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ISTANBUL (Reuters) - Born of a 1960 coup, Turkey's OYAK army pension fund has become a potent symbol of military economic power with interests from cement to car production. Now, as the generals' political influence dwindles with arrests and coup trials, OYAK is attracting unwanted attention.
OYAK chairman Yildirim Turker, a retired lieutenant-general, languishes in jail awaiting trial on accusations dating back before his chairmanship to a 1997 'soft coup' that forced an Islamist-led government from power. An OYAK security firm's employees stand charged in connection with another coup plot and a parliamentary sub-commission has begun scrutinizing its activities after complaints from OYAK members.
Prime Minister Tayyip Erdogan, who has cut back the powers of a military that had toppled four governments in the last half century, has shown no overt interest in storming this symbolic bastion of NATO's second biggest army. But the general pressure on the military, long seen as a bedrock of stability in Turkey, inevitably takes its toll on OYAK.
Some parliamentary deputies back revision of the 1961 law setting up OYAK, arguing the conglomerate has an unfair competitive advantage, enjoying exemptions in areas of taxation and auditing - a contention OYAK denies.
"For some time it has been evident that efforts are being conducted against OYAK to mislead the public...whether this is done deliberately or based on insufficient or incorrect information," OYAK said on its website.
The group has power commensurate with the past might of the army that supports it. It controls a privately-owned pension fund with 260,000 members, and a business arm with 30,000 employees and interests in some 60 companies ranging from steel to cement and the automotive sector. Its sales total some $15 billion.
Security analyst Gareth Jenkins said a flurry of activity around OYAK reflected moves to further undermine the military's power, pointing to the prosecution of hundreds of military officers, including top serving and retired commanders, in the alleged "Ergenekon" and "Sledgehammer" coup plots.
"I think we have to look at all these investigations as a whole. Going back to Ergenekon, Sledgehammer, all of those associated cases and now with OYAK, we see that the main motive here is not to try to pursue real crimes, although there undoubtedly have been crimes committed by the military, but to destroy the military as an institution," Jenkins said.
Erdogan, viewed with suspicion in the army for his Islamist past, says he has curtailed military influence in policy making and ministerial appointments as part of efforts to strengthen democracy. The army intervened to topple governments four times in the secondhalf of the 20th century.
But supporters of the military, enduring now a chain of trials drawing in even a former Chief of General Staff, see a drive by Erdogan to destroy all potential seats of opposition.
Ten employees of an Oyak security firm face trial over allegations security camera footage at the building where a judge was shot dead in 2006 were deliberately wiped, destroying evidence in an investigation into an assassination suspected of being part of a plot to overthrow Erdogan's government.
Last month, police raided the home of OYAK Chairman Turker, and took him away for questioning as part of an investigation, unrelated to OYAK, of a 1997 military intervention that unseated Turkey's first Islamist Prime Minister, Necmettin Erbakan.
That action has become known as the 'post-modern coup', in a nod to the discreet behind-the-scenes pressure that forced Erbakan from power -- a stark contrast to the bloody 1960 putsch that brought the execution of Turkey's three top ministers and the mass arrests and executions of 1980.
Relations between OYAK and the government are important though there is no commercial link to the Defense Ministry.
Two weeks before his arrest, Turker had visited Prime Minister Erdogan at his offices in the Dolmabahce palace overlooking the Bosphorus Straits in Istanbul to donate an electric car produced by OYAK's joint venture with French carmaker Renault.
Finance Minister Mehmet Simsek took the unprecedented step of attending an OYAK general meeting on Saturday.
"I hope that my attendance will have a positive impact, improving society's perceptions of OYAK," he said.
The meeting elected three serving officers as board members to replace Turker and two others detained last year as part of the Sledgehammer investigation of another suspected coup conspiracy against Erdogan in 2003, media reports said.
OYAK, which faces no accusations itself, declined to comment on any of the cases involving OYAK staff.
Erdogan has himself suggested the business world could be dragged into investigations of the 1997 'post-modern coup'.
"Who wasn't mixed up in this? The business world, media, civil society groups, university rectors - who did what? This matter isn't just connected to the army. This should all come to the surface," he said in a speech.
Returning to the theme a week ago, he said pious Muslim businessmen were victims of the ousting of Erbakan, being blacklisted while the mainstream business world remained silent.
There is no suggestion OYAK will face any investigation and authorities would be careful taking any steps that might harm such a large player in the economy.
OYAK, Turkey's first and largest privately-owned pension fund, has its origins in its very own OYAK Law ratified after Turkey's 1960 military coup with the aim of protecting the welfare and financial security of military personnel.
There are now voices in parliament calling for revision of that law, arguing it gives OYAK an unfair competitive advantage, enjoying exemptions in the areas of taxation and auditing.
"It is very dated and does not satisfy today's conditions. It is a law prepared in anti-democratic conditions," said ruling AK Party Bursa deputy Ismail Aydin, chairman of a parliamentary sub-committee investigating complaints from OYAK members.
"The OYAK law was prepared in 1961 and emerged right after the coup, it was prepared by the military themselves," he said. "The law must be revised and adapted to today's circumstances."
The commission was formed because of complaints non-commissioned officers were not represented adequately in OYAK management, that just payments were not made to members in proportion to their deductions and some market transactions were detrimental to OYAK members.
A group of 12 inspectors from the labor ministry, treasury, finance ministry and capital markets board have been examining OYAK operations in the last fortnight and Aydin said the committee would complete its report by the end of this month.
Among the group's main holdings are a 50 percent stake in leading iron and steel producer Erdemir, which posted a net profit of 1 billion lira ($568 million) last year, on sales of 8.9 billion lira ($5.1 billion).
It also owns a series of listed cement companies across Turkey and jointly owns with French car maker Renault the automotive venture Oyak Renault, which produced more than 300,000 vehicles in 2010. Despite the strong military role, it does not have investments in the defense sector.
There is little evidence yet that the investigations have troubled the group's investors. Shares in OYAK units have shown limited reaction to the recent spate of adverse news.
Aside from its private equity investments, OYAK is also a second-tier private pension fund, primarily for officers. It provides pension, death and disability benefits as well as housing and personal loans for its members.
The group's executives have highlighted the growing role of civilians in the group, but it is still dominated by military personnel, for whom membership of the fund is compulsory.
Analysts said OYAK had benefited in the past from the confidence the military link has inspired in foreign investors.
"It is a strategic investor in a number of industries. In the past foreign investors approached Oyak looking for partnerships because they thought the connection would help grow their business due to the military's influence," said former diplomat Sinan Ulgen, chairman of the Centre for Economics and Foreign Policy Studies (EDAM).
Calls to reform OYAK were previously set out in details in a report on the military-economic structure in Turkey, published by the TESEV think tank in 2010.
"OYAK was founded with a law, it is not untouchable, and it is possible to introduce new legislation to reform it," said the report's author Ismet Akca, assistant professor at Yıldız Technical University, arguing that the military's economic role violated the basic requirements of a modern democracy.
The radical conclusions of that report called for OYAK to be disbanded in the medium term, arguing that the military's role as an economic actor should be brought to an end through a commission of experts representing OYAK stakeholders.
While there appears to be little prospect of such an outcome OYAK's sensitivity to such criticism is illustrated by statements on its website dating back to September.
The company rejects accusations that it does not pay adequate taxes and that it benefits from unfair competition, while it also stresses that it is not part of the Turkish Armed Forces and does not receive subsidies from the government.
"The fact that nearly all of OYAK's members are TSK (Turkish General Staff) members or that these members are within the decision-making bodies does not make OYAK part of the TSK. OYAK has no organic link with the TSK," the company said.
Additional reporting by Pinar Aydinli; Writing by Daren Butler; editing by Ralph Boulton