The Curious Case of Victor Pey

Why the Chilean government wants to keep a friendly newspaper shuttered.

The irony of Chile’s media is that there was more ideological diversity and journalistic energy in the printed press in the late 1980s, in the waning years of the hard-line dictatorship of General Augusto Pinochet, than now when he is long gone and proponents of democracy are firmly in control. Two daily newspapers, El Mercurio and La Tercera, dominate. Both are politically right of center. Their virtual monopoly is a legacy of the scorched-earth ideological repression that took place when Pinochet took power in the 1970s, confiscating or closing all media organizations that did not cheer on his military government. Chile’s newspaper market became what one study called a market ”duopoly… accompanied by an ideological monopoly.”

One might think that such an unbalanced press would have been remedied in the sixteen years since Pinochet left power, especially considering that the center-left Concertación, a coalition of moderate Socialists and Christian Democrats, has won all the elections. But one would be wrong.

”In sixteen years of democracy, clearly we have a failure in this area,”said Ricardo Lagos Weber, a government minister and spokesman. ”We have a debit, as they say, a debt. The majority that voted for the Concertación still does not have a print medium with which it can fully identify. But what can the state do about this? That is a delicate question.”

Doing nothing–a hands-off policy–perhaps would be defensible. But fighting tooth and nail against the re-emergence of a paper shut down by Pinochet is harder to understand. Consider the Sisyphean struggle of ninety-two-year-old Victor Pey. Pey wants to relaunch Clarín, the raucous, left-leaning tabloid that was the largest-selling weekday paper in the country until it was confiscated by Pinochet as part of his military takeover in 1973.

Pey had purchased the paper a few months before it was confiscated, and he has been trying for more than ten years to get the current government to pay him financial restitution so that he can put Clarín back on the streets. The new Clarín, he assures me, will be independent of any party and will occupy the place it once had as a mass-circulation newspaper on the side of ordinary Chileans. It will be, as its masthead proclaimed in its heyday, Firme con el pueblo, ”Solidly With the People.”

Judging from Pey’s political associations, however, a new Clarín could also be counted on to be firme with most of the policies of the current government, while providing long-absent critical coverage of Chile’s powerful right-wing parties and business community. In a region in which objectivity is not the rule in journalism, diversity of political views and diversity of ownership in the media take on critical importance for democracy. A reasonable restitution settlement–projected in journalistic circles in Chile to be at least $50 million to $100 million–could ensure that Pey’s Clarín avoids the fate of several other newspaper start-ups in recent years that lacked the financial backing to survive.

So why is Chile’s government so furiously opposed to settling with Pey? It’s not for lack of democratic credentials or a willingness to make reparations for the abuses of the dictatorship. Chile’s current president, Michelle Bachelet, was herself a political prisoner. Her election last year as the country’s first woman president attracted wide and laudatory international coverage. Indeed, Chile is often held up as the shining example of the effort to re-establish democracy in Latin America. The Concertación governments have recognized their obligation to pay for confiscated property and have doled out tens of millions of dollars in reparations to human rights victims.

When it comes to repairing the skewed media situation left by Pinochet, however, the government has been curiously passive. And when it comes to the case of Pey and Clarín in particular, the government has put up a wall of opposition.

Victor Pey runs his private crusade to restore some ideological balance to the Chilean press from a modest second-floor apartment in the middle-class Ñuñoa neighborhood in Santiago. There is a worn brown rug, a chair with a broken back in front of a computer, and shelves of books, magazines, and photos from his variegated past. Pey is an erect man with pale skin and an aura of always being in a hurry. Now, recently recovered from a heart ailment, at his age he is understandably impatient to settle the dispute over Clarín and get on with the business of building a new newspaper.

Although a civil engineer by training and a businessman by vocation, he has been a fighter in political causes since growing up in the Catalonia region of Spain. During the Spanish civil war in the 1930s he helped convert a Barcelona automobile plant into an arms factory for the Republican (leftist) side. That led to his first flight into exile. He escaped to a refugee camp in France after the rightist military, led by Francisco Franco, defeated the forces of the Republican government.

In 1939 he arrived in Chile’s Valparaiso harbor on a French ship with 2,100 other Spanish refugees. Pey had met the Chilean consul in Paris, the poet Pablo Neruda, who arranged for the exiles to find a home in Chile. Chile’s well-organized leftist parties, among the largest and most vibrant in Latin America, warmly embraced the refugees, and the Spaniards quickly began to prosper in Chile’s business and political life.

Pey got into the newspaper business through friendship and by chance. While running an engineering firm involved in making improvements to Chile’s ports in the 1940s and 1950s, he developed a circle of well-connected friends. They included the Socialist senator (and later president) Salvador Allende, and the future founder of Clarín, Darío Sainte-Marie, who was then the editor of the government-owned newspaper, La Nación.

From its creation, Clarín was a textbook example of the interconnected nature of government, political power, and journalism in Chile. The new newspaper was first printed in La Nación’s plant, with the acquiescence of the populist president at the time, Carlos Ibañez, who was Sainte-Marie’s secret partner. The inspiration for the paper was the realization that the next government, expected to be controlled by the conservative right, would take over La Nación and leave the progressive forces of the center-left without a newspaper.

True to form, the new government that assumed power in 1958 quickly fired Sainte-Marie. It also expelled the start-up Clarín from La Nación’s plant as soon as it became evident that its editorial line was, to put it mildly, critical of the rightist parties and business interests that made up the new regime. Without editorial offices or a printing press, the increasingly popular new paper improvised with antique flat-bed presses purchased at scrap-iron prices.

Enter Victor Pey. Sainte-Marie asked him to organize the physical plant of the newspaper, and specifically to buy and install new presses imported from East Germany. The paper flourished. It was the 1960s, a time of feverish political activity and the mobilization of peasants and workers in Chile. The paper specialized in racy pictures, police stories–the more gruesome the better–and ad hominem attacks and hilarious send-ups of the pomposities of the Chilean aristocracy. Objectivity, or even accuracy, were not words used to describe Clarín.

The readers loved it. It was the first paper written in the spicy idioms–known as ”Chilenismos”–of the middle and lower classes. Sainte-Marie wrote a regular column under the pen name ”Volpone,”gleefully fashioning himself in the image of the unscrupulous trickster who is the main character in Ben Johnson’s seventeenth-century satire. ”The soul of the paper was always Sainte-Marie,”Pey tells me. ”Sometimes he had to put another journalist in charge because there were problems with suits for libel and calumny and he had to go to jail. But he was always the one who ran the paper.”

In 1970, Sainte-Marie’s friend, Senator Allende (whom he had known since childhood), ran for president on a radical platform of agrarian reform, nationalization of Chile’s copper mines, and state control of the economy. He had run twice before and lost, but this time he had two significant new assets: his party had gained control of one of the largest radio networks, and there was Sainte-Marie and Clarín, which was selling 150,000 copies a day all over Chile, putting it in the league with the staid dean of the Chilean press, El Mercurio.

The paper lavished favorable coverage on Allende and another reformist candidate. But Sainte-Marie was most effective in ridiculing the right-wing candidate, Jorge Alessandri, a bachelor former president whom Clarín referred to relentlessly as ”La Señora.”

Overcoming huge odds, including a covert plan by the CIA to discredit him, Allende won a plurality and was confirmed by Congress. An abortive coup attempt, sponsored by the CIA, ended in the assassination of the commander of the Chilean army. But Chile’s democracy survived, and Allende was inaugurated in October 1970, promising a unique political experiment: to bring socialism not by violent revolution but by electoral victories.

Sainte-Marie’s Clarín became the backbone of Allende’s leftist experiment, and the acerbic editor was not shy about claiming credit. ”Many people deny this for political reasons, but the reality is that the difference of votes between Allende and Alessandri [less than one and a half percentage points] would not have existed if it had not been for the action of Clarín in the campaign,”Pey says. ”Sainte-Marie said to Allende, ‘I made you president.’ He said it many times, in front of me.”

Allende, himself a man of colossal ego, reacted by distancing himself from his old friend. Sainte-Marie grew increasingly resentful of Allende’s social snubs and lack of appreciation. He responded with bouts of drinking; his marriage to a much younger woman was unraveling disastrously, and he feared a public scandal that would be seized upon by the right. Sainte-Marie had soured on his own success and wanted out.

Pey, meanwhile, had assumed a more active role in the paper. Clarín’s circulation had surged to 280,000 each weekday, overtaking El Mercurio. The paper again needed newer, faster presses to keep up. Pey took on the task of importing a modern, color rotary press. Clarín also purchased a large building (its third major piece of real estate) in the center of Santiago, near the Defense Ministry, in whose basement the press was to be installed. ”One day Saint-Marie called me and said, ‘Old friend, I have to leave, and next week is when I’m leaving. You who have been with me and have seen all of this, you should keep the paper,’ ”Pey recalls. Pey used the week to pull together his assets, borrow money, and decide to buy the paper. He made a series of payments totaling about $1.3 million. It was a fire-sale price, Pey says, because the paper was booming and the value of the buildings and new presses alone far exceeded the selling price. He traveled to Portugal, where Sainte-Marie had fled, to finalize the bill of sale.

That’s where the story gets murky and the disputes begin. Pey had documentation of the bank transfers to Sainte-Marie, the bill of sale, and stock certificates signed over by Sainte-Marie and others who appeared on corporate ownership papers. But Chile’s September 11–the Pinochet coup–intervened, forcing Pey into exile before he could register the transaction with the Superintendent of Corporations, a regulatory body.

It was a violent, chaotic time. The country was wracked with protests for and against Allende, the economy was paralyzed with inflation topping 500 percent, and the president and his coalition parties were rapidly losing control. On September 11, 1973, General Pinochet (with well-documented U.S. encouragement) overthrew the Allende government in one of the most violent military coups in Latin American history, leaving thousands dead and tens of thousands political prisoners.

Clarín and Chile’s other pro-government media were a special target. On the same day that military aircraft bombed the presidential palace, soldiers stormed into Clarín’s offices, shut down its presses, and jailed its top editors. Clarín’s front page that day, its last, trumpeted a call to resistance.

Pey was among the hundreds of Chileans who were ordered to turn themselves in to the new military authorities. Many of those who obeyed were executed. Having survived the trauma of Spain, Pey was not tempted. He hid out for several days and eventually got asylum in the Venezuelan embassy. He was allowed to leave the country under embassy protection, but his passport was taken away, in effect making him stateless.

The political cleansing of the Chilean media was total. In all, twelve print publications were closed and forty radio stations silenced. The staffs of the three television stations were purged and the stations placed under military control.

Amid much publicity, in 1975 the Clarín company was officially confiscated without compensation, under a decree designed to liquidate all properties owned by political parties and labor unions. The military’s actions at that time, intended to discredit Pey as a tool of the Marxist president, have provided–in yet another bit of irony–some of the strongest evidence in Pey’s favor in his struggle with the current government. To justify the confiscation, a Pinochet government official announced that the ownership papers for Clarín had been discovered in the private office of Victor Pey. The papers, the official said in a written statement, showed that Pey, not Darío Sainte-Marie and the three other men whose names still appeared in the registry of the Superintendent of Corporations, was the real owner of Clarín. The papers, found in a strongbox, had the signatures of Sainte-Marie and the others, and showed that the four men had signed over their titles to all Clarín stock, in effect, to Pey, the possessor of the documents. ”Based on this evidence… the result is that it was Victor Pey who bought… the Empresa Periodística Clarín, making payments of U.S. $780,000 [and] $500,000,”the official declared.

That’s where the matter stood in 1990. With a democratic government in power, Pey moved to recover Clarín. At first all went well. A court order returned to him the ownership papers that had been preserved by the military government. With the papers in hand, he began the process–which he initially thought would be friendly–of claiming restitution. It should be simple, he said at the time: ”They took it away from me by decree; they can restore it to me by decree.”

Pey vowed that he had no intention of keeping the money for himself. ”I have said that the minute I have sufficient resources I am going to publish the newspaper Clarín, which will defend interests that coincide in some ways with the interests of the current Concertación government.”As a guarantee of his intentions, Pey donated 90 percent of the Clarín property to the President Allende Foundation, a nonprofit human rights organization founded in Spain.

Pey’s partner in the effort to recover Clarín is a story in his own right. He is Joan Garcés, the Spanish lawyer who devised the legal strategy that resulted in the arrest of Pinochet in London in 1998. Garcés served as a political adviser to Allende until the coup, and is the president and co-founder of the President Allende Foundation.

After several years went by with no progress on Pey’s claim in Chile, he and Garcés tried another tack. In November 1997, Pey, a Spanish citizen, and the foundation filed their claim against the government of Chile in the International Centre for Settlement of Investment Disputes (ICSID), an arbitration center at the World Bank in Washington, D.C.

The filing put the Chilean government in a double bind. On the one hand, it could not refuse the arbitration, to which it was committed by treaty with Spain, without sending a negative signal to foreign investors interested in Chile’s booming economy. In cases of confiscation the arbitration process allowed for restitution not only of the property itself but also of unrealized profits. Thus Pey’s claim was initially set at a stratospheric $517 million, although the three arbitration judges appointed to the case will establish any final settlement.

On the other hand, the government did not feel free to negotiate a lesser settlement through direct talks with Pey for fear of the wrath of Chile’s powerful rightist parties and their ally, El Mercurio. Alarm bells went off inside the Concertación. According to a former official directly involved, Concertación leaders warned President Ricardo Lagos that if the government did not put up a fierce fight, employing the best lawyers, it could be accused of ”some sort of connivance with the Allende Foundation.”Such accusations did in fact soon materialize, not only from the right but from the Christian Democrats, the large centrist party that is a mainstay of the Concertación coalition. El Mercurio’s writers pounded on the story, citing ”rumors”that the money for Clarín was actually going to end up in the treasury of the Socialist Party.

The warnings set in motion a counter-strategy to avoid settling with Pey and the foundation. The strategy amounted to paying a lesser amount to other claimants in Chile, on the legal theory that once the case had been administratively resolved in Chile, the World Bank arbitration process would be closed.

At that point–mid-1998–there were no rival claimants to Clarín. Darío Sainte-Marie had died in the early eighties. His will, obtained from government files on the case released to me, has a long list of bank accounts and properties, but no mention of Clarín. Another man whose name appeared on the Superintendent of Corporations registry, Emilio González, had also died and his will, too, contained no claim to Clarín.

Nevertheless, within a few months of the filing of Pey’s claim with the arbitration center, the heirs of Sainte-Marie, González, and two other men whose names appeared on the registry surfaced to file a joint claim in Chile, and in record time were granted a settlement of $9 million. (Needless to say, none of the recipients expressed any intention of publishing a newspaper.) The strategy and the government’s actions are too complex to explain in detail, but the central elements were confirmed by two government officials involved in the deal and by government documents released to me through a petition using the Chilean equivalent of the Freedom of Information Act.

In the simplest form, here is what happened: the government’s Committee for Foreign Investment, which was fighting the Pey arbitration case in Washington, hired a lawyer to make the legal argument, called a ”Study in Law,”against Pey’s claim of ownership. The lawyer did that in a twenty-page confidential document in which he concluded that only the people listed in the Superintendent of Corporations registry (or their heirs) were the legitimate owners, and that because Pey had failed to register the titles and transfer papers in his possession, ”a legally certified purchase”by Pey could not be demonstrated.

The same lawyer then approached at least two of the families mentioned in his report and made them aware of a possible financial windfall if they teamed up with him to make a claim. According to Roberto Mayorga, who was in charge of the case for the Committee for Foreign Investment and who hired the lawyer, ”What I know is that the heirs were not aware they had rights to Clarín, and they had learned about it through the Study in Law which was leaked and which concluded that they were the title holders to the stocks of the company that owned the newspaper.”He said the lawyer’s action in contacting the families was ”unethical”but not illegal under Chilean law. In exchange for their legal services, the lawyer and his partners received a $1.6 million share of the restitution paid to the families.

The government’s minister of national property at the time, Claudio Orrego, who signed the administrative decree for the $9 million, also acknowledged that the payment was connected to the Washington arbitration of the Pey claim. ”I don’t want to deceive you,”he tells me. ”The idea was that this [the $9 million restitution to the heirs] in some way would sanction the other pending issue.”He said he was presented with the case in his first month as minister and that there was ”urgency”to resolve it quickly. ”This was a strategy that came from before our arrival,”he says. ”I remember that the international case was invoked as one of the factors of urgency to be able to resolve the matter quickly.”

In the end, the tactic did not work. The World Bank arbitration judges refused to close the case. So the Chilean government was out $9 million and the arbitration continued to drag on anyway for several more years, until last year, when it appeared to enter its final phase. A confidential draft decision that runs over a hundred pages, which I have read, provides a strong indication that the board is leaning toward a resolution favorable to Pey. The document declares that the sale of Clarín to Pey ”was without doubt the real intention of the parties”and that the Chilean government’s arguments that others were the true owners ”gave rise, to say the least, to abundant doubts and questions.”

The arbitration board conducted what the presiding judge said was its last hearing in January, and signaled that the next step would be the final ruling. The judge seemed to echo Joan Garcés’s plea that time is running out for the ninety-two-year-old Pey. ”The tribunal has already set a working calendar,”the judge said, ”and we are aware that it is necessary to finish as soon as possible, because this is a case that has lasted too long, for a series of reasons that it would serve no purpose to recall.”

The arbitration tribunal’s decision, and the establishment of a settlement amount, if any, are not subject to appeal. A government spokesman, Ricardo Lagos Weber, said his government will accept the decision, whatever it is. ”Chile has to honor its international commitments, whether they are from ICSID or from the Inter-American Human Rights Commission,”he told me.

if and when Clarín appears on the streets again, it will face an uphill battle to survive in Chile’s homogenous media climate. Three other newspaper startups have tried and failed since the return of democracy to break the domination of the two media companies that publish El Mercurio and La Tercera, which account for about 90 percent of newspaper circulation and advertising in print media. None was able to attract advertising from Chile’s conservative business community. Three other weekly political magazines that had survived, with international funding, during the waning years of the Pinochet dictatorship collapsed for lack of advertising in the first years of democracy.

The government has proclaimed a policy of nonintervention regarding the media, but in Chile the government has never been a passive actor on the country’s media stage. In fact, the government still owns the newspaper La Nación, a money-losing relic from the early part of the last century when state media were in vogue in Latin America. And La Nación, with a minuscule circulation and very little journalistic credibility because of its government ties, has been one of the factors preventing any new paper from surviving financially.

It certainly was a factor in the most recent failure of Diario Siete, which folded in June 2006 even though it had earned respect for its tough investigative reporting. ”We knew there wouldn’t be many private ads,”editor Mónica González says. ”The businessmen in Chile are the most ideologically rigid in the continent.”

Instead, according to the paper’s confidential business plan and three inside sources, the success of Siete depended on the promise by President Lagos to finally close La Nación as a daily newspaper, thus freeing up its ample government and institutional advertising for the privately run Siete. When Lagos left office in March 2006 without following through on the promise, Siete’s financial backers–many of them prominent Concertación political figures–pulled the plug.

As for Victor Pey, he is allowing himself some optimism, now that the judges are finally writing a decision, that ”white smoke”may soon appear. Still, he is at a loss, as are many in Chile, to explain the resistance to his project. ”You have to introduce one thing into your thinking, and that is there is someone in whose interest it is that Clarín not come out,”he told me.

If it were just the money, to follow this line of thinking, the logical course would be for the government to simply offer Pey less. But the government’s actions–especially in paying rival claimants in the midst of litigation with Pey–suggest more complicated motives at work. The theory I heard most often, from journalists and political operatives, points to the overweening power of El Mercurio and the economic forces with which it is allied. They are resigned to not winning elections, the theory goes, but have forged a bargain with the government in which it does not encroach on El Mercurio’s journalistic and economic power, and El Mercurio in turn keeps its coverage of the Concertación critical but respectful. Unspoken–but evident in the tone of both El Mercurio and La Tercera–is a commitment to refrain from the kind of savage anti-leftist media campaigns that were instrumental in goading the military to action in the past.

It makes sense in some ways, but I can’t bring myself to buy such a tidy conspiracy; besides, it’s hard to imagine a return to political violence in the country that has become a model of stability and prosperity in the region. Still, I can’t ignore the blatant faintheartedness displayed by various Concertación governments when the political right has turned up the heat, as it did when the Clarín claim came to light.

For Concertación officials, Clarín is the devil they don’t know, a potential menace to a comfortable modus vivendi. However favorable and professional Pey promises it will be in its reincarnation, Clarín is not seen as a political asset, much less an ally for the government coalition. It was, and would be, they fear, the paper of extremes, the scandal sheet everybody remembers either loving or hating. Perhaps in the minds of Chile’s cautious politicians–who are more interested in economics these days than ideology–there is the fear that Clarín’s existence, even its support, will produce an unwanted flashback to the bad old days of polarization and bombast that once led Chile to tragedy.

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John Dinges is the co-founder of the investigative journalism center in Santiago, Chile. He has written three books about military dictatorships and human rights in Latin America. The most recent is The Condor Years: How Pinochet and his Allies Brought Terrorism to Three Continents. He is a professor of journalism at Columbia University.