Moscow Times Changes Hands After Shady Money Dries Up

The indispensable John Helmer takes on his former employer

Thu, May 7, 2015
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In the red
In the red

This article originally appeared at Dances with Bears


The Moscow Times, a small English-language daily outlet for a string of foreign causes since 1992, has been sold by its Finnish owner, Sanoma. The new Russian owner, Demyan Kudryavtsev, told the newspaper on Tuesday he won’t be closing it down, but will be changing what it does. He told a Moscow Times interviewer the publication has “huge potential”, but that it is behind the times technologically, and failing to meet the needs of consumers.

The asset value of the paper has not been disclosed by Sanoma, which announced that “ it will book at the closing a non-recurring capital gain of around EUR 8 million before currency translation adjustment.” If Sanoma swapped title for debt, this may mean that no cash changed hands. Positive value in the deal on the buyer’s side was limited to Sanoma’s 33.3% stake in Delovoi Standard, the Cyprus publisher of business daily Vedomosti, plus what Sanoma calls “its United Press portfolio of titles”. These include Men’s Health, Women’s Health, and National Geographic. Sanoma doesn’t identify the value of the assets counted separately.

In its analysis of the deal, the Moscow media have omitted to mention the Moscow Times. Vedomosti remains part-owned by Rupert Murdoch and by Pearson, owner of the Financial Times.

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The Moscow Times claims a circulation of 35,000 and a million monthly internet hits. Neither number has been verified; neither produces audited revenue. In its transaction announcement Sanoma included the Moscow Times among “more than 50 publications and projects with a cumulative readership about 12 million and about 25 percent share of the glossy advertising market.” That suggests the Moscow Times was of negligible value in readers; less in money.

Jon Hellevig (right), a Finnish national and Moscow-based lawyer and financial advisor, has commented that it’s good riddance to Sanoma. “Finland’s rabidly anti-Russian propaganda media group – calling for sanctions and war against Russia – is losing readers and advertisers, and making heavier and heavier losses. Many [Finns] say that they have stopped subscribing because they cannot stand to open the paper to a fresh load of hate propaganda every day. “

Sanoma’s financial report for 2014 showed that with sales of €54 million its Russian titles accounted for just 3% of the group-wide total. That’s dominated by operations in the Netherlands, Belgium and Finland. On the bottom-line, the Russian operations were loss-making – with the loss widening in 2014, compared to 2013. Sanoma’s report admits there were “segment liabilities”, but doesn’t reveal what the debts were of the Russian segment. Late in December Sanoma disclosed it had sold its 50% stake in what has been, historically, the profit-making anchor of its Russian media – Cosmopolitan.

Without this, the first quarter for Sanoma for this year was significantly worse than the same period of 2014 – sales were down 13%; earnings, down 22%; a loss of €13.3 million instead of a three-digit profit the year earlier.

“The market capitalization of the company is a mere 15% of what it used to be some five years ago,” according to Hellewig. “Some analysts expect the media group to go bankrupt under its heavy debt burden, which is the only thing that is not shrinking in the company. Finnish human rights activists are delighted with the news, sensing that the time when this devil of Finnish society will be gone is approaching.”

The Moscow Times version claims it “was established as Independent Media in March 1992 by a group of Dutch investors headed by Derk Sauer…From the beginning, founder Derk Sauer raised an ‘Iron Curtain’ between the editorial and commercial divisions as a precautionary measure to protect the newspaper’s reputation in a country where the media is still known for publishing paid-for articles. The newsroom and commercial offices even occupy separate floors at SIM’s headquarters in Moscow.”

Sauer himself claims to have sold his “beautiful house” in the Netherlands to raise the cash to finance the start of the newspaper. “I sold the house,” he said last November, “developed a business plan, plunged into the company’s financial performance and become a true entrepreneur.” In 1992 Sauer told me himself he was getting investment from US sources.

I am the last of the original Moscow Times writers still reporting from Moscow. The story of my sacking can be read, along with the story which caused it, here.

At the beginning of September 1992, the political and constitutional conflict was intensifying between the Russian parliament, led by Ruslan Khasbulatov, and President Boris Yeltsin. Reporting on growing support for Khasbulatov and Yeltsin’s worsening position, I was told by the Times editor, then Meg Bortin (above, centre), to change my text, so that it would mean the opposite of what I was reporting, and favour Yeltsin. I refused; Bortin gave me an ultimatum; I refused again; the article was spiked; and I never appeared in The Moscow Times again (above right – Sauer and Bortin in 1992).

According to an exchange of documents on September 4, 1992, Sauer proposed paying me a monthly stipend if I would stay silent. When Sauer’s payments stopped, I resumed regular reporting in the English-language media of Moscow – firstly in the Moscow Tribune published by Anthony Louis, then in The Russia Journal of Ajay Goyal (below, left).

For a time in the 1990s, there were an extraordinary number — five English-language newspapers running simultaneously in Moscow, including the Exile of Mark Ames and the Moscow News, the veteran of them all.

In 2002, celebrating the Moscow Times’ 10th anniversary, then-US Ambassador Alexander Vershbow wrote to commend Sauer’s product for its “marvelous job chronicling Russia’s transformation over the past decade.” He mentioned specifically how the Times had “recorded the dramatic showdown between President Yeltsin and the parliament.” In fact, Sauer and a string of his editorial appointees backed US policy for Russia until Yeltsin was replaced. Since then Sauer has favoured the Russian oligarchs who, openly or secretly, financed the publication.

When the Home-Beautiful and US investment money ran out, Sauer arranged funding for the Moscow Times from a Swiss entity belonging to Mikhail Khodorkovsky. For more on Sauer’s secret relationship with Khodorkovsky, read this. After his arrest in 2003, then trial and imprisonment, Sauer replaced him with money from Vladimir Potanin. How much Sauer hasn’t reported. The Exile analysed that transaction as the case of a hypocrite selling a fake to a crook. Then Sauer bought Potanin’s stake back in order to sell on to Sanoma. Sauer remained as chief executive until 2008, then chairman of the board until 2013. For that period the Moscow Times was part of what Sauer called Independent Media. Only it wasn’t, nor was he.

Along the way, Sauer fought off a bid to buy the control stake from the Dutch media group VNU by castigating the bidders as concealing the interest of an unnamed Russian oligarch. Sauer didn’t provide the oligarch identity because there wasn’t one. The bidders were Ajay Goyal and me. Behind Sauer at the time there was Potanin.

Since late 2012 Sauer has moved on to work for Mikhail Prokhorov at RBC media holding. The line on the bottom of its balance-sheets is as red as Sauer managed at the Moscow Times. In its financial report for 2012, when a profit of Rb219 million ($7 million) was declared, the auditors Deloitte Touche issued a warning that Sauer’s new business had negative net assets of Rb3.5 billion ($113 million) and was in deficit for operating capital by Rb6.5 billion ($209 million) on account of loan defaults. There was “substantial doubt”, the auditors warned, that the group could continue as a going concern.

The full 2014 results have yet to be released. The first-half result was a loss of $25 million. A more recent promotional release from RBC claims that earnings (Ebidta) for the year jumped twofold as revenues fell 12%. The current share price of RBC is Rb6. At the start of 2011, it was Rb75; when Sauer took over it was Rb25. The loss of market value has been more than $800 million in constant roubles.

Sauer’s record of losing his shareholder’s or proprietor’s money may reflect the fact that he (they) intended to run publications like the Moscow Times as a non-profit enterprise — wait, take that term back. On March 25, Sauer issued a notice that RBC is launching a libel action against a Moscow critic for charging the publicly listed shareholding company’s management “of running business unprofessionally. RBC OJSC (Moscow Exchange: RBCM) states that the interview damages the reputation of RBC and its senior executives.”

Russian investigative reporting has disclosed that Sauer tried fronting for Prokhorov to buy back Vedomosti from Sanoma, but failed. That’s to say, the backing Sauer has enjoyed from elements of the Russian government has gone.

In an interview in March with the Russian edition of Harvard Business Review — a title Sanoma sold last week — Sauer was asked to describe his “core values”. He replied: “we must first have a sense of humor… I think the main thing for me – as a person and as a manager – [is] modesty… I try to avoid stereotypes, but I think that the main obstacle to the development of the Russian economy and society as a whole is the lack of openness. And first of all, the ability to criticize and accept criticism.”

Mark Ames (below, left) started in Moscow as a writer for the Moscow Times, and then founded The Exile.

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The Exile in 1998: (left to right) Jake Rudnitsky, John Dolan, Edward Limonov, Mark Ames

“Our 1998 April Fool’s Day issue was an exact replica of The Moscow Times. It was picked up by the US Embassy and the Duma as if it was genuine. We said [Prime Minister Sergei] Kirienko had resigned after getting arrested in a fight over a tiara during a male beauty contest at a Moscow club. Sauer had a top official from the press ministry call me at my apartment home number and chew me out. He made me promise we wouldn’t do that again. I asked the ministry official how he got my home number. He said that wasn’t any of my concern — they knew how to find me. That was the sort of thing Sauer did to his competitors and critics. A humorless little prick — what else can you expect from a Dutch Maoist.”

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