Saturday, May 21, 2005

Litigation as Defense Against Charges of Nepotism

September 22, 2004


"Uncompromising views, without fail" promises the Economist magazine in its advertising. Well, the Economist has failed.

On August 14, the London-based magazine published an unremarkable piecetitled First Singapore, next the world on Temasek Holdings, theSingapore Government holding company that controls some 40 listed companiesin Singapore. These companies have a market worth of around S$60 billion(A$51 billion), about a quarter of the local stock exchange's market capitalisation.

In turn, the companies have assets in Australia. Among them are theelectricity transmission network for the entire state of Victoria and Optus,the country's second biggest telecommunications operator.

The Economist said in its piece that Temasek lacks transparency,that listed Temasek companies have significantly underperformed the stockmarketand that they typically operate in protected markets with favourable regulation.All of that is true. It also said that Temasek operated with a "whiffof nepotism". That may be true too, but who is to say?

Two weeks later, on September 1, the Economist printed an apologyto the Lees. The offending article, the magazine explained, could havebeen taken to mean that the new Prime Minister Lee Hsien Loong and/or Lee'sfather Lee Kuan Yew were responsible for having Hsien Loong's wife, HoChing, appointed to head up Temasek, not on merit but "for corruptnepotistic motives for the advancement of the Lee family's interests".It went on to apologise and mentioned that damages had been paid to LeeHsien Loong and Lee Kuan Yew. Those damages totalled an astonishing S$390,000.

Personally, I would not have said that Ho Ching's appointment owes anythingto nepotism because I have no evidence that it does. The Economist wascareless to suggest it. Ho Ching is certainly well- qualified. It mightbe fair to question whether nepotism played a role in her appointment butnot fair to assert it.

But whether the assertion of nepotism is worth S$390,000 particularlywhen the Prime Minister, the Minister Mentor (as Lee Kuan Yew is now known)and the head of the Government's main holding company are all close relativesis another matter. The issue did not go to court. Lee family lawyers complainedto the Economist and within two weeks the magazine had paid up.By any measure the sum is obscene. And ridiculous.

In Australia this inference of nepotism would be taken as fair comment,particularly with politicians for whom public scrutiny is part of publicoffice. It would also need to be demonstrated that the Economist hadbeen acting maliciously. Of course it was not.

In 2002, the two Lees and then Prime Minister Goh Chok Tong picked upS$595,000 from the Bloomberg wire service in settlement over anarticle that the men had deemed offensive. It was on the same matter -Ho Ching's appointment to Temasek. Other media organisations have alsobeen threatened with defamation. Several have paid out.

Huge out-of-court payments such as these are now part of the cost ofdoing business in Singapore for news organisations. Principle has beensacrificed for commercial considerations.

If the Singapore Government is not appeased then the risk is that mediaoutlets' distribution in Singapore will be curtailed. Several prominentforeign newspapers and magazines learned the hard way in the 1980s and'90s when their distribution in Singapore was cut back.

Not surprisingly, the Economist is not commenting on the matter.Perhaps it is embarrassed. It ought to be. At what point does an out- of-courtpayout become a pay-off?

Britain has made it illegal for its registered companies to make improperpayments to foreign officials. It would be interesting to know whetherthe payments to the Lees, which appear to be excessive, are not court-awardedand which appear to be made to head off controls on the magazine's distribution,would constitute bribery of foreign officials under British law. What wouldbe made of a western company (which is what the Economist is) givingsuch a large sum without apparent consideration to say, a pair of Indonesianministers? There wouldn't be a whiff of nepotism so much as the stenchof corruption.

Singapore Government officials defend their right to take defamationaction and to be awarded huge payouts on the basis that their personalintegrity is vital. But acting like sensitive control freaks would detractfrom their integrity such that over time, compensation for damage to theirreputations should decline with the value of those reputations.

No doubt media organisations will defend their payouts to head off legalaction by saying that legal costs in Singapore can be enormous. Certainlythey are, and the Lees themselves have been significant beneficiaries.Lee & Lee is one of the largest law firms in Singapore. It's littlewonder that litigation has become a powerful tool for the family. It'swhat they know best.

But the real problem is that foreign news organisations allow themselvesto be so readily picked off by the Singapore Government. Multinationalcompanies have started to initiate joint strategies to combat intellectualproperty rights abuses. It's about time that foreign media organisationsdid the same to combat the litigious excesses of the Singapore Government.


Anonymous Anonymous said...

Why no more posts liao?


11:29 PM  

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