A TV Tussle Titillates in Prague

By Mortkowitz, Siegfried; Ernsberger Jr., Richard | Newsweek International, January 17, 2000 | Go to article overview

A TV Tussle Titillates in Prague


Mortkowitz, Siegfried, Ernsberger Jr., Richard, Newsweek International


It was a beautiful partnership--while it lasted. Six years ago American billionaire Ronald Lauder, an heir to the Estee Lauder cosmetics fortune, became a major investor in TV Nova, the first commercial station in the Czech Republic. His partner in the venture was Vladimir Zelezny, a shrewd and politically well- connected Czech businessman. Zelezny and Lauder have much in common, including a passion for art collecting and Jewish philanthropy. Zelezny ran TV Nova--and using a blend of lowbrow entertainment (including "Baywatch" and naked weather forecasters) and sensationalistic news shows made it an unqualified success. The station gave Zelezny political clout; he personally hosts a popular call-in show called "Ask the Director." And it gave Lauder a solid financial foundation for the TV group he's building in Eastern Europe.

But last spring this potent mix of imported money and local talent exploded. A complex structure that gave Lauder control of the operating company and Zelezny control of the all-important broadcast license is now in shambles. In April a public company named CME--which holds Lauder's TV interests in the region--fired Zelezny for alleged financial improprieties at the operating company, which he ran. Three months later Zelezny retaliated. He cut the switch on the old studios and began broadcasting from a new location, using a new operating company that he had set up. Lauder, who spent about $15 million getting TV Nova started and considerably more on programming, was left out in the cold. TV Nova was CME's glittering star, the firm's one dependable moneymaker. Without it, the company's stock (quoted in New York) has plunged from $30 a share to less than $2, losing about $500 million in market value. Lauder accuses Zelezny of "hijacking" TV Nova and causing "enormous financial damage" to his company.

The former partners are now embroiled in a high-profile legal battle, in which the U.S. government is taking a conspicuous interest. If the case is not resolved soon, there could be serious damage to the Czech Republic's reputation as a safe place for foreign investment. That's certainly Lauder's game plan. A former U.S. ambassador to Austria, Lauder has powerful contacts in Washington, and he's mustering them to try to recoup either the TV station or his investment. In a recent meeting, Secretary of State Madeleine Albright urged Czech Foreign Minister Jan Kavan to treat Lauder's case "very seriously."

Lauder has even confronted Czech Prime Minister Milos Zeman over the matter. Last November, when Zeman made an official visit to Washington, he was greeted by a full-page ad in The Washington Post, paid for by Lauder. The headline read: think twice before you invest in the czech republic. The ad asserted that "Czech business, regulatory and legal practices fall woefully short of international standards." Lauder then confronted Zeman at a Washington reception in the Czech's honor. According to witnesses, the two men had a vigorous 20-minute discussion, during which, Zeman told NEWSWEEK, he charged Lauder with publishing false information in the ads. Zeman asked Lauder to apologize; Lauder refused.

Lauder's interest in Czech television began in 1993, when he was head of the Central European Development Corporation, a private investment company specializing in Central and Southern Europe. It was the original investor in TV Nova and the precursor of CME. According to CME chief Fred Klinkhammer, the Czech Broadcast Council did not want to give a foreign company complete control of TV Nova. …

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