Reuters: Hot Stocks: UPDATE 2-Turkey probes tax affairs of Koc energy firms

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UPDATE 2-Turkey probes tax affairs of Koc energy firms Jul 25th 2013, 13:31 Thu Jul 25, 2013 9:31am EDT * Probe launched into several Koc-owned firms * One of group's hotels sheltered protesters * Finance minister says no link to demonstrations (Adds analyst comment, background, updates shares) By Humeyra Pamuk and Evrim Ergin ANKARA/ISTANBUL, July 25 (Reuters) - Turkey's government has launched a probe into the tax affairs of energy firms affiliated with one of the country's most prominent business dynasties, weeks after criticising one of the family's hotels for sheltering protesters during anti-government unrest. Police and finance ministry tax inspectors late on Wednesday raided the offices of Tupras, Turkey's sole refiner, and energy company Aygaz, both of them controlled by conglomerate Koc Holding. Shares in all three companies fell more than 3 percent, extending losses from late on Wednesday. Finance Minister Mehmet Simsek said there was no connection between the probe and last month's demonstrations. Fuel retailer Opet, also owned by Koc Group, and a joint venture between Royal Dutch Shell and Turkish Turcas Petrol were also part of the investigation. "Ministry of Finance tax inspectors carry out around 50,000 inspections a year. There is absolutely no linkage between (last month's) protests and current tax probes," Simsek said on his Twitter account. An official at the Shell-Turcas joint venture said he expected the investigation to continue until the end of the month. The Koc family are one of the most prominent dynasties among a secular business elite in Turkey which has at times had an uneasy relationship with Prime Minister Tayyip Erdogan's Islamist-rooted AK Party. The family owns five of Turkey's 10 largest companies. Erdogan has criticised the Divan Hotel, owned by Koc, for opening its doors to shelter protesters fleeing police tear gas during weeks of violent anti-government demonstrations last month and some analysts had warned it could face sanctions. Koc declined to comment on the investigation. The protests began as a peaceful campaign against redevelopment plans for Gezi Park, a small, leafy corner of central Istanbul, but spiralled into a broader show of defiance against what demonstrators said was Erdogan's authoritarianism. The unrest, in which police fired tear gas and water cannon night after night, dented Turkey's image of stability on the edge of the volatile Middle East. PRECEDENT Erdogan's government has in the past levied heavy tax fines and seized the assets of media firms perceived to be critical of his administration. The government has denied any political motivation in such cases. Dogan Holding, once Turkey's largest media group, was fined over $2.5 billion for alleged tax evasion in 2009. But the case slipped under the radar after Dogan, which also has energy, manufacturing and finance interests, sold two dailies and a television channel as part, it said, of a routine restructuring. Tupras said in a statement that checks had been carried out on physical inventories including fuel feedstock, refined oil products as well as lube oil as part of the probe. An official from Turkey's energy watchdog EPDK said the finance ministry had asked it for information but added that the probe was not part of regular EPDK inspections. Tupras shares initially fell more than 6 percent in early activity on Thursday but recovered some of their losses to trade down 3.5 percent by 1100 GMT. Koc Holding and Aygaz were down 3.2 percent and 3.7 percent respectively, underperforming the broader Istanbul share index , which fell 1.56 percent. Erdogan has rounded on a number of companies for their perceived support of the protests, and investors said they would be watching to see whether other probes are announced. "If the investigation spreads to other companies, it will be negative for capital markets," said Ali Bahcuvan, head of the Stock Market Investors' Association. Fellow family-run conglomerate Boyner came under fire after its chairman posed in a photo with a demonstrator's placard. The country's third-biggest lender Garanti Bank saw a small number of customers cancel credit cards in support of the demonstrations after a sister media firm gave them scant coverage, but later found itself the subject of government ire after one of its executives voiced sympathy for the protesters. "Erdogan has already singled out some businesses like the Koc Group, Boyner and Garanti Bank," Eurasia Group analyst Naz Masraff said in a note last week, ahead of the probe. "These companies may be used as scapegoats as Erdogan applies direct or indirect sanctions against them." (Additional reporting by Birsen Altayli in Istanbul; Writing by Nick Tattersall; Editing by Dale Hudson) Link this Share this Digg this Email Reprints

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