An American group is trying to turn up the heat on the Bermuda Government to resolve an increasingly bitter wrangle over control of a TV network.

Yesterday the McDonald Group (not related to the restaurant chain) released a letter showing the Bermuda Monetary Authority approved a deal which released 60 percent of Cablevision's profits.

A complaint by the Group over its problems has also prompted a US State Department inquiry -- involving a new Bermuda telephone company.

In a further twist the Group claimed it had informed American officials involved in talks about the costly clean-up of the old US bases about the McDonald problems.

However last night Finance Minister Grant Gibbons said the released letter did not deal with the whole issue, that no-one involved in the base talks had mentioned McDonald and that the State Department see through the problem.

The row, which could threaten US/Bermuda relations and endanger American investment in the Island, stems from a battle between the McDonald Group and the Bermuda Telephone Company for control of Cablevision.

Telco claims the company's structure and the payment of 60 percent of Cablevision's profits to the McDonald's as consultancy fees are in breach of Bermuda's 60/40 rule.

The telephone company has taken its case to the courts and a hearing is due to take place before the Privy Council next year.

McDonald claims the Bermuda Government and Bermuda Monetary Authority approved both the structure and consultancy fees when it invested about $8 million into Cablevision in 1987.

Yesterday the Group released a letter from the BMA, dated February 5, 1987, in support of its claim.

The letter states that based on certain amendments "which we find acceptable, we can now confirm that we are content for the McDonald Group to participate in the above local company'' -- Bermuda Cablevision.

The amendments concern the consultancy fees which equal 60 percent of Cablevision's profits. Originally the McDonald Group wanted 80 percent.

Mr. Biltchik added: "Bermuda's Companies Act has a section, 114B, which says there can be exemptions to the 60/40 rule.

"People know that in order to get foreign investment there has to be some flexibility.

"Very few exemptions were being made in 1987, but the BMA said to McDonald's Bermuda lawyers `let's devise a way to enable this investment to repatriate profits'.

"Normally when a cable entrepreneur develops a system it gets 80 percent of the profits, but because the McDonalds like Bermuda and were prepared to make a prudent investment they said they would take 60 percent.'' He added: "It was the BMA that came up with this idea and the Bermuda Government said it was OK.'' He said he had also advised US Government officials dealing with the Bermuda Government over base land talks, about the McDonald situation.

US group trying to pressure Govt. over Cablevision From Page 1 Mr. Biltchik said McDonald now wanted the Government to grant an exemption under section 114B of the Companies Act -- which could halt Telco's legal action and guarantee the legality of the Cablevision set-up.

He also said the situation could be resolved if Telco offered a fair price to buy McDonalds out of Cablevision.

According to Mr. Biltchik, Telco offered about $10 million for the US controlled shares, but the real price should be between $25 million and $30 million.

"Telco made an offer, but it was considerably less than the value of the shares so we said no. The negotiations were called off and soon after Telco filed suit.

"They said the consultancy fees and control of the company was illegal, but when they bought their shares they knew about the fees.'' The McDonald Group raised its concerns with Senator Richard Shelby and Congressman Bachus, who both represent Alabama where the firm is based.

As a result, Sen. Shelby asked the State Department to refuse TeleBermuda permission for a landing licence for a new telephone cable to Bermuda claiming US interests on the Island were in jeopardy.

The State Department had to start an inquiry into the claim -- but it has enraged TeleBermuda president Mike Kedar who said his company was being used as a pawn in a battle between the McDonald Group and Bermuda.

TeleBermuda was recently granted a licence to operate a telephone company in Bermuda under Government plans to open up the market.

It wants to lay a cable from America to Bermuda, but first needs permission from US authorities to land the cable.

"We are finding ourselves as a scapegoat for some frustration that the McDonald Group has. I am really getting annoyed about this Group trying to cause harm to our company,'' Mr. Kedar said.

"However, I am sure that level-headedness will prevail and I do not think it will affect the project.'' He added: "The State Department automatically has to have an inquiry when complaints are made.

"But while they are doing this, surely it is helping Telco. It is contrary to their own interests.'' The McDonald Group says it is not trying to harm TeleBermuda and the US Group's legal advisor, Bert Rein, said Bermuda should be praised for creating a competitive environment for investors.

But he added: "By, attempting, however to in effect expropriate the McDonald Group's cable television investment, Bermudians are sending a dangerous sign, that there is no real security for the American investor in Bermuda.'' Dr. Gibbons said the letter released by the McDonald Group did not deal with Cablevision's share structure.

"It was the BMA making sure that the thing was in compliance with Bermuda law so there would not be a sense that the dividends were out of proportion to McDonald's ownership,'' he said.

He added that no-one in the US Government involved in the base talks had mentioned the McDonald's issue.

"I would certainly feel that would be unfortunate. As I have said from the beginning we say this is a matter of civil litigation.

"We have not been in contact with the State Department, but I would trust that the State Department would understand that this is an effort to bring Government pressure on what is a purely commercial issue.''