Did Sweden’s Bonnier Group inadvertently pump cash into Latvian political faction’s black war chest?

The following blog entry has been republished here courtesy of Free Speech Emergency in Latvia.

I have written this as a “dream” on my Latvian language blog, but in fact it is credible version of what may have happened in the controversial divestment by  Sweden’s Bonnier Group of the Latvian media group AS Diena and the business newspaper Dienas bizness (my employer for 11 years up to 2006).
The version I have heard is as follows:

By early 2009, Bonnier realized that its newspapers in Latvia had been loss-making for some years and it had to decide how to stop the losses. There were a few options. First, to declare the newspapers bankrupt. This could be a dragged out process and perhaps would require a restructuring of the Diena group to separate out some profitable and potentially profitable parts. It would also cause some bad PR for Bonnier, who came into the Latvian market in the early 1990s under the banner of bringing a free, independent press to the post-Soviet country;

Another, similar alternative would be to close the newspapers. This (also probably the bankruptcy proceedings) would require dismissing the entire staff, paying severance pay, etc. There would also be bad PR.

The third possibility was to divest the newspapers. However, with at least Diena making serious losses (both papers lost a total of LVL 2.7 million in 2009), it was unlikely to get a buyer for any reasonable price. Also, it didn’t look like the media market in Latvia would recover in the foreseeable future with the country in the midst of a very severe recession.

It was then, according to a version I have heard, that the Bonnier Group decided to use a means of divestment that may have been used when the Swedish Social Democratic media group A-Pressen fell apart in the early 1990s. Then, in order to divest unprofitable regional and small-town newspapers, A-Pressen made some deals in which the “buyer” was actually paid to take over the asset. In other words, there was reimbursement for at least the first year of predictable losses that the paper would make.

For the “buyer”, this meant little or no cash out of pocket  and vastly reduced risk, at least for a while. The method is said to have also been used in non-media related transactions, for instance, filling the cash on hand of a company, then “selling” it for a roughlt equivalent sum.

Of course, I may have some of this wrong, there is some huge Swedish government study of the A-Pressen case I have yet to read. But should this version be reasonably accurate, it means that the “buyers”  of Diena and Dienas bizness were compensated with a pretty good sum, that the Bonnier Group could show as an expense, not further losses from its Latvian subsidiaries.

To make a long story short, after the initial “sale” of the newspapers to a company founded by former Diena executive Aleksandrs Tralmaks, it appears that ownership of the newspapers came into the hands of the British Rowland family, who had little or no previous contacts with Latvia and with investments in media. There is consensus among observers in Latvia that the Rowlands were probably a front for political interests in Latvia, most likely the party alliance between oligarchs Andris Šķele and Ainars Šlesers, with Ventspils mayor and accused money-launderer Aivars Lembergs also probably involved.

Once the reimbursement for taking the two newspapers off the Bonnier Group’s hands passed through the Rowlands (with some fee deducted), it may have found its way into the black (underground) or grey (hidden influencers, support organizations) war chests of the oligarchs.

It now appears to have turned up again in the latest bizarre twist in the decline and fall of both formerly Swedish-owned newspapers. On August 5, the Diena group announced that 51 % of its shares had been purchased by Viesturs Koziols, a Latvian entrepreneur, friend and former business associate of Ainārs Šlesers.  Koziols said he had bought the shares with his own money, but also said he had no vision of how to develop the media group and bring it back to profitability.

If there is a Mrs. Koziols or other significant other, I would imagine that Viesturs would face her wrath for blowing a significant part of the family fortune on a loss-making, seemingly hopeless investment (hopeless if you have no idea what to do with your “purchase”). Koziols is listed as a Latvian millionaire and he didn’t get to be that by being a foolish investor.

This leads one to believe that perhaps Koziols is spending a part of the money paid ” through” the Rowlands from the Bonnier Group. Which is not to say, by any means, that the Bonniers intended for any of this to happen, nor that they can be held responsible, anymore than I can be blamed for spending a 20 lat bill that passes through a number of people and is, say, spent to buy liquor for an underaged alcoholic.

Circumstances strongly suggest that Koziols investment in Diena is a “risk-free” project since it is money entrusted to him, with sole purpose of keeping the weakened and discredited media group alive and inactive politically until after the October 2 parliamentary elections. Then it may be allowed to go under by the New Year, just as another Koziols media project, Republika.lv, did before and after the 2006 elections (I have no content analysis, but others say it was a short-term, election year project).

Indeed, there may have been no actual transfer of funds, merely a shift of front men from 100 % Rowlands (with people still WTF’ing their presence) to 51 % for a local boy with at least some entrepreneurial credibility. One sign that no new money is coming into Diena is that journalists are not being paid their per-item honoria any more, just basic (as little as LVL 180) salaries. Since the Latvian media job market is very limited and depressed, this will not set off a stampede away from Diena, but will very seriously demoralize the already confused and demoralized reporting staff.

What does this have to do with freedom of expression in Latvia? It is not directly on point, there is no state authority repressing the media. However, there are political interests undermining the quality and independence of the press. These political forces, especially the First Party of Ainārs Šlesers, are homophobic and have a hidden authoritarian agenda. There will be less freedom of the press, a kind of Russia Lite, if these political forces win. So, ultimately, it is a freedom of expression issue.

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