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Private plaintiffs may seek injunctive relief in civil actions brought under the Racketeer Influenced and Corrupt Organizations Act, a Southern District of New York judge has ruled. Deciding an issue that the U.S. Supreme Court will consider in the coming term because of a split in the circuit courts, Judge Jed S. Rakoff said legislative history supports a finding that Congress did not intend to “deprive the district courts of … utilizing this classic remedial power,” in private civil actions brought under the act. The judge made that ruling in Motorola Credit Corp. v. Uzan, 02 Civ. 666, while explaining his reasons for granting a preliminary injunction two weeks ago in a billion-dollar fraud case brought against a Turkish cellular phone company and three other businesses controlled by a prominent Turkish family. The suit was brought by both Motorola Credit Corp. and Nokia Corp., which charged that the Uzan family, its various businesses and the family-controlled cell phone company Telsim are in the process of defrauding Motorola and Nokia of $2.7 billion. “When business deals go sour, both sides are apt to cry ‘fraud,’ and courts know better than to take such claims at face value,” Rakoff said. “But here we have the unusual case where every preliminary indication is that the defendants, behind a fa�ade of legitimacy, engaged in repeated acts of fraud and chicanery, and thereby perpetrated, and continue to perpetrate, a rather massive swindle.” The companies advanced the Uzan family loans for purposes such as purchasing cellular phone equipment after being told that Telsim’s finances were sound and that the loans were fully collateralized by Telsim stock. But during a six-day hearing earlier this month, Rakoff heard evidence that $1 billion of the $2.7 billion advanced by Motorola and Nokia was unaccounted for, “with much of it seemingly diverted by the defendants for the benefit of the Uzan Association Enterprise,” a tightly controlled organization managed by a family hierarchy that made decisions at regular Sunday night dinners. The family represented that Telsim was on the verge of merging with, or being sold to, other financially sound companies. And “in a particularly raw bit of business that well illustrates the defendants’ fraudulent intent,” he said, the family secretly diluted the value of Telsim’s stock by shifting assets and ownership. When Nokia and Motorola began a full-fledged investigation, he said, the family arranged for a lawyer who worked for the Uzan family in Turkey to arrange to have bogus criminal proceedings launched against top executives of the companies on the basis that executives made “explicit and armed threats to kill,” members of the Uzan family. The charges would be dropped, the defendants informed the companies, if Motorola and Nokia would agree to defer seeking repayment of the overdue loans. Motorola and Nokia turned to the Southern District. Seeking repayment of the loans and an injunction to block any further theft, they filed suit under RICO, 18 U.S.C � 1961. The Uzans argued that injunctive relief is not available for private plaintiffs under RICO — an issue that has yet to be decided in the 2nd U.S. Circuit Court of Appeals. SPLIT DECISIONS The two circuits that have considered the issue are the 7th and 9th U.S. Circuit Courts of Appeals, with the 7th ruling that injunctive relief is available under the act on the basis of “unambiguous statutory language,” in � 1964. The split prompted the U.S. Supreme Court to grant certiorari in a 7th Circuit case, now Scheidler v. National Organization for Women, Inc. (U.S. Apr. 22, 2002). Judge Rakoff said that “While the instant Court would gladly avoid the issue until the Supreme Court rules, that is not possible, for even though … Motorola has an independent entitlement to injunctive relief under its state law claims, co-plaintiff Nokia has brought claims here only under RICO and a certain percentage of the Telsim stock that plaintiffs seek to transfer to this court’s registry is claimed as collateral by Nokia alone,” — so the case must be decided now. Rakoff’s review of the legislative history of the act focused on subsection (a) of � 1964, which he said “made express what was already inherent — that in civil RICO actions, as in other civil actions, the federal district court’s have broad equitable powers.” “If anything,” he said, “subsection (a) extended the court’s equitable jurisdiction in civil RICO actions beyond what was granted by the Judiciary Act of 1789, while subsection (b) gave the Government the right to bring such actions.” The original version of RICO that passed the Senate, he said, contained no reference to damages. He added that “it was only relatively late in the legislative process that the House added an amendment giving victims of racketeering activity a private right of action,” and provided for treble damages. “Taken overall, then, what clearly emerges from the legislative history is that Congress intended to give private litigants a right to sue under RICO and that, since the Act nowhere else specified damages, this was expressly included in the amendment,” he said. “But to go further and to suggest that Congress in so amending Section 1964 to add a private right of action for damages thereby intended to deprive the district courts of applying to private civil RICO cases the courts’ equitable powers and jurisdiction that subsection (a) of the Act so broadly affirmed is to push the legislative history far beyond what it can reasonably support.” Finding that “very serious damage is likely to result if the requested relief is not granted,” Rakoff issued the injunction. The Uzan family was represented by Robert Serio of Los Angeles-based Gibson, Dunn & Crutcher. Motorola was represented by Howard Stahl of Washington, D.C.-based Steptoe & Johnson. Nokia was represented by Jason Brown of Holland & Knight’s New York office.

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