Ukrainian Tycoon Buys Magazine That Investigated HimLeonid Bershidsky
(Corrects type of liquefied gas in fifth paragraph.)
June 25 (Bloomberg) -- If you don’t like what the press is writing about you, buy the press. Judging from recent events, this is the approach of a Ukrainian businessman who has been the subject of investigative reporting by the Kiev edition of Forbes magazine.
The businessman in question, 27-year-old “multimillionaire from nowhere” Sergei Kurchenko, has just acquired the Forbes licensee, UMH Group. Until recently, UMH was the only large media holding in Ukraine whose owners had no potentially conflicting interests outside the media market. (Disclosure: I was editor of a UMH-owned publication, Forbes.ua, throughout 2012.)
Observers in Kiev believe the deal has political implications in the run-up to the 2015 presidential election. In any case, it offers a study in the way media are faring under the post-Soviet authoritarian regimes. Direct suppression is not necessary when a simple change of ownership that looks like an ordinary business deal can be arranged.
On November 12, 2012, Forbes.ua ran a story titled “The Gas King of All Ukraine.” It was the first detailed look at Kurchenko, a dynamic and powerful newcomer to the nation’s business scene. Until then, Kurchenko had been a complete unknown. Not even his photograph could be found until an anonymous well-wisher mailed a Forbes.ua journalist a scan of his passport.
The story described the meteoric rise of a group called GazUkraina-2009, which in less than a year became a leading importer of petroleum products, particularly liquefied petroleum gas. The journalists found a collection of seemingly unconnected businesses, some of which repeatedly won contract tenders held by state-owned energy companies. Interviews with numerous government officials and energy traders, all of whom spoke on condition of anonymity, suggested the success was due to Kurchenko’s connections at the state companies and the Prosecutor General’s Office. The government officials said that GazUkraina’s companies were adept at evading import duties on fuel, by bringing it into the country purportedly for processing and export.
Kurchenko declined to be interviewed, and his representatives denied that the companies mentioned in the story had anything to do with him or GazUkraina. As editor of Forbes.ua at the time, I saw angry letters from GazUkraina threatening to sue Forbes Ukraine and UMH Group unless the story was retracted. Ultimately, no lawsuits were filed.
After the story, Kurchenko embarked on a publicity offensive. In December 2012, he acquired the popular soccer club Metalist, which later won second place in the national championship. He reportedly paid $300 million for the team and another $70 million for its stadium.
In his first interview, granted in May to the weekly Korrespondent, another UMH title, he said that the team lost $70 million a year but would be a good investment in the future. More likely, he was following in the footsteps of Russian billionaire Roman Abramovich, whose acquisition of the Chelsea football club in London helped him gain acceptance as a legitimate businessman in the U.K.
The Metalist deal did little to improve Kurchenko’s public image. Tens of thousands of Metalist fans flocked to the Forbes website to read the Forbes investigation, by then expanded and published in the print version. Other Ukrainian publications, including the popular website Ukrainskaya Pravda, linked Kurchenko to powerful people in President Viktor Yanukovych’s home region of Donbass and then to Yanukovych’s family.
“Just six months ago, no one knew of GazUkraina-2009 and Sergei Kurchenko,” Ukrainskaya Pravda wrote in March. “It seemed as though he cast no shadow. The group’s entities have been linked to smuggling operations that cost the state budget billions. The same entities had huge success in the completely corrupt government purchase system. In Ukraine, such things are possible only when top officials are personally interested.”
By June, Kurchenko had made his move into the media market: UMH Group owner Boris Lozhkin agreed to sell 98 percent of his company to Kurchenko’s new company, VETEC, for an undisclosed sum estimated at between $300 million and $400 million. According to Lozhkin, Kurchenko will have paid the full amount to the shareholders by March 2014, at which point he will take over management of the media group, currently the Ukrainian market leader in radio, print and Internet media. Apart from Forbes, it publishes the Ukrainian edition of Conde Nast’s flagship magazine, Vogue, and a number of other titles.
“Everything happened very fast,” Lozhkin said to Forbes.ua. “At 27 a person’s reputation is only just forming and I think Mr. Kurchenko has every chance to build up a good reputation.”
The magazine’s editor, Vladimir Fedorin, responded with a terse statement published on Forbes.ua. “I consider the sale of Forbes Ukraine the end of the project in its current form,” Fedorin wrote. “I am convinced that the buyer is pursuing one of three goals: 1) to silence journalists before the presidential election; 2) to whitewash his reputation; 3) to use the publication for purposes that have nothing to do with the media business.” Fedorin said that he would stay on until October to wrap up his involvement in the project.
Ukrainian journalists expressed concern and outrage at the change of the media company’s ownership. “All of Kurchenko’s business was built up using the government machine,” investigative reporter Mustafa Nayyem commented on Facebook. “The only function of UMH in this scheme is to keep the government machine in the hands of those who allow him to expand and protect his assets.”
Possibly the most famous Ukrainian, world boxing champion turned politician Vitali Klitschko, agreed that Kurchenko’s purchase was a political deal. “According to the information I get, he is just a person who has been made the public face, a front for other people who are well known but they do not want to go public with this business,” he said.
Just two days before the UMH deal was announced, Mako, the business group led by Yanukovych’s eldest son Oleksandr, suddenly issued a press release denying any involvement, even though no one had suspected Mako of it.
In written answers to a Forbes reporter’s questions, Kurchenko said that he was merely interested in the media business and promised his new company’s journalists editorial independence. “This is a business and investigations are part of it, so we will not hinder its development,” he said. Kurchenko indicated he bore Forbes no grudge for the original story but would not comment on its substance, saying only that “VETEC today has nothing to do with” GazUkraina-2009.
Forbes Inc. in the U.S. approved the deal and said it had no plans to withdraw the Ukrainian license. “I am very happy with the new opportunity for Forbes Ukraine,” Interfax Ukraine quoted Miguel Forbes, the company’s president of television and licensing, as saying. “We are totally confident in the UMH management team and we believe the new cooperation will lead to additional investment and expansion for Forbes in Ukraine.”
So now it is up to journalists at Forbes and other UMH titles to decide whether they want to work for the man they investigated. Media jobs in today’s Ukraine are as scarce as in other ex-Soviet states, including Russia. Deals similar to the UMH one, which are “strictly business” on the surface, have cleared the media landscape here of most publications that had the temerity, and the audience, to try to call ruling regimes to account.
(Leonid Bershidsky, an editor and novelist, is Moscow correspondent for World View. Opinions expressed are his own.)
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