications, including Expert, a business magazine; Novaya Gazeta, an investigative journal; and The Russia Journal, the leading English-language business publication.
Recently, Sberbank, the state-owned savings and investment bank, went to a Moscow court, claiming that one of its board directors had defamed the bank by statements which were published in several local newspapers. The court found in favour of the bank. The bank declared it 'will not tolerate unjustified criticism, and in the future will firmly and consistently defend its interests by all means, including legal actions." Not for Russia is the doctrine, enshrined in most legal codes abroad, that public officials cannot resort to the defamation law when their public performance is the subject of public criticism.
At his annual open press conference, President Putin defended his record of handling the oligarchs by saying that "probably everyone involved in business always looks for ways to earn more money, and to do this as effectively and cheaply as possible. Society's task, our common task - because both the state and the media should keep a very close eye on this - is to make sure this situation does not arise in the country."
For the Russian oligarchs, the cheapest way of neutralizing the local and international media is not to buy them - that costly exercise was abandoned in the financial collapse of 1998 - but to frighten them; and then to make them an offer they are only too relieved to accept. For western and Russian reporters and commentators on the short leash, it is fanciful to claim that noone is pulling at the other end.
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