Scores detained for manipulation

Hurriyet Daily News with wires

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Turkish police detained 54 individuals on Thursday in an operation described as a crackdown on the biggest manipulation in the history of the Istanbul Stock Exchange.

Duncan Blake, a Scottish executive and head of the British Chamber of Commerce in Turkey was among those detained. Blake is the president of Merko, a food processing company.

The manipulation is alleged to have created illegal profiteering to the tune of 20 million Turkish Liras, or $12.5 million.

Merko shares lost 45.5 percent since the start of the year, and were trading at 1.28 liras at noon Friday. In two trading days between March 23 and March 25, the shares declined 31 percent.

Other companies alleged to be among the targets of manipulators are Van Et, a meat processing company, Penguen Gida, a food firm, Pera Gayrımenkul Yatırım Ortaklığı, a real estate investment trust, and Viking Kağıt and Olmuksa, two paper companies. Sharp declines and gains were seen in the shares of all these companies throughout the past months.

Lawmaker involved

The police operation targeted manipulation and insider trading at the Exchange, according to a story by business daily Referans on Friday. Those detained include Galip Öztürk, owner of Van Et and Metro Turizm, a passenger bus operator. "According to claims, some big brokerage firms through which suspects made transactions will be taken in the scope of the operation," Referans said.

The criminal organization was led by speculator Bekir Sani Karayal, alleged Hürriyet newspaper yesterday, adding that a lawmaker is also involved in the organization but could not be detained due to parliamentary immunity.

According to Hürriyet, Karayal inflated the share price of companies, including Merko. "It is alleged that in return Blake handed out commissions to Karayal regularly," Hürriyet said.

Shares plummet

As Thursday’s operation commenced, shares of the companies involved took a nosedive. Viking Kağıt, which gained nearly 71 percent from March 26 to March 31, had lost 11.4 percent from March 31 to April 1. The share shed a further 21 percent. Olmuksa shares, which gained more than 50 percent from March 16 to April 1, dove 17.3 percent. Van Et, whose shares gained a whopping 193 percent from Jan. 1 to April 1, shed 16.4 percent in one day. Penguen Gıda shares, which have lost nearly 70 percent since the start of 2008 but gained 38 percent from Feb. 18 to April 1, lost 6.5 percent on Thursday.

Some among the detained will be formally charged with "forming an illegal organization to commit crime," Referans said. A similar operation against stock manipulation occurred in July 2006, when 26 individuals were taken into custody. While 18 of them were released later, six were arrested on charges of leading a criminal organization.

Speaking to Anatolia news agency, Ali Bahçuvan, president of the Bourse Investors Association, or BORYAD, said the operation has irked investors.
"If stock market players are detained with such grand police operations, big investors will stay away from capital markets," Bahçuvan said Thursday. "Investors would not invest in companies that are not members of the IMKB-100 [the benchmark index]."

"If there is manipulation, an investigation by the public prosecutor would give confidence, not discontent," said Nevzat Öztangut, president of the Association of Capital Market Intermediary Institutions of Turkey, or TSPAKB.

Speaking to the Financial Times, the head of an Istanbul brokerage said there was speculation that the Capital Markets Board, or SKP, could impose fines and bans on individuals and firms accounting for 30 to 40 percent of domestic trading volumes.

"In the short term this could have serious volume implications," the broker told the newspaper. "Domestic investors accounted for daily trading volumes averaging around $1 billion in 2008, much of which has traditionally been very short term and speculative in nature," the FT said.

The raids came shortly after the appointment of a new chairman at SPK. Vedat Akgiray, the new chief, is described by market participants as dynamic and keen to get down to business, the FT reported Thursday.