October 31, 2015

Prosecutor behind Koza İpek seizure urged to face truth in PwC report

A decision by a controversial court to place a leading Turkish conglomerate on receivership over alleged abuses contradicts an earlier report by leading US-based auditing firm PricewaterhouseCoopers (PwC), which said that the company was clean and met standards, experts told Today's Zaman.

Koza İpek Holding and its publicly-traded subsidiaries had been audited since 2009 by the PwC, which is one of the world's top four auditing firms and serves in 157 countries with more than 208,000 employees. A decision by a judge in Ankara on Monday ruled for the handover of the administration of the group's 22 companies to a board of trustees. The judge is from a court specially set up by the interim Justice and Development Party (AK Party). The 22 companies include two newspapers, a radio station and two popular TV stations, which have long been the main platform for critical voices. The court decision must be overturned since it -- along with an expert report behind it -- is legally-flawed and ignores all state and private auditing mechanisms in Turkey, experts argue. Experts suggest that a recent PwC report invalidates the allegations against Koza İpek, in the first place. One of those allegations brought forward by the politically-motivated court in Ankara was that Koza İpek lent financial support to terrorist groups.

“If that [terror financing] is the case, then why doesn't the prosecutor launch a probe into the PwC as well? …If the court is the sole auditing mechanism in Turkey, then why did the government give an operating license to PwC or any other firm to audit similar cases?” economist Yaşar Erdinç told Today's Zaman on Thursday. The company has served some of Turkey's top companies from seventeen separate sectors since 1981 and currently has 1,500 personnel based in İstanbul, Ankara, Bursa and İzmir. The allegations leveled against Koza İpek stain PwC's image as the responsible auditing firm, economist İbrahim Öztürk argued with Today's Zaman on Friday, saying, “I don't think it is possible for any business in Turkey or the world to buy their way into such a large-scale, credible auditing firm as PwC. …they won't resort to bribery or bow to political pressure. So what is wrong?” On a global scale, PwC firms provided services to 418 companies in the Fortune Global 500 and 443 in the Financial Times Global 500 lists, the company's website reads.

A PwC Turkey audit report for 2014 states that Koza İpek's financial performance and cash flow for the year were in “accordance with the financial reporting standards accepted by the Turkish Capital Markets Board (SPK)”.

“All accounting records between the years 2009 and 2015 reflect the truth,” PwC said in its report. PwC Turkey was not immediately available to comment on the issue on Thursday. A source familiar with the issue told Today's Zaman that the company maintained its position regarding Koza İpek and may refrain from making any further comment.

“Are you going to launch a probe into the PwC for allegedly covering up abuse in Koza İpek? Are you considering any legal action to potentially cancel the operating license for PwC in Turkey? Is there any such plan to appoint a trustee to PwC Turkey for allegedly turning a blind eye to terrorism financing?” Erdinç asked the prosecutor in his column on Bugün daily on Wednesday. Erdinç told Today's Zaman that the board of trustees blocked him from writing his column for Bugün following these comments.

Rıdvan Karluk, an assistant professor of economics at the Ankara-based Turgut Özal University, stressed earlier this week that the judge's decision went against legislation and maintained, “The appointment of trustees has revealed the mechanism of free enterprise does not work in Turkey.” Karluk noted that if the Ministry of Finance had noticed evidence of any wrongdoing, the receivership would have been legitimate. He added that the decision is illegal if this is not the case. He underlined that the Koza İpek decision may have ramifications for Turkey's sovereign credit rating, investment appeal and therefore economic growth.

Published on Today's Zaman, 30 October 2015, Friday