Motorola a victim of massive fraud

As previously announced, in the July 31, 2003 judgment rendered by Judge Rakoff of the United States District Court for the Southern District of New York ("the District Court"), the District Court found that the Uzans and their confederates had perpetrated a "massive fraud" against Motorola in connection with loans made by Motorola to Telsim, the second largest telecommunications company in Turkey that was owned by the Uzans.

The District Court had found, among other things, that the Uzans fraudulently induced Motorola to make the loans to Telsim, stole the collateral given to Motorola to secure the loan (stock in Telsim), filed false criminal charges against Motorola executives and stole at least $1 billion from Telsim for personal use.

In a 42-page opinion, the Appeals Court explicitly dismissed the claims of the defendants that the District Court lacked jurisdiction, stating: "we reject each of defendants' challenges to the District Court's jurisdiction over this action." The Appeals Court further stated that the District Court had made "extensive findings . . . laid out in its meticulous 173-page opinion" and that the defendants on appeal "do not challenge the District Court's findings of fact, nor do they contest the legal conclusions regarding the substantive issues of liability that follow from those findings."

In addition, the Appeals Court upheld the District Court’s ruling which ordered that the Uzans be arrested and imprisoned if found within 100 miles of New York until such time as the Uzans purge their prior contempts of court, including, their defiance of a court order requiring them to deposit the stolen Telsim stock into the court’s registry (for the benefit of Motorola and co-plaintiff Nokia Corporation), among many other refusals to comply with the District Court’s orders.

"We are extremely gratified with the decision from the Appeals Court," said Peter Lawson, executive vice president, general counsel and secretary of Motorola. "From the outset of this case, the Uzans have raised one specious argument after another to divert attention from their massive fraud. After extensive briefing and argument, the Appeals Court has now clearly rejected the challenges of the Uzans. We look forward to continuing our efforts to execute on the assets of the Uzans worldwide, including the Uzan’s jet aircraft, prestigious London apartments and luxury apartments in midtown Manhattan in New York City."

Motorola noted that, as to the Uzan’s New York City apartments, the New York City Sheriff has scheduled an execution sale for November 10, 2004.

The Company also noted that the Appeals Court remanded three issues to the District Court for additional findings and analysis. The issues are:

1. Whether the District Court correctly imposed a constructive trust over the stolen shares in favor of Motorola (the constructive trust was affirmed as to Nokia)

2. Whether Motorola may collect its judgment against non-party companies owned and controlled by the Uzans, and

3. The amount of punitive damages the District Court may impose against defendants in favor of Motorola. As previously announced, the District Court imposed $2.13 billion in punitive damages against the Uzans for perpetrating their massive fraud against Motorola.

The Appeals Court held "although we agree with the District Court that, on this record, some punitive damages award is appropriate, we direct the District Court to reconsider the size of that award on remand."

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