The unlawful seizure of assets of companies worth tens of billions of dollars and the confiscation of the wealth of critics of President Recep Tayyip Erdoğan since 2015 mark a radical departure from the free market economy for Turkey.
Expropriated from people who were deemed critics of the regime, this wealth was redistributed to Erdoğan’s cronies who in turn provide financial support to sustain his corrupt ruling Justice and Development Party (AKP) government. At least $11 billion worth of assets belonging to companies run by businesspeople who are seen as close to the Gülen movement were seized in a move unprecedented in Turkish history after they were suddenly branded by the government as terrorists when there was no evidence whatsoever suggesting that they were involved in any crime or terrorism.
Two instruments were used in this mafia-style wealth grab by the Erdoğan government: the judiciary’s susceptibility to political pressure from the government, and the partisan regulators at the Savings Deposit Insurance Fund (TMSF), which does Erdoğan’s bidding. It takes only one public prosecutor to launch a probe in a blatant abuse of the criminal justice system against a company whose assets are later plundered. The judges who were put on the bench by Erdoğan in specially authorized courts sign on to warrants in almost rubberstamping fashion to seize critics’ assets.
Without even bothering to wait for the conclusion of proceedings in court and no real opportunity to mount a challenge to these unlawful confiscations, the TMSF is being called in to replace owners, boards of directors and managers in a process that will lead to either liquidation of the company at a dirt-cheap price or handing it over to Erdoğan’s associates in closed-door negotiations.
According to a TMSF report, as of March 2018 government trustees had taken over 985 companies in 44 provinces across Turkey, seized the personal wealth of 124 people and taken control of shareholders’ stakes that represented less than 50 percent of 142 companies. The total assets for all those seized amounted to TL 49.4 billion (over $11 billion at today’s exchange rate) with a total turnover of TL 24.6 billion and equity capital of TL 19.7 billion. In total, 50,192 people were employed by these companies that were taken over by the government. The impact on related industries that relied on business orders from the seized companies is not known.
In addition to this terrible picture that says much about the state of the rule of law in Turkey, the government the seized assets of 149 media outlets after declaring them closed on charges of terrorism without going through the trouble of judicial or administrative investigations. Using the state of emergency that was declared in July 2016 and extended repeatedly since then, the government issued decree-laws (Kanun Hükmünde Kararnama, or KHK) to shut down major TV networks, newspapers and radio stations. All of their assets were transferred to the TMSF for quick liquidation without a chance for their owners to file legal suits against such extreme measures.
Responding to a parliamentary inquiry from an opposition lawmaker, Mehmet Şimşek, the deputy prime minister responsible for the economy, stated on April 6, 2018 that the TMSF earned TL 27.6 million (roughly $6.2 million) from the sale of 62 TV and radio stations and newspapers. Most of these sales were made in closed-door negotiations, meaning they were handed over to Erdoğan’s associates for one cent on the dollar. Even one broadcast license for a single TV network could be worth more than this figure reported by Şimşek. The TMSF, which should comply with the standards of the International Association of Deposit Insurers (IADI) and the Financial Stability Board (FSB) in insuring financial stability for the economy, has itself turned into a threat to the very system it is supposed to protect.
Since July 2017, the head of the TMSF has been Muhiddin Gülal, a member of Erdoğan’s ruling AKP who served as a municipal council member in Istanbul’s Beyoğlu district between 2004 and 2009. A graduate of a religious high school (IHL) just like Erdoğan, he has been a member of Turkey’s Banking Regulation and Supervision Agency (BDDK) since 2013 even though he had no experience in the banking industry. He played a key role in taking over the management of Bank Asya, the largest Islamic lender in Turkey at the time, on Feb. 3, 2015 after the bank was targeted by Erdoğan because of its affiliation with the Gülen movement.
Although Bank Asya was in perfect financial health with one of the country’s highest capital adequacy ratios and there was no reason to justify the takeover, the BDDK fabricated a charge to take over the board of directors and eventually turned it over to the TMSF on May 29, 2015. Berat Albayrak, Erdoğan’s son-in-law, was pulling the strings according to emails leaked by the Red Hack group that exposed the private communications of Albayrak in the fall of 2016. The banking license was revoked on July 22, 2016, when control was with the TMSF, and it was declared bankrupt on Nov. 16, 2017. This was the first time a bank with an excellent capital adequacy ratio had been forced into bankruptcy with a series of government moves in a political vendetta pursued by Erdoğan against Fethullah Gülen, his most outspoken critic, who has been living in the US since 1999.
Turks who are victims of this witch hunt not only lose their wealth and assets but also their freedom in most cases as well because of the criminal investigations launched into them on dubious charges and with political motivations. Many industrialists and businesspeople who have managed decades-old family conglomerates were jailed or forced to live in exile after the government initiated criminal probes and seized their assets. Prominent families such as the Boydaks, İpeks and Nakiboğlus who have created successful business empires are only a few. No wonder so many Turkish businesspeople are today in a rush to move their assets out of Turkey, prompting Erdoğan to issue a public threat to those who do so. In several speeches, the Turkish president branded them as traitors and vowed that they would pay a price.
In the meantime, the TMSF keeps stirring up trouble for hundreds of thousands of average Turks who had done nothing wrong other than deposit their money in Bank Asya, which had been operating legally under the close watch of regulators since 1996, long before Erdoğan came to power. In criminal prosecutions and terrorism trials, having an account at Bank Asya is considered sufficient evidence for one to be declared a terrorist. The bank, which had 210 branches, 5,000 employees and around 1.5 million customers, was a popular bank and among the top sponsors of sporting events, charitable work and community events. It was the official sponsor of the Turkish Football League at the secondary level between 2008 and 2012.
The 2017 performance report by the TMSF revealed that it responded to 3,317 inquiries from 1,327 separate government agencies that asked whether their own employees, their spouses and children had any accounts at Bank Asya. A total of 1,859,211 government employees were listed as having been investigated in these inquiries in addition to their spouses and children. Apparently, this is one of the criteria used by the government to profile people and determine if they are linked to the Gülen movement. The TMSF probe was used to dismiss well over 120,000 government employees from their jobs without any effective administrative or judicial investigation.
Moreover, the TMSF also acknowledged that it has responded to 40,079 inquiries from prosecutors and courts that covered investigations into 260,395 people as part of efforts to find out whether they maintained an account at the bank. This is completely ridiculous given the fact many Turks had used this popular bank, which was operating legally and advertising freely in the Turkish financial market. It was even approved by the government to be a liaison bank for the collection of taxes and payment of highway tolls. This defies legal certainty, which is one of the requirements of the rule of law in the sense that the legal system must be predictable and transparent.
The expropriation and seizure of assets have become tools of persecution under the Erdoğan regime, which not only redistributes wealth in Turkey but also sustains a climate of fear for any donors who may be willing to fund the opposition. There is no domestic remedy left in Turkey to challenge government actions considering how the judiciary and independent regulatory bodies operate on the whims of one man, Erdoğan. Resolution of these problems would require years of litigation at the international level at the European Court of Human Rights or arbitration boards as part of Turkey’s commitments under international law and treaties. It would come at significant legal expense. Even if the plaintiffs were to win the cases, there is no guarantee that the Erdoğan government would enforce judgements.
Only if Turkey were to one day return to a functioning market economy and restore the rule of law in the post-Erdoğan era would it be possible to seek remedies for the great injustice done to the Turkish business community. That does not mean that the international litigation and arbitration efforts must be abandoned. Victims of Erdogan’s persecution who lost their assets and wealth must resort to these remedies, whatever is available to them at the international level, to maintain pressure on the Turkish government. Sooner or later Turks will realize that the rule of law and a freely functioning market economy remain critical to keep the troubled Turkish economy afloat, especially considering how the economy is dependent on trade, technology and foreign direct investment.