By Charlie Charalambous
THE CYPRUS Tourism Organisation (CTO) faces a damaging legal battle in Scandinavia following threats by a Swedish advertising agency to sue it for non-payment of a 3.6 million Krone (£233,258) campaign bill.
A Stockholm law firm hired by the cash-hit agency Rekom Reklamkommunikation told The Sunday Mail it was now considering legal action against the CTO for not paying the outstanding amount plus interest.
“If we haven’t heard anything within a week, we must do something, because we can’t handle all the creditors. We will have to take legal action against the CTO,” said Rekom’s legal adviser Jonas Reiner of Stockholm law firm Fylgia.
With media outlets in Sweden, and some in Denmark, demanding to be paid, the CTO is said to be harming rather than promoting Cyprus’ good image abroad.
“We think it’s a serious matter for the CTO because they should be interested in trying to maintain its reputation in Sweden which is a substantial tourist market,” said Reiner.
More than 100,000 Swedish tourists visit Cyprus every year, contributing greatly to an economy heavily reliant on tourism.
Fylgia has even contacted the Swedish foreign office in an attempt to try to resolve the issue by making a formal complaint against the semi- government organisation in Nicosia.
Stockholm-based Rekom Reklamkommunikation was contracted by the CTO to carry out a 5 million SEK (£645,000) marketing and advertising campaign in Scandinavia to woo increasing numbers of tourists to Cyprus.
The agreement was signed in 1996, and the firm said most of the payments are outstanding from mid-1997.
But the CTO has a different story to tell, going so far as to allege the ad agency may have fiddled invoices and over-charged for work which has not been done.
“This agency has not fulfilled its obligations. They haven’t done the job in many aspects which should have been done,” CTO spokesman George Georgiou told The Sunday Mail.
Georgiou said in no uncertain terms that the problem lies with the agency and not the CTO. “There is a problem with the invoices,” he said. “We have paid for stuff which wasn’t done.”
“They haven’t done their job and we are not sure about the expenses either, ” he added. The CTO has proof about the alleged suspect invoices, Georgiou said.
Reklamkommunikation claims the work has been done but that nearly two- thirds of the invoices have not been paid, and it now faces the very real threat of bankruptcy because of the number of creditors knocking at its door.
“Our opinion is that this (CTO claim) is incorrect, the invoices are not false,” Reiner said. “If we don’t get payment from the CTO then we don’t have a possibility to pay all the creditors with total claims of 2.6 million SEK (£167,740). This is a lot of money, so bankruptcy is a reality.”
Reiner said that the CTO has not complained about any of the invoices sent and has failed to contact his office, despite a warning letter sent in December threatening legal action if payment was not made by January 15.
“We don’t know why they are not paying, because they haven’t contacted us. So we will sue if nothing substantial happens.”
The CTO, however, says it has sent constant messages to the Swedish ad agency explaining what the problem was.
“We have not delayed payment but sent observations and an officer to consult with them, but they didn’t co-operate,” Georgiou said.
The prospect of an expensive legal wrangle finds the CTO in defiant mood. “If they want to take legal action then we will do the same to defend our reputation,” Georgiou said.
One Swedish journalist who has been following the story in Stockholm believes the situation is compounded by the CTO’s bureaucratic methods and the fact that it got its fingers burnt by a marketing firm in Belgium two years ago.
“As we understand it the ad agency has not been fiddling, but the issue is being badly handled by a bureaucratic CTO who are very suspicious because of what happened in Belgium,” said Swedish travel writer José Pieters.
Pieters works for major travel magazine RES and specialist publication Travel News which are owed a total of 250,000 SEK (£16,129) for work done for Reklamkommunikation.
The CTO launched an internal investigation in 1997 after it discovered a Belgian firm had tried to swindle thousands from the organisation by charging for non-existent advertising.
Following the discovery, the Belgian company refused to hand over invoices for £52,325 worth of CTO advertising in newspapers and magazines, but agreed not to be paid.
A CTO inquiry into the Belgian fiasco is still not complete.
During a House committee discussion last May, on how the organisation’s £9 million plus budget was being spent, vice-chairman Andreas Georgiou conceded that the CTO had been ripped off in the past by agencies charging too much commission and over-charging for lacklustre campaigns.
“We were not getting value for money,” Georgiou told the House Watchdog Committee in May 1998.
