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Geneva court dismisses Motorola fraud appeal

Tussle with Telsim continues

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Motorola has failed in its latest attempt to prove the owners of Telsim guilty of fraud, the Turkish cellular telco said today.

The Geneva Court of Justice ruled that Motorola could not show it had sufficient evidence to back its allegations and consequently chucked the case out.

Motorola had gone to the Court to appeal against an earlier judgement which prevented the cellphone maker from pursuing the Uzan family, Telsim's owners.

Motorola sued the Uzans back in January 2002, as did Nokia. Both companies accused the family of fraud, alleging they had pocketed loans provided by the technology companies in order to allow Telsim, Turkey's second largest mobile phone company, to buy their kit.

Such 'vendor financing' had by then become commonplace in the mobile industry as vendors sought to persuade telcos to buy more handsets and infrastructure hardware. The practice was born in the boom times, as a way to allow rapidly expanding telcos to meet demand for handsets and network capacity, but in more recent, more difficult years vendor financing hit balance sheets hard.

In Telsim's case, Motorola argued that its loan - worth around $2.7 billion - was secured with a promise of Telsim stock. If the telco defaulted, Motorola would take ownership of 66 per cent of the company.

The vendor alleged that the Uzans deliberately took the money and put it onto other family businesses in which Motorola had no stake. One result of the action, it claimed, was that its anticipated stake in Telsim was significantly devalued. Telsim's value has been hit the worldwide telecoms slump too.

"It is, rather, a premeditated and unlawful attempt by the Uzans to rob both Motorola of our assets," the vendor said at the time. It accused the Uzans of extortion, intimidation "and hacking into Motorola's computer system".

Telsim has always denied the charge, and claimed it never repaid the loan because the equipment it received was substandard.

Motorola sued Telsim in the New York court, but the fight has extended to the British court - an attempt by Motorola to get the Uzans extradited from Turkey to the UK, since they refuse to attend the New York court - and, more recently, to Switzerland, where the Uzans have been hoping to take the case to arbitration. Racketeering and organised crime allegations brought against Telsim by Motorola and Nokia were dismissed by the New York court last April.

The Geneva case is simply part of the broader manoeuvring. Telsim CEO Hakan Uzan believes the Court of Justice ruling demonstrates the "futility of Motorola's pursuit of costly and damaging litigation in the US courts", but it's unlikely that Motorola will agree. Or that it's going to see its $2.7 billion any time soon. ®

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