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Why does Turkey suddenly need so many bankruptcy trustees?

Turkish President Recep Tayyip Erdogan's battle against the Gulen movement is making some people very rich — and bankrupting others.
Finansbank headquarters is seen between Tekfen (2nd L) and Sapphire (R) towers in Istanbul, Turkey, June 9, 2016. REUTERS/Murad Sezer - RTSGPQH

Thousands of young people among Turkey's 3.2 million unemployed are dreaming of getting a government appointment as a bankruptcy trustee. Since October, thousands of people have Googled the question “How can I become a trustee?” That in itself is enough to illustrate Turkey's economic problems — not to mention the unusual wave of bankruptcies the government has been involved in.

Turkey's economy has been shrinking for two years. The gross domestic product, which was $823 billion in 2013, was down to $720 billion at the end of last year. Turkey, which had the 17th-largest economy of the world, as of last year dropped to No. 19. Economic data for the first five months of 2016 are not all that promising, either.

Turkey’s exports declined 6.5% to $57.4 billion in the January-May period as compared with the same period in 2015. The government had set an export target of $155.5 billion for 2016 that isn't likely to be achieved.

A crisis reigns in the tourism sector, which is of vital importance to Turkey's economy. According to the official figures, compared with April 2015, 28% fewer tourists visited Turkey in April of this year. That was the most drastic monthly drop of the past 17 years. The tourism sector is expecting a $5 billion revenue loss for this year.

Alongside attacks by the Islamic State and the Kurdistan Workers Party, the crisis with Russia also has affected commercial life as much as the tourism sector. Istanbul’s majestic Grand Bazaar is far from its days of glory. You don’t see many tourists in the once-tourist-infested areas of Eminonu, Sultanahmet and Taksim. Usually animated, cheery shopkeepers in major shopping hubs of Laleli, Osmanbey, Merter and Kadikoy are not smiling nowadays.

Another major problem for the economy is the continuing violent clashes in the southeast that have cost the lives of more than 500 police and soldiers and 7,000 Kurdish militants.

Clashes have displaced more than 200,000 people, and commercial activity in the region has come to a standstill. Many businesses have closed, and others are having problems procuring goods from other parts of the country.

The number of companies that have filed for deferred bankruptcy during the first four months of this year has broken an all-time record. According to the Ministry of Justice, commercial courts last year granted deferrals to 492 companies. In the first quarter last year, 112 companies applied; in the same period this year, 184 had already applied.

Bankruptcy deferral is a legal measure to protect the assets of companies, similar to Chapter 11 bankruptcy in the United States. When that ruling is obtained, all legal proceedings against a company's assets cease. All debts, including public debts, are restructured and spread over time so companies can continue operating. The courts, however, appoint new management to companies when it's determined the firms have not been run properly.

This is where our story begins. From January to April of this year, courts appointed more than 800 trustees to companies that have filed for bankruptcy protection.

What has made the idea of a trustee career popular is the relentless war President Recep Tayyip Erdogan has launched against his foe, the Gulen movement, which is accused of trying to set up a parallel state. Courts of peace, which have become the spearhead of the ruling party, last year made rulings to detain 4,011 teachers, academics, businessmen, police and soldiers accused of being part of the Gulen movement. More than 800 of them were subsequently arrested, and new management was installed at more than 350 organizations, including educational institutions, hospitals and companies of varying sizes. The government appointed 1,200 people it favors to be trustees to run these organizations.

The 5th Criminal Court of Peace of Ankara took the first step in this campaign. That court in October appointed a trustee to run the largest gold producer of the country, Koza Ipek Holding, citing "strong suspicions of providing financial assistance to Fethullah Gulen movement." In an expert report that constituted the basis of the court ruling, the fact that Koza Ipek Holding "has an outstanding accounting system" was cited as a reason for suspicion.

The court seized all properties of Akin Ipek, the owner of Koza Gold Cos. and reputedly one of the highest corporate taxpayers in the country, and appointed pro-government names to take over the company's media holdings.

Also in October, when a trustee was appointed to publisher Kaynak Holding in a similar move, Google searches such as “how to become a trustee” and “how a trustee is appointed" surged.

Anadolu Court of Peace in Ankara appointed Imran Okumus as the trustee of Kaynak Holding and decided he would be paid 5,000 Turkish liras ($1,700) each month for every company his holding controls. Okumus, who found himself with a salary of 105,000 Turkish liras a month for managing 19 companies and two foundations of the holding, ended up with even more — 129,000 Turkish liras a month — when some companies that had indirect links to Kaynak Holding were also seized.

Okumus, who suddenly became the highest-paid CEO in the country, became the most-discussed name in Turkey’s social media.

Appointments of trustees became a flurry that defied any logic. The Zonguldak Court of Peace broke new ground by appointing a trustee for Vera Patisserie, a bakery that had five outlets in Zonguldak province.

Sami Karahan, chairman of the commercial law department of Marmara University, said it is unprecedented in the republic's history to seize companies and private educational institutions through rulings of courts of peace, rather than commercial courts. Karahan said this practice, which the government is using to discipline its opposition, is in clear violation of constitutional rights to property and expropriation.

“These rulings by courts of peace are not only in violation of our constitution, but also contravene the European Human Rights Convention. Don’t forget, one day Turkey will be penalized by the European Court of Human Rights and the bill will have to be paid by Turkish taxpayers,” Karahan said.

With 2,000 trustees being appointed over the past six months — and being paid monthly salaries that vary from 5,000 to 100,000 Turkish liras — it's no wonder the unemployed are interested. The minimum monthly salary in Turkey is 1,300 Turkish liras.