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ORT
I. News on
Law Developments.
The State Duma has passed the first reading of a
bill forbidding the transfer of ORT shares to foreign
states, organizations, legal entities, or private
persons.
On
March 5, the State Duma passed the first reading of the
bill “On the specifics of control of shares of
ORT.”
The
document proposes to establish that the sale, use as
collateral, or other transfer of control of the 51% stake
in ORT currently held by the government be permitted only
upon passage of a new federal law.
The
bill also proposes to prohibit transfer of any ORT shares
to foreign states, organizations, legal entities, or
private persons.
In
presenting the project, Gennady Volkov, deputy chairman
of the Duma Committee on Information Policy and
Communications, announced that the government (cabinet of
ministers) looked favorably on the bill. At the
same time, he noted that there are also negative
conclusions and proposed amendments to the document.
In
particular, the Ministry of State Property’s
opposition to the bill is well known.
As a
result, it was proposed that deputies decline the
original intention of immediately approving the bill in
all three readings simultaneously, and the document was
passed only in the first reading.
Duma
chairman Gennady Seleznev suggested that the bill’s
sponsors—members of the Committee on Information
Policy and Communications—speed up preparation of
the bill for its second reading.
ORT General Director Igor Shabdurasulov believes that the
bill “On the specifics of control of shares of
ORT” “does not stand up to any criticism from a
legally pure point of view.
According
to Shabdurasulov, “The current version of the bill
contradicts individual resolutions of the Constitution,
the Civil Code of the Russian Federation, and the law on
joint stock companies.”
He
expressed regret that deputies so easily believed the
framers of the bill, and that, despite “the
bill’s obvious legal impropriety,” it received
a favorable evaluation from the government (cabinet of
ministers).
In
Shabdurasulov’s opinion, the law does not pose any
fundamental problems for the functioning of ORT. He
noted, however, that if the bill in its current form is
passed by the Duma in all three readings, “the
Federation Council and the President will have their
say.”
ORT
does not intend to appeal to the Duma or the government
with evidence of the bill’s legal impropriety.
At
the same time, Shabdurasulov announced that if he is
invited to the Duma Council or the Duma’s plenary
session, he will definitely accept the invitation and
present his arguments to the deputies.
The
President will support limits on the control of ORT
shares.
The
presidential administration has no serious objections to
the law “On the specifics of control of shares of
ORT” that was approved by the Duma in its first
reading. The document needs some legal touching up,
but will be supported fundamentally, said a source in the
presidential administration.
The
President will not sign the law on a council on ethics
and morals.
On
March 10, the State Duma passed the bill on “A
higher council on ethics and morals in the sphere of
cinema and television and radio broadcasting.” In
accordance with regulations, in the next few days the
document will be sent to the Federation Council for
review.
While
the senators’ opinion of the document is still
unknown, the Information Directorate of the presidential
administration, during the Duma’s second reading of
the bill, announced that it is doubtful that the
President will support the law.
From the
files of Teleskop: The law in question proposes the
creation of a 12-person council composed of
representatives of the president, both houses of
parliament, and the cabinet of ministers. The
council would see to it that TV channels did not provoke
people to commit crimes, that there would be no programs
that provoked violence, and that war and national
division would not be propagandized. So that the
Council’s decisions will have some potency, it would
have the right to decide punishments for violators,
including imposition of fines (from 1000-5000 minimum
wages), and recommendation for replacement of channel
heads. The council would not impose the punishments
itself, but the executive agencies of the government
would be obligated to implement its decisions.
Teleskop, March
9, 1999, available at <http://www.internews.ru/crisis/lawdep1.html>.
II. Duma
approves ban on foreign ownership of ORT.
The State Duma has passed in the first reading a
bill on Russian Public Television shares, prohibiting
sales of shares in the channel to foreigners.
[Correspondent]
Actually, the new bill makes the Russian government
the biggest loser. The draft law prohibits
the granting of loans against the security of Russian
Public TV shares. It is absolutely unclear now how
Vneshekonombank [Bank of Foreign Economic
Activity]—which has already issued the first tranche
of a loan to Russian Public TV—can obtain any
security from the station.
However,
the new bill is unlikely to create any problems for
foreigners, in particular for Australian media mogul
Rupert Murdoch who has his eye on 20 per cent of Russian
Public TV stocks.
Ren TV, Moscow,
March 6, 1999
III. Duma
approves bill on ort broadcasting company shares.
The Russian State Duma on Friday approved in the
first reading with 308 votes a bill concerning the
specifics of managing shares of the ORT broadcasting
company. Shares from the 51% federal stake may be
sold, mortgaged or otherwise disposed of only on the
basis of federal law, the bill states. It also bans
the possession of any ORT shares by any international
organizations, foreign countries, companies or
individuals. Deputy Chairman of the Duma
Information Policy Committee Gennady Volkov (Our Home is
Russia), who presented the bill, said that it has been
evaluated positively by the government. He said
there also had been negative comments on the bill and
amendments to it. Therefore, he suggested dropping the
initial plan of having three simultaneous readings of the
bill, and the bill was approved in just the first
reading.
Interfax news agency,
Moscow, March 5, 1999
IV. ORT
accused of obstructing audit.
On March 2, Khachim Karmokov, chairman of the
Accounting Chamber, accused ORT of obstructing the
Accounting Chamber’s audit of the TV company’s
activity.
“The
management of ORT is trying to prevent auditors from the
Accounting Chamber from reviewing documents. The
managers insist that ORT has no federal property, at a
time when 51% of the channel’s charter capital
belongs to the state. ORT also insists that it does
not receive financing from the federal budget, when the
Accounting Chamber audits show that they are receiving
funds from the budget,” said Khachim Karmokov.
According
to Karmokov, the Accounting Chamber has written documents
attesting to all these facts and sent them to the General
Prosecutor.
ORT
General Director Igor Shabdurasulov denied
Karmokov’s accusations aimed at the company’s
management.
“We
have no federal property, and after 1995 we did not
receive any funds from the federal budget,” said
Shabdurasulov.
According
to Shabdurasulov, the 51% stake in the company, “is
not our property. The entire stake belongs to the
state,” and is held by the State Property Ministry
(45%), the Television Technical Center (3%), and
ITAR-TASS (3%). “Therefore, all questions
regarding the audit of the use of federal property, i.e.,
shares—should be directed to the state
shareholders,” he said.
“As
concerns federal budget funds, I would be happy to see
them, but in the laws on the federal budget in 1996,
1997, 1998 and 1999, no funds were stipulated for
ORT,” Shabdurasulov emphasized.
According
to Shabdurasulov, the last time ORT received federal
budget funds was in 1995, but in that same year, the
Accounting Chamber audited their use. Both ORT and
the Accounting Chamber have documentation of the audit.
The
general director noted that the State Duma, at the end of
last year, passed a resolution providing for an
Accounting Chamber audit of ORT. “On February
3, I met with a group sent by the Accounting Chamber and
expressed the principle position of ORT’s
management,” he said.
As a
result of that meeting, Shabdurasulov noted, a document
was signed establishing that the group from the
Accounting Chamber had come to ORT, and that the
information the group requested had not been
provided. “I signed that document, but at the
same time noted to them that such actions are not in
violation of any articles of the law on the Accounting
Chamber, which is confirmed by a document I have that ORT
received from the General Prosecutor in February of this
year,” said Shabdurasulov.
“The Accounting Chamber tried to audit ORT in
1997,” explained Shabdurasulov. “When
they weren’t provided with the materials, the deputy
chairman of the Accounting Chamber, Yuri Boldyrev,
requested that the General Prosecutor file charges
against then General Director Sergei Blagovolina for
withholding information.”
An
explanation issued by the General Prosecutor in February
and signed by Senior Assistant Arkady Melnikov says that
the General Prosecutor in 1997 declined to pursue a case
in connection with the withholding of information from
the Accounting Chamber, since ORT has no federal property
or budget funds.
ORT’s
temporary external director Pavel Chernovalov plans to
issue notices to the channel’s creditors regarding
the sums owed to them no later than the beginning of this
month.
As
Chernovalov noted in an interview with Interfax-AFI, ORT
has several hundred creditors, including legal entities
and individual entrepreneurs.
In
the meantime, General Director Igor Shabdurasulov
announced that as of January 1, 1999, ORT’s debts
were a little over $100 million.
Speaking
about relations with ORT management, Chernovalov
emphasized that he has established “a working
relationship” with the managers, most of all with
Shabdurasulov. “The monitoring procedure is
proceeding smoothly, in full accordance with the Law on
Bankruptcy,” said Chernovalov.
From
the Teleskop files: The bankruptcy procedure against ORT
was filed by the International Association Chto? Gdye?
Kogda (“What? Where? When?”) on January 19 of
this year. The hearing to resolve the bankruptcy
question is scheduled to take place on April 20.
The Moscow Arbitration Court introduced external
monitoring at ORT, appointing Pavel Chernovalov as
external monitor on January 29.
The
Presidential Administration is prepared to support the
bill “On the specifics of control of ORT
shares.”
The
above news was announced to Interfax by a highly placed
official in the Presidential Administration. He
also noted that according to his information, the
government is not opposed to the bill.
This
information has not yet been confirmed by official
sources.
The
bill was introduced by Oleg Finko (LDPR), chairman of the
Duma Committee for Information Policy and Communications,
and by Deputies Sergei Sukharev (KPRF), Gennady Volkov
(NDR), and Larisa Zlobina (Rossiskiye Regiony). As
Finko announced, at the beginning of March the bill will
be reviewed by the Duma in its first reading, and in his
opinion, it will be approved. With the law,
deputies hope to strengthen the role of the state in
controlling the ORT stakes held as federal property.
In
addition, the Duma has already passed the first reading
of the bill “On confirmation of the list of stock
companies producing products (items, work, services),
having strategic importance for provision of state
security, and on the control of their shares,” which
includes ORT.
In
the meantime, ORT General Director Igor Shabdurasulov
believes the bill, which limits government use of the
state stake in ORT and also forbids the sale of the
company’s shares to foreigners, is “monstrously
ignorant” and contradicts the Constitution, Civil
Code, and Law on Stock Companies.
From
the files of Teleskop: The bill “On the specifics of
control of ORT shares” forbids “use as
collateral, sale, and other forms of control of 51% of
the shares of ORT held as federal property” without
passage of a federal law. In addition, it enjoins
to “forbid transfer to foreign states, international
organizations, foreign legal entities, and private
persons of any shares of ORT.”
Oleg
Finko, head of the Duma Committee for Information Policy
and Communications, plans to continue the fight for
strengthening the influence of legislative power on
ORT’s policy.
At
present, Finko is attempting to convince the government
and Presidential Administration of the necessity of
unifying ORT and VGTRK, so as to consolidate in the hands
of the state the levers of control of the main TV
channels, which should express the opinion of the
president, government, and parliament. The
unification should also improve the material-technical
and financial position of both TV companies.
After
the withdrawal of General Prosecutor Yuri Skuratov, Finko
plans to return to the question of re-examining the
results of the privatization of ORT, during which, in the
opinion of the deputy, a number of serious violations
were committed. Finko’s attempt to re-examine
the results of the privatization in Fall of last year was
unsucessful.
Teleskop, March
3, 1999, available at <http://www.internews.ru/crisis/audit.html>.
V.
Murdoch’s Russian media plans said to be suspended.
A “source close to Murdoch” told an
ITAR-TASS correspondent that the Australian media
magnate’s Russian project has been put on ice.
Murdoch has opted instead for French television’s
Canal+, with which Murdoch’s BSkyB company has begun
secret negotiations. Viktoriya Arutyunova discusses
the possible reasons for Murdoch’s change of plan.
There may be several reasons why Murdoch has
suddenly cooled towards Russia. The first and, let
us say, strangest reason is set out in an ITAR-TASS
report: It is utterly impossible to see how the
mysterious Russian project could prevent a partnership
between BSkyB and Canal+. It is also unclear which
of Murdoch’s Russian projects we are talking
about: The television project involving TV-6, the
long-standing commercial project with LogoVAZ, or the
most recent advertising project with ORT, LogoVAZ and
TV-6.
Remember
that the announcement of the establishment in Russia of
an advertising holding company involving Murdoch’s
News Corp and the three aforementioned companies caused a
stir in the television and advertising market.
Specialists in the advertising sphere said that
everything would be ready by May to set up the holding
company. But Rupert Murdoch decided not to rush
into it.
The
second reason for putting the project on ice may be the
fact that the Duma was about to adopt a law “On
particular ways of disposing of ORT shares,” banning
their transfer to foreign states, international
organizations, and foreign corporate bodies and
individuals. There is another possible
reason: Boris Berezovskiy, the main ORT
shareholder, has entered another major dispute with the
Russian government.
All
this is entirely likely but the news that the Russian
project has been put on ice could indicate not so much a
desire on the magnate’s part to get out of Russia as
his intention to alleviate the consequences of the fact
that the ORT management announced the beginning of
cooperation with Murdoch long before the preliminary
agreements with News Corp were even signed.
Clearly, ORT’s aim was to stabilize the advertising
market. But it had exactly the opposite
effect. So the statement by a “source close to
Murdoch” was merely an attempt to calm the deputies
and the public keeping an eagle-eye on the transfer of
shares in ORT.
Finally,
we know that each deal takes the Murdoch corporation
experts several months, sometimes years to prepare.
We can assume that Murdoch’s cautious advisers saw
fit to delay final decisions on Russia and see how strong
Berezovskiy’s positions, which have been pretty
rocky of late, are.
But
not wanting to waste any time, for now they are
concentrating on the next project on the Murdoch list
after ORT and TV-6—Canal+.
‘Kommersant,’
Moscow, February 26, 1999
VI. ORT TV:
company stock not for sale.
Russian Public Radio and Television (ORT) Director
General Igor Shabdurasulov has strongly denied the
possibility of selling the company’s stock in the
wake of setting up a joint advertising company by ORT,
LogoVAZ, TV-6 and Rupert Murdoch’s News
Corporation. “The formation of a joint
advertising company does not imply interference with the
interests of its founders,” he told Interfax
Friday. Talks, the drafting of founding documents
and clarification of the rights and duties of the
founders are underway, Shabdurasulov said. “I
am not sure how long this process will take, but the
implementation stage must still be far off since I would
be involved in it,” he said. The Duma bill on
the specifics of managing ORT shares that reduces the use
of the state stock by the Cabinet and banning the sale of
the stock to foreigners is pitifully out of touch and
inconsistent with the constitution, civil code and the
law on joint stock companies, Shabdurasulov said.
He was perplexed by a letter to the Duma, signed by
Deputy Prime Minister Valentina Matviyenko, saying that
the Cabinet does not object to the bill.
Interfax news agency,
Moscow, February 19, 1999
VII.
ORT’s shares valued at 800m dollars.
The board of government representatives of Russian
Public Television, ORT, has accepted the evaluation of
the value of company shares by a Russian auditor at 800m
dollars for the entirety of the shares, Russian Deputy
Prime Minister Vladimir Bulgak told the press on [17th
February]. He said a stake in ORT may be
mortgaged in exchange for a 100m-dollar Vnesheconombank
loan by the end of February. He also said that
government shareholders agreed that the assessment had
been made according to Russian standards. However,
Bulgak said, there has been no full-scale meeting of the
ORT board of directors yet.
Interfax news agency,
Moscow, February 17, 1999
VIII. Duma
official opposes Murdoch plans for ORT.
The Russian Duma deputy Oleg Finko, who heads the
Duma’s Committee for Information Policy and
Communications, has said that he opposes any plans for
the US-based tycoon Rupert Murdoch to take control of
Russian Public Television (ORT) in a deal with Russian
businessman Boris Berezovskiy. The following are
excerpts from an interview with Finko, broadcast by
Russian Ren TV on 14th February:
[Interviewer]
Oleg Aleksandrovich . . . the powerful media tycoon,
Rupert Murdoch, is trying to take root in Russia’s
media market. Do you think that is dangerous?
[Finko]
It is undesirable. It is too early to speak of
danger, because Murdoch has not yet taken root and the
process may take a very long time. Thirdly, taking
root in Russia does not mean consolidating one’s
hold, all the more so for a foreigner. But it is
undesirable, because Channel 1 [ORT] broadcasts to a huge
area. It broadcasts to almost the whole
country. I would not mind Murdoch buying another,
small channel. Let him buy a licence and let him
and his colleagues start working in Russia from
scratch. Why not? But he is buying a channel
which is ready-made.
[Q]
As far as I know the Duma is trying to stop him
drafting a special law. The current legislation
allows a foreigner to buy a Russian television
channel. Besides, there is an agreement of some
kind. As far as we know, a contract agreement has
been signed with [CIS Executive Secretary Boris]
Berezovskiy. The advertising market has moved
towards Murdoch.
[A]
I must say that Berezovskiy takes too much upon
himself. Berezovskiy does not own 51 per cent of
the shares in ORT, that is why he cannot take such
decisions. If you look deeper into the decisions
that Berezovskiy and conductors of his policy within the
channel have taken, it will turn out that the decisions
are illegal, believe me.
[Q] Berezovskiy
manages the shares that he has at his disposal, the state
holding of shares.
[A] Who
gave him the right to manage the state holding of
shares? It is all based on secret agreements.
There is a board of directors. It is not
Berezovskiy who runs it, but [Vitaliy] Ignatenko, the
former deputy prime minister and the current director of
ITAR-TASS news agency. He should be promoting the
policy of the state. If we start to unravel this
ball, it will turn out that Berezovskiy is dealing
illegally. It will turn out that a great number of
laws, standards and regulations are being violated
here. That is why one should start with that.
Nevertheless,
if ORT wishes to create an advertising agency—and it
is doing so now—it is within the channel’s
right. They may create it. We know that
[Sergey] Lisovskiy used to reign previously in the ORT
advertising business. So let Murdoch replace him,
if ORT wants it so much. That is their corporate
affair.
We
are not talking about advertising here, we are talking
about shares in ORT itself. You very well know that
out of every 100 shares, 51 should belong—and I
would like to stress the word should—to the state,
while 49 per cent belong to whoever. That is why we
would not like the state holding of shares or part of it
to go to a foreigner because this channel is of great
importance.
It does not mean that we are against financial investment
in Russian television. We are all for it. But
when Berezovskiy starts trampling on a state channel,
then we say: hands off state property. Or let
us consider selling the 51 per cent of shares to
Berezovskiy. But he is unable to buy them because
they were not able to pay in full for the other 49 per
cent of shares. I have insisted on them paying in
full and I have asked the Prosecutor-General’s
Office to look into it. If we investigate, we shall
see that many shares were given to somebody and were not
bought. Moreover, the money has not been
transferred either to the state or to ORT.
[Q]
We used to think that Berezovskiy and private
investors financed the channel. The state did not
pay up in accordance with the amount of shares it owns.
[A]
This does not correspond to reality. It is a
legend made up by Berezovskiy and his entourage. I
can easily prove it to you.
First, Channel 1 has not paid for transmission of
its signal, that is to say for broadcasting proper, for
ages. As an expert, you should know that signal
transmission accounts for 50-70 per cent of costs.
Every year the state has taken the transmission expenses
on itself. This amounts to something over 50 per
cent. The very fact that nobody grabbed them by the
throat and said pay us back or we shut you down over the
transmission expenses—
[Q, interrupting]
That is to say the state has been letting ORT off
its debts.
[A]
Of course. Not only did it waive the debts but
we know for a fact that the state transferred money to
pay for the transmissions. The facts illustrate
this. When they say that they do not enjoy state
support, it is a lie. There is state support; it is
specific, measurable and considerable. Moreover, I
am not against Murdoch coming here, but let him start
from scratch. From scratch. He should not be
buying ready-made stuff.
Ren TV, Moscow,
February 14, 1999
IX. Deputy
wants VGTRK to control ORT.
On [10th February], [State Duma information
committee chairman Oleg] Finko sent the prime minister a
letter inquiring, in particular: “Is
consideration being given to the option of transferring
the state shareholding in the Russian Public Television
[ORT] company to the operational control of the VGTRK
[All-Russia State Television and Radio Broadcasting
Company] leadership?”
It
is, of course, an interesting question, especially since
the idea of transferring ORT to the VGTRK’s control
has not yet received universal recognition.
ORT’s press service told a ‘Segodnya’
correspondent that it was the first they had heard of the
idea of transferring shares from the first to the second
television channel.
Channel
2 [VGTRK] also learnt of this plan from a
‘Segodnya’ correspondent, but was much less
surprised. VGTRK Deputy Chairman Lev Koshlyakov,
who is in charge of news broadcasting and public
relations, reported that the VGTRK had not initiated this
process and “will do whatever the government
decides.”..
Most
of ORT’s top managers are considered to be [Russian
tycoon Boris] Berezovskiy’s people, and [Prime
Minister Yevgeniy] Primakov has already brought in a team
of people to the VGTRK from the Foreign Intelligence
Service, which the prime minister previously headed.
By
all accounts the grounds for the deputy’s question
by Finko were provided by the persistent rumours that
Berezovskiy had agreed to sell 20 per cent of ORT shares
to the well-known international media magnate Rupert
Murdoch.
The
intention of Berezovskiy and Murdoch to set up a joint
company to sell advertising time on ORT is indirect
confirmation of the fact that such plans could
materialize. This was announced in December last
year. True, ORT General Director Igor Shabdurasulov
stated that he knew nothing about the proposed sale of
ORT shares to Murdoch. Meanwhile, Murdoch is
neither confirming nor denying that an understanding has
been reached with Berezovskiy . . . .
What
about the government? Yesterday [11th February]
Deputy Prime Minister Valentina Matviyenko gave her
opinion on ORT. She tried to assure the deputies
that their fears were groundless. Commenting on the
rumours of the proposed sale of 20 per cent of ORT shares
to Murdoch, the deputy prime minister stated that the
government “would never support the sale of ORT
shares to any international structure or foreign
citizen.”
“And
this deal is impossible without the state’s consent
(currently the state owns 51 per cent of the ORT
channel’s shares—editor’s note),” she
announced in an Interfax interview.
From
which it follows that both the draft law elaborated by
Duma members on the disposal of ORT shares and
Finko’s “suggestion” could be
superfluous. Because now that the VGTRK is de facto
“in the pocket” of the prime minister and the
all-Russia signal dissemination network belongs to the
selfsame VGTRK, Gosteleradio’s [former Soviet State
Committee for Television and Radio Broadcasting] revival
can be considered complete with the transfer of
television’s first button to Channel 2’s
control.
‘Segodnya,’
Moscow, February 12, 1999
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