Motorola Credit Corp. v. Uzan
| Decision Date | 31 July 2003 |
| Docket Number | No. 02 CIV.666 JSR.,02 CIV.666 JSR. |
| Citation | 274 F.Supp.2d 481 |
| Parties | MOTOROLA CREDIT CORPORATION and Nokia Corporation, Plaintiffs, v. Kemal UZAN, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Mishell B. Kneeland, Paul Fishman, Friedman Kaplan Seiler & Adelman LLP, New York, NY, Allison G. Kort, Jason Brown, Holland & Knight LLP, New York, NY, for Nokia.
Robert F. Serio, Mark Holton, Prasanth R. Akkapeddi, Gibson, Dunn & Crutcher, New York, NY, David Rosenberg, Marcus, Rosenberg & Diamond LLP, New York, NY, Stanley R. Mortenson, James R. Heavner, Jr., Baker Botts LLP, Washington, DC, for Cem Uzan, Murat Hakan Uzan.
Kenneth M. Bailo, Emmet, Marvin & Martin, LLP, New York, NY, for Kemal Uzan, Cem Cengiz, Murat Hakan Uzan, Melahut Uzan and Aysegul AkayAtty pro hac vice.
Brian V. Otero, Hunton & Williams, New York, NY, Jennifer Culotta, David F. Geneson, Hunton & Williams, Washington, DC, for Keith Bane, pro hac vice.
Andrew N. Vollmer, Andrew Weissman, Wilmer, Cutler & Pickering, Washington, DC, for ABN AMR() Bank N.V., pro hac vice.
Timothy P. Harkness, David Polk & Wardwell, New York, NY, for Deloitte & Touche LLP.
As the Court of Appeals has noted, "[t]his case raises a host of unusual [legal] questions ...." Motorola Credit Corporation v. Uzan, 322 F.3d 130, 134 (2d Cir. 2003). Part I of this Opinion and Order resolves such of those questions as are presently ripe for decision. No legal thicket, however, can hide the fact that all the credible evidence before the Court proves that the defendants — in particular, the members of the Uzan family — have perpetrated a huge fraud. 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. Having fraudulently induced the loans, they have sought to advance and conceal their scheme through an almost endless series of lies, threats, and chicanery, including, among much else, filing false criminal charges against high level American and Finnish executives, grossly diluting and weakening the collateral for the loans, and repeatedly disobeying the orders of this Court. Part II of this Opinion and Order details the overwhelming evidence of this misconduct and the legal consequences that flow therefrom, including, among much else, an award of damages in excess of $4 billion and an order for the arrest and confinement of the individual defendants should they be brought within the jurisdiction of the Court.
Before turning to any of this, however, a brief background is in order. Plaintiff Motorola Credit Corporation ("MCC") is the financing affiliate of Motorola, Inc., a major provider of telecommunications equipment and services. Co-plaintiff Nokia Corporation ("Nokia") is another major telecommunications manufacturer. Nokia's financial arrangements, so far as here relevant, were handled through the Stockholm Branch of ABN-AMRO Bank N.V. ("ABN-AMRO Bank").
The defendants are the five leading members of the Uzan family, namely Kemal Uzan, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, and Aysegul Akay (collectively, the "Uzans"), their associate Antonio Luna Betancourt, and three Uzan-controlled companies, namely, Unikom Iletism Hizmetleri Pazarlama A.S., Standart Pazarlama A.S., and Standart Telekomunikasyon Bilgisayar Hizmetleri A.S. ("Standart Telekom"). Directly or indirectly, the Uzans — reputedly among the richest families in the world, see e.g., L. Kroll, The World's Billionaires, Forbes, Feb. 28, 2002 — also control more than 130 other companies, including, of particular relevance here, a telecommunications company named Telsim Mobil Telekomunikayson Hizmetleri A.S. ("Telsim").
Between April 1998 and September 2000, the Uzans fraudulently induced MCC and Nokia to transfer to Telsim approximately $2.7 billion, supposedly to finance a major expansion of Telsim's operations. Actually, however, the Uzans intended to divert a large part of these funds to other entities they controlled and to their own pockets, so as to fund their economic empire and to pay for such personal items as private airplanes, yachts, helicopters, and multimillion dollar apartments in New York and elsewhere. Although defendants' refusal to provide much of the Court-ordered discovery leaves uncertain the full extent of the fraudulent diversion, it amounts at least to $1 billion, involving the direct transfer of $450 million from Telsim to other Uzan-controlled entities in Turkey, a separate diversion of $133 million from Telsim to certain Uzan-controlled entities in the Netherlands Antilles, and still another $552 million diversion through the device of inflated "Telsim" expenses payable to Uzan-controlled entities. Ultimately, it appears that as much as $300 million found its way into the Uzans' personal bank accounts.
Plaintiffs were slower to uncover this fraud than they otherwise might have been because the defendants provided them with false financial information about Telsim, because the defendants falsely represented that further financing from third parties was imminent, and, most especially, because the plaintiffs thought they were protected by substantial collateral. Specifically, the Uzans had arranged for still another of their companies, Rumeli Telefon Sistemleri A.S. ("Rumeli Telefon"), which at that time owned about threequarters of Telsim's outstanding shares, to pledge virtually all those shares to the plaintiffs as collateral for the plaintiffs' loans to Telsim. But in April 2001, the Uzans, knowing that they could no longer stave off default, convened a secret meeting of Telsim's shareholders at which they diluted the economic value of Rumeli Telefon's shares in Telsim to a third of what it had previously been and transferred majority control of Telsim from Rumeli Telefon to Standart Telekom. A few months later, at another secret meeting, they stripped the remaining collateral of its voting rights and took other steps to further diminish its value.
Meanwhile, plaintiffs, having finally declared Telsim in default, sent financial investigators to Turkey to try to uncover the truth. The Uzans retaliated by filing criminal complaints against high ranking executives of Nokia, Motorola, Inc., and Motorola Turkey (Motorola, Inc.'s local affiliate), falsely charging the executives with threatening to kill the Uzans. But, despite these and other impediments, plaintiffs eventually uncovered enough evidence of the fraud to commence the instant lawsuit.
The complaint, filed in January, 2002, charged the defendants with federal acts of racketeering, state claims of fraud, and other serious misconduct. Early in the case, the Court issued injunctive relief for the purpose of maintaining the status quo, including the preservation of what little was left of the collateral. But, the defendants contemptuously refused to obey the Court's orders, in one case even breaking their sworn promise not to further eviscerate the collateral. The defendants also repeatedly reneged on promises to provide discovery ordered by Magistrate Judge Maas (to whom certain aspects of the pretrial preparation of the case were assigned), and instructed their counsel not to reveal to this Court or the Court of Appeals secret steps they were taking in Turkey to obtain ex parte orders undercutting the prior orders of this Court. Additionally, the defendants, though not themselves parties to any arbitration agreement with either of the plaintiffs, demanded that the instant disputes be submitted to Swiss arbitration pursuant to arbitration agreements between Telsim and MCC and between Telsim and ABN-AMRO Bank.
Notwithstanding these difficulties, the Court conducted two evidentiary hearings and a trial, at which the aforementioned facts, and much else, were established. Subsequent to the trial, however, the Court of Appeals, to which the defendants had appealed from the Court's preliminary injunction order, determined that those of plaintiffs' claims brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., must be dismissed as unripe — without prejudice, however, to their being reinstated when they become ripe. Since several of this Court's orders were premised, at least in part, on the viability of the RICO claims, the Court of Appeals remanded so that this Court could reconsider its prior rulings in light of this development. Thereupon, this Court, while dismissing the RICO claims (without prejudice), in accordance with the mandate of the Court of Appeals, see Order, dated April 3, 2003, invited motion practice on all issues implicated by the Court of Appeals' decision or otherwise preliminary to any final determination of the underlying claims. Having received extensive submissions on these matters, the Court now adjudicates these motions in Part I of this Opinion and Order.
I. The Motions
The motions presently pending before the Court are resolved as follows:
1. Plaintiffs' motion to preclude defendants (on grounds of waiver and the like) from further contesting any disputed matter in this case is denied as to jurisdictional matters and those legal disputes that reasonably could not have been expected to be raised except in the new posture of the case created by the Court of Appeals' decision, but is otherwise granted.
2. Plaintiffs' motion to supplement the Complaint to reinstate the RICO claims is denied, without prejudice to those claims being reinstated when the contractual remedies have been...
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