Thursday, July 16, 2009

Latvia seeks to upgrade thought police, increase the chill

The Latvian government is considering a proposal to increase the powers of the Security Police to question and issue warnings to persons whose behavior "shows signs of illegal activity that could harm state security" according to a recent report (in Latvian) in Diena.
If adopted, the expanded powers -- aimed clearly at speech and expression, not actions-- would increase the chilling effect of the Security Police on free expression and debate. It would allow Security Police officers to question persons (including a summons to police facilities) and demand "explanations" for their activity.
The Security Police have already shown that their threshold for intervention against expression is at times very low and inconsistent. Last fall, the Security Police detained Dmitrijs Smirnovs, a college economics lecturer, for saying in a public discussion that he though people should not keep money in Latvia's banks nor Latvian lats. The authorities also questioned a musician who joked about not running off to take money out the bank during a concert. These incidents brought international attention to violations of freedom of expression by the Latvian Security Police.
Since then, there have been hundreds of mentions and discussions of the possible devaluation of the lat, the soundness of the Latvian financial system, and the wisdom of Latvia's economic policies, ranging from Nobel Prize winner Paul Krugman, The Wall Street Journal, the Financial Times (the former all being beyond the reach of the Security Police) to statements by local economists (Alf Vanags of BICEPS) and many bloggers and internet commentators. Except for Smirnovs, no one that I know of has been detained.
There have been cases of the Security Police acting against persons expressing radical political views, notably a neo-Nazi writing under the pen name Fenikss. His interrogation by the Security Police several weeks ago (the second in a year) indicates that the police of "prophylactic talks" dating back to the Soviet perestroika era KGB, was already being applied.
Before the late 1980s, the KGB would simply arrest dissidents, but it discovered (given its past as an all powerful institution of terror and repression) that it could silence or dampen dissent by the chilling effect alone. It was enough to have a talk with the KGB over coffee or tea to make one wonder whether expressing one's views was the smart thing to do.
Now the Security Police, looking more and more like the "liberal" era KGB (as it takes on the function of "overseeing" economic and political debate in society) is about to be handed more powers to exercise the "chilling effect" -- one of the most powerful arguments against any restrictions on free speech under at least US First Amendment practice. In other words, the mere threat of trouble will prevent people from speaking or writing who would otherwise do so.
Having, for the time being, abandoned its efforts to repress discussion of the economy and currency, the Security Police is now apparently being prepared to go after persons who discuss forms of resistance and disobedience to the current government's policies of extreme, sudden, and seemingly capricious cuts in public services and entitlements, effectively closing down the national health care system, reducing public education to a minimum and slashing pensions.
What the government fears is that there will be public discussion of such things as civil disobedience, tax resistance (why pay for nothing) and, of course, the harsher issue of street violence and rebellion as the fall draws closer and perhaps tens of thousands of Latvians will lose their unemployment benefits. While I believe violence will solve nothing, I think the possibility of new riots should be freely and openly discussed, without the Security Police interfering. If a person who has lost their job and unemployment benefit, who has seen one parent deprived of elective surgery and another retired but working relative (perhaps a surgeon) driven from their job by pension cuts, who sees their child's math teacher paid less than a street sweeper, that person understandably should be able to talk about the Latvian government and state in the words of the Bloodhound Gang: We don't need no water let the motherfucker burn!

Wednesday, July 8, 2009

Freedom and confidentiality in media transactions

I thought for a while about where to put this and decided to post, initially, to the Free Speech Emergency blog because media are one of the most important vessels of free speech. I don't, presently, see any serious free speech issues in the sale of the Latvian media group Diena and the business newspaper Dienas bizness by the Swedish Bonnier Business Press to what will eventually be a mutual fund with investments in Baltic media.
The controversy about this in the Latvian media has arisen from the apparent structure of the transaction. The Bonniers were so eager to sell their Latvian assets that they wanted to do it before the buyer came into legal existence. That is, the Luxembourg-based Catella Media Investment Fund has not been legally founded yet. In order to seize the opportunity, the Estonian financier Kalle Norberg and the Latvian former executive of Diena some years ago, Aleksandrs Tralmaks, organized a temporary arrangement to buy and hold the assets until the final ownership structure was in place.
They also needed to fund the transaction, rumored to be around LVL 9 million, and what they seem to have done is a variation on when an ordinary citizen is offered a chance to buy something two weeks before payday. She doesn't have the cash on hand, but borrows it from several neighbors. They then, technically, become "investors" in "today only" discounted flat-screen television until the end of the month, when our real buyer is paid and pays off her neighbors. Is it important to know who these neighbors are?
OK, I am simplifying the process with Diena and Dienas bizness, but as I understand it, two of the future owners and investors are already known -- Kalle Norberg and Alexandes Tralmaks. They have put up some of their own money. The other investors, who have, for various reasons, wanted to remain anonymous, but both their and Norberg and Tralmaks' shares in the media assets will change when the mutual fund is set up. As more money comes into the fund, which, presumably, will become owner of all shares in the Latvia media assets, the relative ownership proportion of the initial investors will be diluted and will change on a day-to-day basis, as will the identities and number of all owners of shares in Catella Media Investment. Mutual funds trade on a daily basis.
Let us make a wild guess and say that a certain Niklas Z of Skype fame lent USD 500 000 to the transaction entity. When the mutual fund becomes operational, Niklas Z' s loan will be changed into shares of Catella, and the asset that he and all the other mystery men and women will directly own will be shares in a mutual fund. In the short term, of course, most or all of Catella's capital will be invested in Diena and Dienas bizness, but there could be additional purchases of media assets in the future.
Mutual funds are pure instruments of financial investment -- I put my money in fund A, whose managers and investment strategy I trust, and expect to see growth of, say, 40 % when I sell my fund shares in five years. In the interim, the fund, for all I care, can finance chipmunk races and crocodile choir contests, as long as I get my expected return on investment. I am not interested in owning or influencing the management and strategy of any of the fund' s assets, otherwise I would buy those shares directly, in sufficient amounts and put myself or my representative on the board of Chipmunk Racers R Us.
If and when someone in the Latvian media gets a leaked copy of the transaction related investment agreement, it will probably include a rather dull list of Estonian, Danish, Swedish and British names -- Veiko, Tarmo, Niklas, Samantha, whatever. And, certainly, the media will have full freedom to publish this "scoop" and should be protected from lawsuits or prosecution should that happen.
In short, I think the uproar over who the mystery investors in the transactions is overblown and too much energy is put into exploring conspiracy theories. It is certainly necessary to have transparency in media ownership, but things should shortly fall into place. Of course, I could be wrong and the real owners of Diena and Dienas bizness are Elvis Presley, Borat and three Russian oligarchs.