Ben Klayman
CHICAGO: Finland's Nokia and Motorola Inc., the world's two largest mobile
telephone makers, filed a joint lawsuit on Monday charging the owners of Telsim,
Turkey's No. 2 wireless carrier, with fraud under US anti-racketeering laws.
The two handset makers filed the suit, which seeks the recovery of about $3
billion in loans plus damages, in US District Court in New York. It charges that
Telsim's owners, the Uzan family, intentionally defrauded the two companies in
violation of the US Racketeer Influenced and Corrupt Organizations, or RICO,
statute.
The Uzan family could not be reached for comment. The suit was filed against
Kemal Uzan, four children including Telsim Chairman Hakan Uzan and board member
Cem Uzan, three Uzan-controlled firms and an individual close to the family.
"We are taking the unusual step of jointly filing this action because it
is clear to both companies that the Uzans had no intention of dealing in good
faith with us in an effort to resolve this situation," Motorola's general
counsel, Peter Lawson, said in a statement.
"This action is in recognition that this is not a normal commercial
dispute between private parties -- it is, rather, a premeditated and unlawful
attempt by the Uzans to rob both Motorola and Nokia of our assets," he
added.
The RICO statute was designed to eliminate organized crime and racketeering
in legitimate businesses operating across state lines. Over the years, RICO
cases have encompassed illegal activities related to enterprises affecting
interstate or foreign commerce.
Pressure on Turkish government
Bear Stearns analyst Wojtek Uzdelewicz said the lawsuit was more to put pressure
on the Turkish government and did not mean much to investors as the process will
be long and the companies had already taken reserves for the loans. He added
Motorola is not likely to get back anything close to $2 billion.
Nokia and Motorola last year hired a US-based private investigator, Kroll
Associates, to look into the assets of the Uzan family, whose wealth was
estimated last year at $1.6 billion. The Uzan family last year ranked fifth in a
published list of Turkish billionaires.
Hakan Uzan said last year his family was prepared to pay some of the money
owed, followed by the remainder after a grace period to allow the struggling
Turkish economy to recover.
To boost sales in the past few years, Motorola, Nokia, Sweden's Ericsson and
other major technology companies have loaned money to customers in an approach
called vendor financing. The practice was especially aggressive in emerging
markets such as Turkey, China and Latin America, where growth prospects seemed
bright.
Companies loaned their customers the money to buy products from them, a
practice that backfired as business slowed and many smaller customers defaulted
on payments.
Motorola disclosed late last year that about $2 billion of its $2.7 billion
outstanding in vendor financing at the end of September was related to Telsim,
which has repaid $170 million. Motorola has since tightened its customer
financing policies.
The suit alleges 13 separate counts of wrongdoing, including four counts of
criminal activity in violation of RICO, Motorola and Nokia said. The RICO counts
allege members of the Uzan family as well as others tied to the Uzans entered
into loan arrangements with Motorola and Nokia that they had no intention of
ever paying back.
The companies said Motorola seeks more than $2 billion in compensatory
damages, while Nokia seeks more than $700 million. They also want unspecified
punitive damages, as well as triple damages under four counts relating to RICO.
They are also asking the court to restore the value of their loans. They said
the Uzan family devalued their stakes in Telsim by two-thirds by diluting the
shares held as collateral for the loans and designating them as nonvoting
shares.
A Motorola spokesman said the Uzans have extensive US real estate holdings,
but declined to say whether the Chicago area-based firm would push for those
assets to be seized. Motorola and Nokia charge that the Uzans used deals that
allowed them to shift assets from Telsim, in which Motorola and Nokia have a
pledged stock interest, to other Uzan entities over which Motorola and Nokia
have no interest.
The companies said the Uzans took action that will allow the transfer of
Telsim assets to a Turkish foundation, making it more difficult for creditors to
receive loan repayment.
Motorola and Nokia said the Uzans extorted and intimidated the handset
makers' executives to avoid their debts, "including issuing threats, filing
baseless criminal charges in Turkey ... and hacking into Motorola's computer
system."
(Additional reporting Paul de Bendern in Helsinki)