US court rules Telsim owners guilty of fraud
Orders Uzans to pay $4.3bn, issues arrest warrant
The latest fight in the ongoing war between Motorola and Telsim ended yesterday when a US judge ordered the Turkish mobile phone operator's owners to cough up $4.3 billion.
The judgment comes less than a week after Telsim said a Geneva-based court said its adversary was not able to prove that Telsim's owners, the Uzan family, had committed fraud as Motorola had alleged.
Motorola seems to have managed to have proved its claims to the satisfaction of the US court, but the chances of it actually collecting the money are slim.
Motorola, along with Nokia, accused the Uzans of fraud early last year. The companies claimed Telsim's owners had pocketed over $3 billion in loans made to Telsim by both companies. Those loans were secured with Telsim stock, but the Uzans moved the money into other ventures over which Nokia and Motorola had no claim, the manufacturers said.
US District Court Judge Jed Rakoff yesterday ruled that the Uzans had indeed kept Motorola's money for themselves, perpetrating "a huge fraud... through an almost endless series of lies, threats and chicanery".
"Under the guise of obtaining financing for a Turkish telecommunications company, the Uzans have siphoned more than a billion dollars of plaintiffs' money into their own pockets and into the coffers of other entities they control," Rakoff said.
Motorola's contribution to the loan was $2 billion. With interest, the total owed stands at $4.26 billion, said Judge Rakoff.
He also reiterated an earlier order that the Uzans must surrender 73.5 per cent of their Telsim shares - the pledge on which the loan was secured - and issued a warrant for the arrest of five family members should they ever set foot in his fair city.
Fat chance of that, we'd say - the Uzans have thus far refused to attend the court and are even less likely to pay a visit now.
The Uzans have long maintained their innocence, and have repeatedly claimed the US Court was not the place to resolve the matter.
"In common with most cross-border contracts, the contract between Telsim and Motorola and Nokia specifically stated that disputes should be heard in arbitration in Switzerland," said Telsim CEO Hakan Uzan in a statement. "Motorola, for its own reasons, decided to circumvent these conditions of the contract by claiming against the owners of Telsim in the US courts."
Uzan also said his family would appeal against the ruling.
For its part, Motorola welcomed the ruling as a vindication of its claims and global pursuit of the Uzans - a conflict that has involved not only the US and Swiss courts but actions in the UK and Turkey.
Motorola may be happy with the judgement, but Wall Street wasn't. The company's stock fell after the announcement on concerns that it isn't going to be able to recover the money the US court has rule that it's owed, Reuters reported.
The loan was made in order to allow Telsim to buy handsets and infrastructure equipment from the two manufacturers. 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. ®