RusAl Accused of ?€?Terror?€™ Campaign

As deeply indebted United Company RusAl sweet-talks foreign investors ahead of a planned initial public offering, it has launched a “terror” campaign at home against a business newspaper.

Vedomosti said RusAl and its lawyers were bombarding its journalists with threatening cell phone calls and e-mails after it published a front-page article on Oct. 26 that contained information from a closed-door investors meeting where RusAl announced its 2008 results.

The article, titled “$6 Billion Found Missing,” revealed that RusAl had posted a net loss of $5.98 billion for last year and a $720 million loss for the first quarter of 2009. Vedomosti cited a presentation from the meeting as its source, without saying how it was obtained.

Vedomosti editor-in-chief Elizaveta Osetinskaya said RusAl accused the newspaper of breaking the law by publishing commercial secrets and was now waging a “war” to force it to reveal its source and prevent it from writing about the company again.

“UC RusAl and its lawyers from Egorov, Puginsky, Afanasiev & Partners have triggered an information terror [campaign] against Vedomosti,” Osetinskaya wrote in an unusually sharp post on her LiveJournal blog late last week. “Their goal is to make us stop writing fairly and objectively about one of the most closed companies in Russia, as we have done for the past 10 years.”

Vedomosti is a joint venture between The Wall Street Journal, the Financial Times and Independent Media Sanoma Magazines, which is the parent company of The Moscow Times.

RusAl refused to comment for this article. The company’s press office has rejected requests for comment from The Moscow Times since April, when the newspaper bypassed the press office to talk to RusAl workers about conditions at their plant.

Dmitry Afanasiev, chairman of Egorov, Puginsky, Afanasiev & Partners, said Vedomosti was in breach of the law for publishing financial data from the RusAl presentation in three separate articles, even though it had been warned that the information was a commercial secret.

“We have a number of legal options open to us against the newspaper and its editors, and we are currently reviewing these,” he said Sunday in e-mailed comments.

He did not address Vedomosti’s complaints of intimidation.

Osetinskaya said Vedomosti had no obligation to check with sources whether information it received was a commercial secret. She stressed that Russian media legislation gives journalists the right to gather and publish any information, unless proven that they knew about the confidentiality and still decided to make it public.

“[RusAl and its lawyers] are trying to force us to stop writing stories about RusAl’s business,” Osetinskaya wrote. “This is a real legal terror: They call the mobile phones of our staff from early morning until late at night, warning them, ‘Are you sure you should write about this?’”

The lawyers, she wrote, have flooded staff’s e-mail boxes and even tried to convince the journalists that the phone calls and e-mails fell under the category of confidential information, too.

They “are threatening journalists with consequences” such as possible criminal charges, she said.

Osetinskaya wrote that the real goal was most likely to find out the identity of the source.

“In unofficial conversations, lawyers have made it clear what they indeed want from us,” she wrote. “They need the source of the information.”

She said such a demand was in violation of a company policy that requires journalists to shield the identities of sources from third parties except when ordered by a court.

The whole affair, Osetinskaya wrote, is most likely orchestrated by RusAl owner Oleg Deripaska himself.

“I’m almost sure that Deripaska is dissatisfied personally with the fact that unsanctioned information about his brainchild and about himself has surfaced,” she wrote. “A person who assembled a large empire under his control is trying to control us — genuinely independent journalists.”

Alexander Nadmitov, a lawyer with Nadmitov & Partners not connected to the RusAl-Vedomosti affair, said Vedomosti had no obligation to refrain from publishing the RusAl report unless its source had said the information was a commercial secret.

At the same time, he said, RusAl would be hard-pressed to make the commercial secrets claim stick in court if it had not required the investors at the closed-door meeting to sign a nondisclosure agreement.

“If there was no written agreement between the company and its counteragents, no information provided can be regarded as confidential,” he said.

He said a lot of red tape goes into classifying something as a commercial secret.

“If a company lists certain information as a commercial secret, it should be documented and a list should be made of the people who have access to it,” Nadmitov said. “If a company gives certain information in the form of leaflets to conference participants, the leaflets should bear a disclaimer mentioning that this data should not be disclosed to a third party.”

The RusAl presentation was marked confidential on each page and was prepared for a small group of investment bankers under a confidentiality agreement, Afanasiev said.

Nadmitov agreed with Vedomosti’s assessment that RusAl was probably more interested in finding the source of the leak than going after Vedomosti.

RusAl, which has long been sensitive about how its activities are portrayed in the media, has a lot at stake as it prepares for a possible IPO next month that could raise $2 billion in Hong Kong and Paris. RusAl would use the earnings to reduce its massive debts of about $16.8 billion.

Companies often threaten the media with lawsuits, but the courts are unlikely to be persuaded by an argument based on the commercial secrets law, said Leonid Bershidsky, editor-in-chief of the Slon.ru business portal and a former editor-in-chief of Vedomosti.

“However, if you bribe a judge you can win such a case, well, you can probably win any case then,” he said.

Bershidsky said companies can be aggressive when they lack the ability to work well with the media, investors, analysts and consumers. Journalists, in turn, often find it easier to give in to a big company “that tries to reach its goals by threats or bribes rather than to do their jobs honestly,” he said. “Vedomosti, however, looks for the fair rather than the easy way. This is what Liza Osetinskaya’s blog post is about.”

RusAl has a reputation of being a closed company when it comes to dealing with journalists, said Maxim Kashulinsky, editor-in-chief of Forbes Russia magazine.

“We haven’t experienced any pressure from RusAl so far, but I wouldn’t call their approach a friendly one,” he said. “We ran an article about Deripaska’s business a year ago, and RusAl’s press office declined to comment for it.”

He said some companies try to pressure journalists into not publishing certain information, but this rarely results in lawsuits.

“Companies don’t use such threats on a systematic basis,” he said. “This scandal is an alarming signal for journalists, and I hope Vedomosti comes off victorious, which would benefit all journalists working in Russia.”

A receptionist at RusAl’s press office said no spokespeople were available to comment when called several times Friday. Sergei Babichenko, a spokesman for Basic Element, Deripaska’s holding company that has a controlling stake in RusAl, forwarded all questions to RusAl.

RusAl has used similar tactics against The Moscow Times. In an article in April titled “RusAl Saves $554M On Costs, Production,” The Moscow Times asked workers in one of RusAl’s mines how cost cuts were affecting them. One miner’s response, that the drop in spending was forcing workers to cut corners on safety, drew an angry reaction from RusAl’s press office, which said the newspaper could only publish information about the company that had been cleared by the press office.

Representatives of the mining giant also threatened to sue the newspaper, but no lawsuit materialized. The company has since refused to reply to inquiries from The Moscow Times.