By Drazen Jorgic and Ismael Lopez

MANAGUA (Reuters) – In early 2010, Nicaragua’s Canal 8, an independent television network, had a new owner.

Details of the deal – the identity of the buyer, the purchase price, an exact date for the transaction – remained secret. The seller died of cancer soon after.

But a familiar face soon took charge at Canal 8: the son of Nicaraguan President Daniel Ortega. The leftist leader, who rose to prominence in the late Cold War with his Sandinista revolutionaries, had reclaimed the presidency three years before.

Canal 8 was long known for scrutinizing administrations both left and right. But new chief executive Juan Carlos Ortega Murillo, then 28 years old, quickly imposed orders for “good news” about his father’s government, according to several former employees of the station.

Many Nicaraguans quickly concluded the young Ortega’s appointment meant the first family or its allies were behind the acquisition. They were right.

According to previously undisclosed tax documents from earlier this year, Canal 8 is owned by Yadira Leets Marin, wife of Rafael Ortega Murillo, another son of the president. It isn’t clear whether Leets Marin was involved in the 2010 purchase, but the documents identify her as Canal 8’s majority owner now. She didn’t respond to requests from Reuters for comment.

The takeover of Canal 8 by the Ortega clan was the first step in a media strategy that over the past decade has saturated the Central American country’s airwaves, newsstands and smartphone screens with pro-government coverage.

The strategy was hinted at by Ortega’s wife, Rosario Murillo, in a public communique she issued as the president’s communications chief shortly after he began his second administration in 2007. The goal: not only ensure positive coverage, but also secure outright control of media properties by Ortega and allies.

In the years since, the president, his family and close associates have gained ownership or managerial control of at least a dozen TV channels, radio stations, and online news sites.

Some of the acquisitions, including the Canal 8 deal, were financed at least in part by funds provided by oil-rich Venezuela, said three current and former employees and people familiar with the acquisitions.

The Ortega family itself, according to 2020 tax and corporate registration documents reviewed by Reuters, controls ownership of Canal 8 and radio broadcaster Radio Ya.

Friends and close allies, according to the documents, own three additional television channels – Canal 4, Canal 13, and Canal 22 – all managed by children of the Ortegas. A fourth station, Canal 2, is also owned by an associate, according to people familiar with the channel, and the Ortegas manage its news operations.

Through state ownership, the Ortegas control TV broadcaster Canal 6, national network Radio Nicaragua, and online news portals like El 19 Digital. Associates of the first family own at least three other radio stations, all openly allied with the government.

Nicaraguans for years have speculated about the extent of the Ortegas’ control of their country’s media landscape. But the family has never officially disclosed what assets it owns or operates through allied investors.

Reuters interviewed current and former employees of outlets controlled by the family as well as dozens of government officials, people at rival media, and Nicaraguan tax and legal experts. They provide the fullest portrayal yet of how Canal 8 came under the Ortegas’ control and how the family went on to use budget and tax laws to squeeze rival media and tighten their own grip on power.

The office of the president didn’t return calls or emails from Reuters seeking comment for this report. Murillo, who is now vice president as well as government spokeswoman, didn’t respond to separate requests for comment. Juan Carlos, Rafael and other Ortega relatives named in this story didn’t respond, either. Canal 8 and other media properties run by the family didn’t respond to queries.

The clan’s media empire has crowded out voices opposed to Ortega. “Canal 8 was a space where different, independent journalism was possible,” said Carlos Fernando Chamorro, a prominent journalist who left the station because of the acquisition. “It was a key move toward concentrating control.”

As the media empire shores up the president’s power, his government is steering large sums of state money into the properties controlled by the family and its allies.

Over the past two years, Nicaragua’s government bought advertising worth an estimated $59 million from the three biggest TV channels owned or controlled by the Ortega family, according to data compiled by Media Guru, a consultancy that tracks media spending. The government spent an estimated $230,000, less than 1% as much, at channels not affiliated with the Ortegas.

In another benefit for the Ortegas and their allies, at least two of their channels, unlike rival media, don’t appear to have paid taxes in recent years, according to previously unreported tax documents reviewed by Reuters.

Over the past decade, Canal 8 hasn’t paid more than $4 million in tax and interest it should have under Nicaraguan law, according to the documents, a finding supported by local tax experts who examined the materials for Reuters.

“They’ve created a system in which the money comes out of the national budget, runs through their holdings, and all stays in their pockets,” said Alfonso Malespin, a media specialist at the University of Commercial Sciences in Managua, Nicaragua’s capital.

The media effort is a family affair.

Ortega has been aided by his wife, Murillo. Once a poet, she is widely considered the architect of the media strategy. Their children play key roles: In addition to Juan Carlos and Rafael, four other Ortega Murillo children run major media properties or hold stakes in them.

The Ortega family’s media activities appear to violate several Nicaraguan laws, according to local attorneys consulted by Reuters. By channeling state funds to family-controlled properties, the Ortegas flout legislation that governs behavior and procurement by public servants, the attorneys said.

Because some of the acquisitions were allegedly made in part through a joint venture controlled by Venezuela’s state-run oil company, Petroleos de Venezuela SA, or PDVSA, lawyers said the purchases broke a law that forbids foreign ownership of Nicaraguan media outlets.

And by not paying taxes, the lawyers said, Canal 8 may be violating Nicaraguan tax laws – statutes that Ortega has used to confiscate assets, including studios and newsprint, from rival media. “If the rule of law were respected here, there would be clear criminal and civil penalties, with people arrested and companies impounded,” Alberto Novoa, a former solicitor general who reviewed the tax documents, told Reuters.

Political opponents, human rights activists, and foreign powers including the United States and the European Union say Ortega’s media might has made Nicaragua more autocratic. State propaganda, they argue, was instrumental in helping Ortega secure two re-elections, in 2011 and 2016, and weather a wave of bloody anti-government protests in 2018.

More than 300 people died during those protests, some killed by government snipers on rooftops. Police raided the newsrooms of rival media, arresting journalists and confiscating computers and other equipment, while Murillo went on family-run broadcasters to decry demonstrators as “coup-plotters” and “terrorists.” More recently, she has used the platforms to label independent media “termites” and “extremists.”

In a statement earlier this year, U.S. Secretary of State Mike Pompeo said the attacks, “including the use of spurious revenue charges to shutter studios and seize equipment, demonstrate that Ortega, along with Vice President Rosario Murillo, are interested only in prolonging their rule.”

The media strategy has been cited by the United States among abuses for which it has sanctioned family members and associates including Murillo, Juan Carlos and Rafael, husband of Canal 8 owner Leets Marin. In a June statement, the U.S. Treasury Department announced sanctions against Juan Carlos for spreading “regime propaganda.”

Last year, the Treasury accused Rafael of using various companies, including a chain of state-run gas stations, to launder money and hide family assets. “Rafael Ortega is the key money manager behind the Ortega family’s illicit financial schemes,” it said in a statement.

Nicaragua’s government appears unchastened.

The National Assembly, the country’s pro-Ortega legislature, recently passed laws that further pressure rival media. One bill makes it a crime for anyone to spread “false” information via social media or in news outlets. Another imposes prison sentences of up to six years for anyone convicted of publishing information “not authorized” by the government.

With such measures, opponents say, reality has become increasingly distorted across the country of more than 6 million people. Nicaraguans will go to the polls again next year. They will have a diminishing number of independent sources covering the state of their country, the second-poorest in the Americas after Haiti, and its leadership.

“It’s the opposite of reality,” says Gioconda Belli, a novelist and poet once close to Murillo. “It’s totally Orwellian.”

“NEW AND BETTER WAYS OF COMMUNICATING”

Ortega, now 75, was once an icon for leftist revolutionaries worldwide and a symbol of hope for a Nicaraguan society long torn by inequality. With Coke-bottle glasses and a bookish demeanor, he was chosen by colleagues as Sandinista leader after they toppled Anastasio Somoza, the last in a string of dictators, in 1979.

Ortega, Sandinista colleagues said, appeared less power-hungry than more ambitious rivals at the time.

Nicaraguans elected Ortega president in 1984. He was plagued by economic and social problems, however, and voters denied him a second term five years later. He remained Sandinista chief but spent the next 16 years in the opposition, failing three times to return to the presidency.

For most of their first act, his wife, Murillo, lay low.

The 69-year-old first lady, fluent in English and French, at the time was known mostly for mystical writings and her kaleidoscopic wardrobe. “Rosario had no influence in the ’80s and ’90s,” said Victor Hugo Tinoco, a former Sandinista who served as United Nations ambassador and deputy foreign minister in Ortega’s first term.

More recently, Ortega has deployed Murillo’s communication skills. Her media savvy, people familiar with the couple said, helped him remake his image.

Ortega once sported military fatigues like those of Fidel Castro, his friend and mentor; the leftie look gave way to jeans and Oxford shirts. The couple mended fences with the Catholic Church and businesspeople their party once antagonized.

In 2006, the transformation carried Ortega back to victory.

Upon his inauguration in January 2007, Ortega made Murillo his communications chief. She told aides the government should find ways to publish news “uncontaminated” by critical media, according to several people familiar with the discussions.

In a “Communications Policy” statement that February, Murillo criticized what she saw as favoritism by previous administrations and their practice of having government agencies and state-owned firms place ads in friendly major media. Ortega’s government, she wrote, would “seek new and better ways of communicating.”

Right away, Ortega’s government began playing favorites of its own, according to journalists and media executives. It advertised with left-leaning newspapers and broadcasters and shunned outlets it deemed critical.

Murillo centralized the advertising budgets of all ministries and took full control of their communications, according to former government officials involved in the changes. She put Daniel Edmundo Ortega, another of the couple’s nine children, in charge of Canal 4, a channel owned by Sandinista allies that he continues to manage.

Ortega’s return came at the peak of the so-called “Pink Tide,” a wave of leftist victories that swept Latin America starting around the turn of the century. In the movement’s vanguard was Hugo Chavez, the late Venezuelan strongman, whose charisma and petro-dollar diplomacy inspired and financed like-minded leaders across the region.

In July 2007, the two countries announced the creation of a joint venture, Alba de Nicaragua SA, that would use Venezuelan oil funds to pay for infrastructure and social projects in Nicaragua. The venture, known locally as Albanisa, was meant to begin with $250 million in financing for a refinery west of Managua.

The refinery never started, but Venezuelan cash flowed in.

The International Monetary Fund, in a 2017 report, estimated that Nicaragua received as much as $3.2 billion from Venezuela before the South American country’s economy imploded in recent years. Nicaragua’s own central bank has said the figure reached as much as $5 billion.

But neither government has ever given a full accounting of the financing or how Ortega spent the money, which is equivalent to as much as a third of Nicaragua’s annual economic output.

Spokespeople at Venezuela’s information ministry and PDVSA didn’t respond to Reuters requests for comment.

By 2008, Ortega’s family and close associates had begun building what today is a business empire with assets in energy, security and other sectors. Juan Carlos that year launched Difuso Comunicaciones SA, an advertising agency.

The agency quickly attracted clients eager to do business with those in power. People familiar with the ad agency’s operations say it serves as a conduit for much of the government’s advertising. Difuso produces commercials for state tourism, the ports agency, the electricity authority and other agencies, these people say, and places the ads on channels controlled by the family.

Government documents reviewed by Reuters show that Difuso’s owners include Maria Luisa Mejia, who is regularly referred to in Nicaragua as one of first lady Murillo’s attorneys. Another Difuso owner is Nestor Moncada Lau, an advisor to President Ortega.

In 2018, the U.S. sanctioned Moncada for allegedly paying counter-demonstrators to clash with protestors that year and bribing other Nicaraguans to keep them from opposing the government.

Mejia has never publicly addressed her reported role as Murillo’s attorney. She didn’t respond to requests for comment for this story. Moncada, though widely considered a close aide of Ortega, has never given an interview. Reuters was unable to reach him.

When Juan Carlos took the reins at Canal 8, workers were surprised by what suddenly seemed like a bottomless budget, according to five former employees of the channel. He bought modern studio equipment, they said, and wooed rival journalists with good salaries. He sent iPads and other gifts to the heads of ad agencies from which he hoped to win non-government business.

Questions began circulating in Nicaragua about the source of the money in Canal 8’s newly fat wallet. Rafael Paniagua, the Venezuelan then in charge of Albanisa, told a Managua newspaper in 2010 that Canal 8 was purchased for roughly $10 million by the Nicaragua-Venezuela joint venture. Paniagua left Nicaragua abruptly afterward and never returned.

Reuters was unable to determine how ownership of the channel was transferred from Albanisa to Leets Marin. Paniagua couldn’t be reached for comment.

Rodrigo Obregon, another former Albanisa executive who retired in 2014, recently supported Paniagua’s assertion. The Canal 8 acquisition, Obregon told Reuters in an interview, was part of a plan by Ortega to replicate Chavez’s strategy of bringing the media under state control to “indoctrinate” the masses.

“They were interested in all the radio and TV broadcasters they could buy,” Obregon said.

“IGNORE EVERYTHING”

Throughout Ortega’s second and third terms, his family took control of more broadcasters, often with close associates as owners. Generous compensation made jobs at these outlets attractive for some journalists. The perks included discounted homes at subsidized housing developments, according to four people familiar with the benefits.

In exchange, Murillo expected reporters to toe the Sandinista line.

In 2011, Noel Miranda, a reporter at Radio Ya, a Managua station, asked Murillo at a press conference about allegations by local academics that the government was growing autocratic. Radio Ya is owned by Entretenimiento Digital SA, a company controlled by Rafael Ortega, according to previously undisclosed ownership documents reviewed by Reuters.

Murillo looked at the reporter’s identification card, stared him down, and ignored the question. The following day, Miranda said, he wasn’t allowed back at work. The station didn’t renew the six-month contract he was on, and Miranda is now a reporter for an online news site in Managua. “We knew there were limits,” Miranda told Reuters.

Miranda’s account was substantiated by several former colleagues. Executives at Radio Ya and Entretenimiento Digital didn’t respond to emails and phone calls from Reuters for comment.

That same year, the Ortegas launched a new television station, Canal 13, managed by three other Ortega Murillo children: Camila, Maurice and Luciana. One of the channel’s owners, according to government documents reviewed by Reuters, is Mejia, the attorney who also is part-owner of Difuso, the advertising agency.

Three years later, in 2014, Maurice Ortega also began managing the news operations of Canal 2, another major station owned by Ortega allies.

With more platforms in the hands of the family, the Ortega government increased state spending on advertising more than tenfold, according to data compiled by Media Guru, the advertising consultancy. The data, independently reviewed by Reuters, is based on market rates for advertising on channels across the country.

Media Guru, which has offices in Managua and elsewhere in Central America, declined to comment.

Between 2000 and 2010, according to a person familiar with the data, Nicaragua’s government spent an estimated $2.6 million a year on advertising. By 2019, the data show, the figure had soared to an estimated $29 million annually.

Last year, all but roughly $128,000, or 0.44% of that amount, went toward advertising with Ortega family outlets, according to a Reuters calculation based on the data. The ads are purchased by government agencies and by state-run companies like the gas-station chain controlled by Rafael Ortega.

At Canal 8 alone, advertising placed by the state jumped from roughly $400,000 in 2009 to an estimated annual average of more than $6 million over the past decade, according to the person familiar with the data. Last year, the government placed ads worth an estimated $16.8 million with the channel, the data show.

By comparison, Canal 10, Nicaragua’s most popular station and a channel not controlled by the Ortegas, in 2019 received less than $9,000 in state advertising, according to the data. Executives at Canal 10 didn’t respond to requests for comment.

The person familiar with the Media Guru data confirmed the accuracy of the spending figures reported here. Separately, three advertising executives in Nicaragua told Reuters the estimates are realistic.

With unrivaled reach, the Ortega family’s messaging permeated the country.

Murillo grew especially visible, appearing on family-run channels, often daily, and issuing orders about coverage and editorial priorities through offspring at the helm of each broadcaster. “She is like the head of an octopus, her children the tentacles,” said one journalist who formerly worked at one of the broadcasters.

In 2014, Sandinista legislators scrapped presidential term limits. Two years later, Ortega won a fourth term and Murillo, now his running mate, the vice presidency. Ortega barred international observers from the election.

In 2018, an Ortega plan to increase social security contributions and lower pension payouts sparked demonstrations.

At first, Murillo told state and allied outlets not to cover the unrest. “The order was to ignore everything,” said Carlos Mikel Espinosa, then an editor at El 19 Digital, a state-controlled online news portal. Espinosa quit when the upheaval intensified and the government response grew violent.

Foreign governments, the United Nations, and human rights groups denounced Ortega and Sandinista allies for reported killings, beatings, detentions and torture of many protesters. Police raided newsrooms of opposition media, seizing equipment and supplies needed for publishing.

They arrested Miguel Mora, founder of 100% Noticias, a Managua television station, and shut its broadcasts. The government, Mora told Reuters, claimed the channel owed unpaid taxes, an assertion he denied. “It was a brutal attack to make us change our editorial line or to make us bankrupt,” said Mora, who was released but has since left the media business.

Some outlets controlled by the Ortegas, meanwhile, are shortchanging the government on taxes, Reuters found.

Documents reviewed by Reuters from the General Revenue Directorate, Nicaragua’s tax collection agency, show that Canal 8 hasn’t paid taxes and interest amounting to about $4 million since 2010, the year Juan Carlos took over. Canal 4, the Sandinista channel managed by Daniel Edmundo Ortega, owes about $380,000 in back taxes, the documents show.

Nicaragua’s tax agency didn’t respond to requests for comment.

It isn’t clear why the taxes have gone unpaid or whether the government has sought to collect them. Tax specialists who reviewed the documents told Reuters both stations are in clear violation of Nicaraguan tax law. “Any other company would have already been seized,” one of the experts said.

Consider the case of Canal 12, a private television station owned by Mariano Valle, a Managua businessman. Valle has sought to keep his channel independent, and its journalists and on-air guests have criticized Ortega policies.

In September, Ortega’s government said the channel owes about $800,000 in unpaid taxes. A judge, pending ongoing litigation, authorized the state to seize the station’s offices and cars, and Valle’s home, and keep them if the channel loses in court.

The channel in a statement called the moves “arbitrary and illegal.” In September Valle told a local radio station, “we don’t owe anything.” He didn’t respond to requests for comment.

Eduardo Enriquez, editor of La Prensa, the last large independent newspaper still operating in Nicaragua, told Reuters that during the protests, tax authorities used their power to block imports of newsprint and ink.

The suffocating reach of pro-Ortega propaganda, Enriquez said, means La Prensa and the handful other independent outlets are operating in a “news desert.” If the Ortegas remain in power, he predicts, “independent media won’t survive.”

(Additional reporting by Daphne Psaledakis in Washington. Editing by Paulo Prada.)

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