Erdogan Takes on Media Mogul Political Feud in Turkey Scares Off Foreign Investors

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Part 2: 'Tayyip Bey, Stop Harassing Us'

Yasemin Congar, 42, is not convinced that Erdogan aims to launch a general assault on the freedom of the press. If he did, she too would be in a tight spot. Congar is the editor-in-chief of the independent daily Taraf, which has taken on both the government and the military. As a precaution, the paper's offices are located in a building that houses a busy bookstore with 24-hour security.

Erdogan has not forgotten the role that Dogan's newspapers played in 1997 in helping to support the military coup against the Islamist government of Necmettin Erbakan, says Congar. "Dogan is a symbol," she adds. The media mogul is also occasionally maligned for supposedly having once received a former prime minister at his villa wearing pajamas. One of his friends insists that there is nothing to the rumor. Nevertheless, the anecdote continues to be repeated, including by Erdogan himself.

In the eyes of critics, the Dogan Group's newspapers and television stations are powerful instruments for asserting the group's industrial interests. Dogan, whose name translates as "falcon," owns the country's biggest oil company, car dealerships, travel agencies, insurance companies and organic farms.

"I could be richer if I weren't a publisher," says Dogan. Nevertheless, he is now using his media outlets to defend himself against Erdogan's attacks. Last September, Dogan had himself interviewed in a special broadcast on his own station, Kanal D. "Tayyip Bey, stop harassing us," a hoarse and visibly emotional Dogan said, addressing the prime minister.

Prior to the broadcast, Erdogan's tax authorities had unleashed 10 auditors on the media holding company, the headquarters of Hürriyet and the glass-walled broadcast center in Istanbul's Bagcilar district. Dogan's executives were not told the reasons for the unannounced visit. Instead, the auditors spent months investigating the companies. New audit reports have arrived continuously since December and a total of 20 reports have been released until now. The penalty has increased to at least €380 million ($513 million), which exceeds the market value of the entire media division. The most serious charge is that Dogan committed tax evasion when he sold a quarter of his TV shares to Germany's Axel Springer publishing house in early 2007.

Dogan did pay millions in taxes on the proceeds. However, the tax authority found that the group should have paid taxes on the transaction earlier and therefore could not claim the usual exemptions. Dogan and Springer announced their deal, worth €375 million ($506 million) in November 2006. But the two sides did not finalize the contract and exchange shares for money until Jan. 2, 2007. In other words, the deal was not sealed until then.

In addition to the full tax, the agency is now demanding a fine equal to more than five times the amount of tax supposedly owed, as well as suddenly ordering Dogan to pay value-added tax on other sales of stock from previous years. Those sales, even according to the official interpretation, were considered tax-exempt in Turkey until now.

Pending a court's decision resolving the issue, Dogan offered a large proportion of his shares and his stations' trademark rights as security. But the tax authority turned down his proposal and instead ordered his holding company's bank accounts frozen. "If they want to force us into bankruptcy, they should say so," says Mehmet Ali Yalcindag, the head of the media company and the patriarch's son-in-law.

"Turkey needs tax reform. The tax audit is not independent, but is instead under the direct control of the Finance Ministry," says Arzuhan Dogan-Yalcindag, the chairwoman of the Turkish Industrialists and Businessmen's Association (TÜSIAD). She is also Dogan's daughter and is married to Yalcindag.

She knows that her name makes it easy for the administration to downplay criticism coming from TÜSIAD as lobbying for the family business. But even the International Monetary Fund has made greater independence of Turkey's regulatory agencies one of the conditions for an urgently needed $20 billion (€14.8 billion) loan. Erdogan, calling the IMF's demands unacceptable, has so far turned down the offer.

Aydin Dogan refuses to capitulate. "I have faith in the judges and am proud of my country," he says. He is so proud, in fact, that he displays documents in his office that demonstrate that he has been Turkey's biggest taxpayer for years. They are on a wall directly opposite the windowsill where Dogan displays his photos of Tayyip Erdogan.

Translated from the German by Christopher Sultan


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