GEO

Audio recording highlights conflict of interest of top media and telecoms regulator

12 November, 2012

A secretly recorded conversation between Irakli Chikovani, the head of the Georgian National Communications Commission (GNCC) and a representative of the Caucasus Online (CO) was aired by Maestro TV on November 6, once more raising questions about a conflict of interest.

In the recording, taken in April by Giorgi Ratishvili, a high-level employee of the GNCC’s broadcasting department who left the regulator several weeks ago, Chikovani appears to say that he is no longer able to cover up the transmission of TV channels for which the Internet and cable TV provider had failed to produce license agreements.

“You have not listened to my warnings, now you have serious problems”, Chikovani appears to says to a CO representative. “We cannot help you, there is no chance.. (...) for 10, 11 months, we have been covering you....don’t you have any off-shore [companies]? (...)  I told you that Magti will not give up. We stopped Silknet. We cannot stop Magti, there is no chance.”

In the recording, Chikovani says that competitors are aware of the fact that CO had been transmitting channels without being able to present the necessary contracts permitting them to do so and the Commission cannot help them anymore. Chikovani mentioned as well that he would be willing to register contracts between CO and TV stations with an older date and that he would delay the issuing of information related to these contracts, but that he would not violate legal deadlines.  

In an interview with media.ge on November 7, Chikovani confirmed that the voice in the recoding is his but said that he had not violated the law and that there was no conflict of interest.  

It is worth noting that at the time the secret recording was allegedly created, Rustavi 2, the country’s largest private TV channel, was headed by Giorgi Gegeshidze (he also owns 10% of shares) with whom Irakli Chikovani co-owns several businesses (see below). The remaining 90% of shares of Rustavi 2 were held by Levan Karamanishvili, who also happens to represent Nelgado Limited, an opaque British Virgin Islands shell company that (via International Online Networks, BVI), owns 50% of Caucasus Online. Chikovani himself is a former shareholder and director of Rustavi 2.  

The case of Caucasus Online’s alleged ongoing copyright violations highlights that the GNCC has been somewhat selective with its enforcement of rules. In spring, a representative of Global TV, a cable/satellite provider co-owned by the brother of Prime Minister Bidzina Ivanishvili (who was opposition leader at the time) told TI Georgia that the GNCC had been paying close attention to copyright issues and had requested Global TV to present agreements with all the channels it made available to its clients, especially to sports programs aired by Russian channels such as football Champions League games for which Rustavi 2 holds a license in Georgia. When Global TV was not able to produce all requested documents, the GNCC issued a warning.

In April, MagtiSat was fined GEL 90,000 by the regulator for misleading advertising after it claimed certain sport events were available “only for Magtisat viewers”, while in fact also customers of the pay-TV provider GMG were able to see these programs. In September, a court decision annulled the fine of Magti, company executives told TI Georgia. In 2011, Rustavi 2 and Imedi, on the other hand, were only fined GEL 2,500 each for over several months airing more advertising than they were legally allowed to.

In recent weeks, the GNCC has made efforts to conduct its activities in a more open and transparent manner, including by consulting with civil society representatives and stakeholders. In October, Caucasus Online was fined GEL 30,000 on request of Super TV, a competing cable TV provider, for making available a number of foreign entertainment channels without having the necessary agreements with these stations.

As the legal definition of conflicts of interest in the Law on Broadcasting is somewhat narrow, we believe it to be important to revise and extend conflict of interest rules for GNCC officials. Currently, a Commissioner faces a conflict of interest if he/she, while in office, provides remunerated work, holds shares, represents, consults or has any other direct or indirect financial interest towards an entity which is subject to the GNCC’s regulation. However, these rules do not address the problem of a revolving door – individuals who move between a company that is subject to regulatory oversight and top level positions of the sector's regulatory body, as was the case of Chikovani.

Furthermore, conflict of interest rules have to be properly enforced, in order to ensure there are no longer questions about the neutrality and fairness of the regulator’s decisions. We believe that in the case documented with the secret recording, a documentation should be launched to establish if there was any misconduct or abuse of power by the GNCC, and to find if all cable TV providers are acting in line with the same rules and standards, in order to ensure a fair and competitive environment.


The businesses of Irakli Chikovani

We documented Chikovani’s private sector activities in our 2011 report on the Georgian advertising sector.

As the head of an important regulatory agency, Chikovani has one of the highest salaries among Georgian public officials. For 2011, he received GEL 216,970 for heading the GNCC. At the same time, Chikovani remains a co-owner of several businesses:

Magi Style: Chikovani owns 33% of shares this construction company which, among other projects, was involved in building the new Parliament building in Kutaisi. Other shareholders are Giorgi Kurckhalia (34%) and Giorgi Gegeshidze (33%), the director and co-owner of Rustavi 2, the country’s largest private TV station. For the year 2011, Chikovani reported that he derived an income of GEL 124,281 from his involvement in this company.

Meno International: Chikovani holds 33% of shares in this construction company, Giorgi Gegeshidze holds 33% and Giorgi Kurckhalia (34%). According to a report by Guria News, Meno International was a sub-contractor of Magi Style in building the new Parliament building. 2011 appears to have been a good year for Meno International, contributing GEL 917,623 to Chikovani’s declared income.

Magi Style Media: Chikovani controls 40.28% shares (35% directly, 5,28% via Magi Style) in the company which offers a range of services related to advertising, including the placement of TV ads – the GNCC is charged with overseeing television stations’ compliance with advertising rules. The other major shareholder in the company is Giorgi Gegeshidze (49% plus 5.28% via Magi Style). In 2011, Chikovani declared GEL 372,017 in income from this company.

Bedegi: With 10% ownership, Chikovani is a minor shareholder in this construction company, in which also Chikovani’s business partners Giorgi Kurchkalia (30%) and Giorgi Gegeshidze (7%) are co-owners. For 2011, Chikovani reported no income from this company.

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Author: TI Georgia
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