Motorola Credit Corporation and Nokia will file a suit in US District Court for the Southern District of New York today to reclaim more than $3 billion owed to the two companies by the Uzan family, controlling owners of Telsim Mobil (Telekomunikasyon Hizmetleri AS), a Turkish telecommunications company.
The suit alleges 13 separate counts of wrongdoing, including four counts of criminal activity in violation of the Racketeer Influenced and Corrupt Organisations Act, commonly known as ‘RICO’.
The RICO counts allege that members of the Uzan family as well as others tied to the Uzans entered into loan arrangements with Motorola and Nokia with the intention of defrauding the two companies.
Motorola is seeking more than $2 billion in compensatory damages and Nokia seeks more than $700 million in compensatory damages. The two companies are also seeking to collect punitive damages, as well as treble damages under the four counts relating to RICO. Finally, they also are asking the courts to restore the collateral for Motorola’s and Nokia’s loans, which was wrongfully devalued by the Uzans.
‘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,’ said Peter Lawson, Motorola’s general counsel. ‘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.’
‘We feel we have the facts, as well as ample precedent, on our side. We are confident that our joint action with Motorola will lead to a favorable resolution of this unfortunate and very unusual situation,’ said Ms.Kirsi Komi, vice president and director, legal affairs, Nokia Networks.
The complaint, filed by the two companies claims that ‘through an elaborate scheme of deceit and intimidation, the Defendants committed numerous crimes and offenses against Plaintiffs Motorola and Nokia, the ultimate purpose and result of which was the theft of more than $3 billion from the companies.’ The complaint alleges that the Uzans and their co-conspirators, through their control of Telsim and another Uzan-controlled company, Rumeli Telefon (the pledge holder), induced Motorola and Nokia to make more than $3 billion in loans to Telsim with no intention of ever paying the two companies back.
The money loaned by Motorola and Nokia was to be used for the purchase of base stations, switching equipment, telephones and other equipment needed for the development of a GSM and 2.5G wireless network in Turkey, that is, a state-of-the-art advanced communications system for wire and data communications, as well as payment toward the acquisition of a license from the Turkish government to develop this network. The suit alleges that some of these funds were diverted for other purposes and to other Uzan-controlled entities, and little if any of the funds were ever meant to be repaid by the Uzans.
The complaint goes on to allege that the Uzans ‘fraudulently used seemingly legitimate businesses, including Telsim,’ to extract money from Motorola and Nokia and then ’employed a number of illicit devices to defraud Motorola and Nokia, to drain money and other assets from Telsim, and to launder the money. The Uzans also manufactured transactions that allowed the Uzans 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 complaint notes that the Motorola and Nokia loans were secured by pledges of Telsim shares in the event of default. Motorola was pledged shares representing 66 percent of Telsim equity, while Nokia was pledged shares representing 7.5 percent of Telsim equity, which the two companies saw diluted to 22 percent and 2.5 percent, respectively, by what it alleges to have been fraudulent and illegal means.
The complaint states that the ‘Uzans’ true intentions were exposed when they stole the collateral for Motorola’s and Nokia’s loans by intentionally and illegally diluting the value of stock pledged as collateral for the loans. Moreover, in a recent act designed to further ensure that the money the Uzans stole from Motorola and Nokia would never be recovered, the Uzans staged a meeting of the Telsim shareholders in which they eliminated the control rights of the shares pledged as collateral for the loans and took actions that would permit the transfer of Telsim’s illegally obtained assets to a Turkish foundation, seemingly beyond the reach of Motorola, Nokia and the other creditors of Telsim.’
The suit also claims that the Uzans have engaged in extortion and intimidation to avoid their obligations – ‘including issuing threats, filing baseless criminal charges in Turkey against several Motorola and Nokia executives, and hacking into Motorola’s computer system,’ the latter of which was accomplished by bribing a Motorola Turkey employee, according to the complaint.
Motorola and Nokia in their suit also cite other US and European companies that they contend were victimized by the Uzans’ fraudulent and illegal behaviour in the past. The suit alleges that the Uzans’ illegal scheme to defraud Motorola and Nokia fits a pattern of ‘the Uzans’ longstanding practice of defrauding investors and co-venturers by obtaining goods and funds based on false assurances that their debts would be repaid, and then seeking to escape their obligations through criminal fraud and extortion.’