Starting Points: financiers

May 28, 2010

Thailand tries to go after financial backers of 'red shirts'

By Andrew Higgins
Friday, May 28, 2010; A01

BANGKOK -- Victorious over rice farmers in flip-flops and riffraff with slingshots, molotov cocktails and a few guns, the commander in chief of the Royal Thai Army has moved swiftly to contain another menace: a golf-loving steel tycoon and maker of Nestle instant coffee.

Multimillionaire businessman Prayudh Mahagitsiri is now No. 21 on the latest installment of an expanding financial blacklist issued by the Center for the Resolution of the Emergency Situation, a body handling Thailand's gravest political crisis since the founding of the modern Thai state in 1932.

Prayudh, along with 151 other businessmen, politicians, lawyers and other alleged financiers of "red shirt" protests, has seen his bank accounts frozen and been ordered to report details of all financial transactions since September to authorities. The aim, said an emergency decree signed by Gen. Anupong Paochinda, is to root out threats to "national security and the safety of citizens" and "get rid of this problem effectively and immediately."

Last week, the Thai military forcibly ended a nine-week protest that had paralyzed central Bangkok, resulting in a frenzy of arson and looting. In all, more than 85 people died in the mayhem and earlier violence.

One of Asia's most vibrant economies is now getting cleaned up and back in business, but the government's campaign to rip out the roots of the protests once and for all has turned on some of Thailand's wealthiest businesspeople.

This economic assault has highlighted a curious and highly volatile feature of a raucous struggle often seen as a battle between Thailand's haves and have-nots. Although many rank-and-file red shirts are relatively poor and many of their most strident critics -- "yellow shirts" -- are fairly well-to-do, Thailand's far-from-resolved confrontation is also a clash within Thailand's elite.

"This is an ideological conflict mixed up with a business conflict. Business competition has always been muddled with political competition. But this is much more vindictive," said Chris Baker, a longtime resident of Thailand and co-author of a recent book about Thailand's billionaire former prime minister, Thaksin Shinawatra.

On Tuesday, Thailand issued an arrest warrant on terrorism charges against Thaksin, a U.S.-educated former policeman who made a fortune off mobile telephones, TV, golf courses and other ventures. He won two elections, styled himself "CEO Prime Minister" and presided over a period of roaring economic growth -- and also mass executions of alleged criminals -- while serving as leader from 2001 to 2006, when he was overthrown in a military coup. He's now in self-imposed exile abroad.

"They are tightening the noose," said Thitinan Pongsudhirak, a professor of political science at Bangkok's Chulalongkorn University. Arrests, censorship and the financial inquest have put Thailand on "a slippery slope," he said, adding: "The creeping fear is that this could become a witch hunt. The question is: Who is next?"

Noppadon Pattama, a former foreign minister whose bank accounts have been frozen, denounced the financial probe as "clearly politically motivated." Like many on the financial blacklist, Noppadon is close to Thaksin.

The government denied engaging in a political vendetta. The money probe, said spokesman Panitan Wattanayagorn, is "not a tool for political conflict" but a response to a security threat. "People who have nothing to hide have nothing to worry about," said Panitan, a political scientist who taught for a time at Johns Hopkins University.

Twenty companies, most of them owned by relatives or close associates of Thaksin, are also under investigation. Like individuals on the list, they are barred from making bank, stock, insurance or other transactions without government permission. Authorities have made public no evidence of wrongdoing and have stumbled over details: One blacklisted company closed years ago.

Thailand's business community, like the rest of the country, is bitterly divided.

When Bangkok lurched toward anarchy last week, mostly pro-Thaksin red shirts turned with fury on property owned by rich families they viewed as hostile or lukewarm to their movement. Police stood by as rioters torched branches of Bangkok Bank and the country's biggest shopping mall, CentralWorld.

The arson attacks mirrored, albeit with far more violence, a campaign launched in early 2006 by opponents of Thaksin to boycott businesses close to the then prime minister. Six months later, the military removed Thaksin and set up a commission to investigate his business network.

That investigation began a long effort to choke off Thaksin's money. It climaxed in February when Thailand's Supreme Court confiscated $1.4 billion of frozen Thaksin assets. The court ruling allowed him to keep about $900 million. Soon after the court decision, red shirts began mobilizing for an occupation of downtown Bangkok.

Sean Boonpracong, a former resident of Herndon, Va., who helped lead the red shirt invasion, said after release from military interrogation over the weekend that protesters got $130,000 a day -- far less than official estimates -- from "friends of Thaksin" for food, generator fuel and other supplies. He denied that any had been used to buy weapons, adding that red shirts discussed setting up an armed wing but rejected the idea.

Some of those on the blacklist sympathized with the red shirt cause, which boiled down to a demand that the government quit and call early elections that would possibly return Thaksin's allies to power. A shopping center owned by one targeted businessman leased space to a host of now-defunct red shirt ventures, including an anti-government TV station, a journal called Red News, the Red Cafe and also the Red Shop, filled with Thaksin dolls, Thaksin T-shirts and books praising Thaksin.

Other tycoons suffered heavy losses from the turmoil they're accused of bankrolling. Particularly hard hit was Panlert Baiyoke, owner of the Baiyoke Sky Hotel, an 88-story Bangkok landmark with 658 guest rooms. The hotel had just one guest last week. This week it had 20.

Prayudh, the coffee maker and chief executive of a steel venture called Thainox Stainless, declined to comment on allegations that he helped fund the protesters.

The government has given no evidence of misbehavior by Prayudh other than a long association with Thaksin. The corporate headquarters of Thainox displays a 2001 photo of Prayudh receiving a business award from Thaksin.

Prayudh made his first big money from a coffee joint venture set up in 1972 with the Swiss multinational Nestle. Nophadol Siwabur, director of corporate affairs for Nestle in Thailand, said the blacklist "is essentially a private matter for Mr. Prayudh." Nestle, he added, "keeps a strict neutrality in political matters."

This hasn't helped Nestle escape the consequences of politics: Its Bangkok offices were in CentralWorld, the shopping and office plaza torched by protesters.